Market Wrap For March 19: Yellen Hints of Higher Rates & Sooner Than Expected End To Taper
The Fed announced that it will increase its tapering by a further $10 billion in addition to dropping the 6.5 percent unemployment rate threshold which has been the target rate to hike the Fund Funds rate. Thirteen of 16 Fed officials expect the Fed Funds rate to rise by the end of 2015.
The Central bank is forecasting that unemployment will drop to 6.1 percent to 6.3 percent at year's ends. This compares favorably to the 6.3 percent to 6.5 percent expected last December.
Fed Chief Janet Yellen said that its quantitative easing program should end some this fall, as opposed to a previous expectation that the program will end closer to December.
- The Dow lost 0.70 percent, closing at 16,222.17.
- The S&P 500 lost 0.61 percent, closing at 1,860.77.
- The Nasdaq lost 0.59 percent, closing at 4,307.60.
- Gold lost 2.13 percent, trading at $1,330.00 an ounce.
- Oil gained 0.28 percent, trading at $99.16 a barrel.
- Silver lost 1.33 percent, trading at $20.58 an ounce.
News of Note
MBA Mortgage Composite Index declined 1.2 percent versus a decline of 2.1 percent last week.
Fourth Quarter Current Account Deficit fell to a 14-year low with the current account gap narrowing to $81.1 billion.
EIA Petroleum Inventories showed that crude rose 5.9 million barrels, gasoline declined 1.5 million barrels and distillates declined 3.1 million barrels.
Japan's trade deficit narrowed to 800.3 billion yen ($7.9 billion) in February from a record 2.79 trillion yen in January.
U.K. unemployment remained at 7.2 percent. The Bank of England's Monetary Policy Committee voted unanimously to keep interest rates at 0.5 percent
Analyst Upgrades and Downgrades of Note
Analysts at Morgan Stanley maintained a Neutral rating on Adobe Systems (NASDAQ: ADBE) with a price target raised to $60 from a previous $55. Shares lost 1.30 percent, closing at $67.63.
Analysts at Stifel maintained a Buy rating on Biogen Idec (NASDAQ: BIIB) with a price target raised to $376 from a previous $360. Shares hit new 52 week highs of $358.89 before closing the day at $350.01, down 0.55 percent.
Analysts at Summer maintained a Buy rating on Celgene (NASDAQ: CELG) with a price target raised to $205 from a previous $180. Shares lost 1.85 percent, closing at $150.84.
Analysts at S&P Capital IQ maintained a Buy rating on JA Solar Holding (NASDAQ: JASO) with a price target raised to $17 from a previous $14. Shares lost 2.48 percent, closing at $11.80.
Analysts at Wells Fargo upgraded Juniper Network (NASDAQ: JNPR) to Outperform from Market Perform. Shares gained 2.08 percent, closing at $26.45.
Analysts at Stifel Nicolaus maintained a Buy rating on NVIDIA (NASDAQ: NVDA) with a price target raised to $21 from a previous $19. Shares hit new 52 week highs of $18.91 before closing the day at $18.56, up 1.73 percent.
Analysts at Stifel Nicolaus maintained a Buy rating on Oracle (NYSE: ORCL) with a price target raised to $43 from a previous $40. Shares lost 0.75 percent, closing at $38.55.
Analysts at Goldman Sachs downgraded Orbitz Worldwide (NYSE: OWW) to Sell from Neutral with an $8 price target. Shares lost 9.16 percent, closing at $8.13.
Analysts at Morgan Stanley initiated coverage of PPG Industries (NYSE: PPG) with an Overweight rating and $210 price target. Shares lost 1.41 percent, closing at $195.16.
Analysts at Citigroup upgraded Transocean (NYSE: RIG) to Neutral from Sell. Shares gained 1.58 percent, closing at $39.81.
Analysts at Morgan Stanley maintained an Overweight rating on Sherwin-Williams Company (NYSE: SHW) with a price target of $221. Shares lost 1.25 percent, closing at $202.23.
Analysts at Goldman Sachs upgraded Teva Pharmaceuticals (NASDAQ: TEVA) to Neutral from Sell with a price target raised to $52 from a previous $40. Shares gained 0.62 percent, closing at $50.22.
Analysts at Bank of America downgraded Yingli Green Energy (NYSE: YGE) to Neutral from Buy. Shares lost 0.92 percent, closing at $5.36.
Equities-Specific News of Note
ING Group (NYSE: ING) will reduce its stake in ING U.S. (NYSE: VOYA) from 57 percent to 45 percent. ING will sell 26.5 million shares in a public offering in a transaction that could be worth $1.2 billion based on the closing price of ING U.S. on Tuesday which was $36.30. Shares of ING lost 0.85 percent, closing at $13.93 while ING U.S. lost 2.95 percent, closing at $35.23.
Royal Dutch Shell (NYSE: RDS/A) said that it pulled out of negotiations over an offshore exploration agreement in the Black Sea, just west of Crimea. Shares lost 0.80 percent, closing at $71.64.
Dow Chemical (NYSE: DOW) said that it plans to raise up to $6 billion from asset sales, more than $1.5 billion to $2 billion its previous target. Shares lost 0.12 percent, closing at $49.61.
Navistar (NYSE: NAV) issued a private offering of $370 million in senior notes due 2019 at 4.75 percent. Shares lost 1.84 percent, closing at $33.70.
81 percent of CommonWealth REIT (NYSE: CWH) shareholders have voted to remove the company's board giving activist funds Corvex Management and Related Fund Management a victory in ousting the trustees including Barry and Adam Portnoy. Corvex and Related will install a new board of trustees, led by Sam Zell and will be subject to shareholder approval. Shares hit new 52 week highs of $28.10 before closing the day at $27.35, up 2.01 percent.
Netflix (NASDAQ: NFLX) announced that its next original series titled Grace and Frankie will star Lily Tomlin and Jane Fonda. Shares lost 0.04 percent, closing at $420.09.
Speaking at Starbucks' (NASDAQ: SBUX) annual shareholder meeting, Howard Schultz said that the company is still in its “early stages” of growth. The company will open 20 new Teavana stores and plans on expanding its mobile payment business. Shares gained 1.76 percent, closing at $75.91.
Autodesk (NASDAQ: ADSK) acquired Creative Market, an online provider of a marketplace for graphics, templates, fonts and other content. Terms were not disclosed. Shares lost 2.63 percent, closing at $51.05.
Toyota (NYSE: TM) has agreed to pay $1.2 billion as settlement in to a criminal probe over accusations that the company misled authorities over the unintended acceleration in its cars in the late 2000s. The Justice Department confirmed the fee will put an end to its criminal probe. Shares lost 1.05 percent, closing at $108.68.
JPMorgan (NYSE: JPM) has sold its commodities-trading wing to a Swiss trading firm Mercuria Energy Group. Shares gained 1.41 percent, closing at $58.30.
In another letter to eBay (NASDAQ: EBAY) shareholders, Carl Icahn is proposing that the company would benefit from selling a 20 percent stake in PayPal through an IPO, in a move similar to what EMC has done with VMware in 2007. Shares lost 0.93 percent, closing at $57.30.
Sony (NYSE: SNE) unveiled a virtual reality headset prototype known as “Project Morpheus.” Shares finished the day unchanged at $17.15.
Winners of Note
Paylocity (NASDAQ: PCTY) priced its IPO at $17 per share, above the expected range of $14 to $16. Shares opened for trading at $31 but traded off since closing the day at $24.04, up 41.41 percent.
Horizon Pharma (NASDAQ: HZNP) announced that it has entered into a definite agreement in which the company will acquire Vidara Therapeutics International through a reverse merger for stock and cash which values the deal at around $660 million. Horizon will exchange 74 percent of its ordinary shares will be exchanged for Horizon Pharma's common shares. Vidara will receive 26 percent of Horizon Pharma shares in addition to $200 million in cash. Shares hit new 52 week highs of $18.30 before closing the day at $16.02, up 9.13 percent.
First Solar (NASDAQ: FSLR) is guiding its 2014 revenue to be $3.7 billion to $4 billion versus a consensus estimate of $3.77 billion. The company also guided its 2014 EPS to be $2.20 to $2.60, below the consensus estimate of $3.12. Looking forward to 2015 the company is guiding its 2015 EPS to be $4.50 to $6.00, well above the consensus estimate of $3.68. Shares hit new 52 week highs of $70.99 before closing the day at $69.40, up 20.57 percent.
Decliners of Note
Kandi Technologies (NASDAQ: KNDI) announced that it has raised $11 million in a private placement with two institution investors for 606,000 shares valued at $18.24 per share. The company also issued 90,900 warrants struck at $22.80 per share which expires in 18 months. Kandi said that the proceeds will be used for “general working capital purposes” with the completion of the placement scheduled to finalize around March 24. Shares lost 10.02 percent, closing at $19.04.
Rubicon Technology (NASDAQ: RBCN) is selling 2.5 million shares on behalf of existing holders including venture capital firm Cross Atlantic Capital who currently has a 19.3 percent stake. Shares lost 8.29 percent, closing at $12.94.
14.7 million FireEye (NASDAQ: FEYE) shares became eligible for sale today. Another 95.6 million shares of FireEye will be eligible for sale after shares received by Mandiant employees are registered for resale. Shares lost 8.04 percent, closing at $71.50.
Early reviews of Lions Gate (NYSE: LGF) upcoming film Divergent are proving to be mixed. Variety noted that the film has "uncertain sense of setting, bloated plot, drab visual style and solid yet underwhelming lead." The movie is expected to bring in $65 million to $70 million this weekend. Shares lost 5.20 percent, closing at $29.14.
Earnings of Note
This morning, FedEx (NYSE: FDX) reported its third quarter results. The company announced an EPS of $1.23, missing the consensus estimate of $1.46. Revenue of $11.3 billion missed the consensus estimate of $11.46 billion. The company claimed that its earnings and revenue miss was due to “Unusually severe winter storms throughout the quarter disrupted operations, decreasing shipping volume and increasing costs, and impacted year-over-year operating income by an estimated $125 million.” Net income for the quarter rose to $378 million from $361 million in the same quarter last year. Operating margin also rose from a year ago from 5.4 percent to 5.7 percent. FedEx issued downside guidance and sees its full year 2014 EPS to be $6.55 to $6.80, lower than the consensus estimate of $6.90. Shares lost 0.14 percent, closing at $138.38.
This morning, General Mills (NYSE: GIS) reported its third quarter results. The company announced an EPS of $0.62, missing the consensus estimate of $0.64. Revenue of $4.38 billion missed the consensus estimate of $4.43 billion. The company noted that “severe winter weather” hurt sales performance. Retail sales declined two percent as the company faced higher dairy costs and higher marketing and merchandising costs for its yogurt business. Net income for the quarter rose to $410.6 million from $398.4 million in the same quarter last year. General Miss issued guidance and see its full year 2014 EPS to be $2.87 to $2.90, in-line with the consensus estimate of $2.88. Shares gained 0.06 percent, closing at $50.74.
This morning, KB Home (NYSE: KBH) reported its first quarter results. The company announced an EPS of $0.12, beating the consensus estimate of $0.10. Revenue of $450.7 million beat the consensus estimate of $437.09. The company posted a net profit of $10.6 million compared to a loss of $12.5 million in the same quarter last year, marking the first time the company earned a net profit in the first quarter since 2007. The average selling price of homes rose 12 percent to $305,200 as the company delivered 1,442 homes in the quarter. Shares gained 5.88 percent, closing at $18.72.
After the market closed, Jabil Circuit (NYSE: JBL) reported its second quarter results. The company announced an EPS of $0.10, missing the consensus estimate of $0.11. Revenue of $3.6 billion missed the consensus estimate of $3.61 billion. Shares were trading higher by 2.41 percent at $18.26 following the earnings release.
Quote of the Day
"The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases.” – FOMC statement released today.
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