Market Overview

Market Wrap For April 16: Markets Hold On To Gains On Positive Yellen Comments And Economic Data

Market Wrap For April 16: Markets Hold On To Gains On Positive Yellen Comments And Economic Data
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U.S. stocks held on to strong gains as U.S. industrial production rose more than projected. The Fed confirmed it will maintain a "friendly" policy that will support the economic recovery.

According to Fed Chief Janet Yellen there are three main concerns the central bank is facing. Specifically, does the labor market still contain significant slack, is inflation hovering upwards towards the 2.0 percent target and what factors could derail the economic recovery.

10 of the 12 districts saw economic improvement, mostly to “modest to moderate” according to the Fed Beige Book which reports from the 12 Federal Reserve Districts.

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  • The Dow gained 1.00 percent, closing at 16,424.85.
  • The S&P 500 gained 1.05 percent, closing at 1,862.31.
  • The Nasdaq gained 1.29 percent, closing at 4,086.23.
  • Gold gained 0.18 percent, trading at $1,302.60 an ounce.
  • Oil lost 0.01 percent, trading at $103.74 a barrel.
  • Silver gained 0.83 percent, trading at $19.65 an ounce.

News of Note

MBA Mortgage Applications Composite Index rose 4.3 percent compared to a decline of 1.6 percent last week.

MBA Mortgage Applications Purchase Index rose 1.0 percent compared to a gain of 3.0 percent last week.

MBA Mortgage Refinance Index rose 7.0 percent compared to a decline of 5.0 percent last week.

March Housing Starts rose to 946,000 from 920,000 in February but fell short of expectations of 965,000. Permits fell to 990,000 from 1.01 million in February and missed expectations of 1.01 million.

March Industrial Production rose 0.7 percent, ahead of the 0.4 percent consensus but below February's 1.2 percent gain. Capacity utilization rose to 79.2 percent from February's 78.8 percent and topped expectations of 78.7 percent.

Atlanta Fed Business Inflation Expectations fell to 1.7 percent from 1.8 percent.

EIA Petroleum Inventories showed that Crude rose 10 million barrels compared to a rise of 4.0 million barrels last week. Gasoline declined 0.2 million barrels compared to a decline of 5.2 million barrels last week. Distillates declined 1.3 million barrels compared to a gain of 0.2 million barrels last week.

The Bank of Canada left its benchmark lending rate unchanged at 1.0 percent.

Chinese GDP growth for the first quarter slowed to 7.4 percent on year from 7.7 percent in the first quarter but still came ahead of the forecasts for a 7.3 percent growth.

Eurozone CPI rose to 0.9 percent in March from 0.3 percent in February but fell short of the consensus of 1.0 percent.

Analyst Upgrades and Downgrades of Note

Analysts at Sterne Agee initiated coverage of Actavis (NYSE: ACT) with a Buy rating and $230 price target. Shares gained 2.72 percent, closing at $199.21.

Analysts at Sterne Agee initiated coverage of Allergan (NYSE: AGN) with a Buy rating and $142 price target. Shares gained 2.85 percent, closing at $131.44.

Analysts at Argus Research upgraded Amazon.com (NASDAQ: AMZN) to Buy from Hold. Shares gained 2.40 percent, closing at $323.68.

Analysts at JPMorgan maintained an Overweight rating on Cliffs Natural Resources (NYSE: CLF) with a price target lowered to $26 from a previous $28. Shares lost 2.40 percent, closing at $18.69.

Analysts at Sterne Agee upgraded Family Dollar Stores (NYSE: FDO) to Neutral from Underperform with a price target raised to $55 from a previous $50. Shares gained 0.46 percent, closing at $57.16.

Analysts at JPMorgan maintained a Neutral rating on hhgregg (NYSE: HGG) with a price target lowered to $7 from a previous $9. Shares gained 1.59 percent, closing at $8.00.

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Analysts at Gabelli initiated coverage of Hertz Global (NYSE: HTZ) with a Buy rating. Shares gained 4.35 percent, closing at $27.36.

Analysts at B.Riley & Co downgraded Intel (NASDAQ: INTC) to Neutral from Buy with a price target raised to $29 from a previous $28.50. Many other analysts maintained their previous ratings on Intel, most notably analysts at Jefferies maintained a Buy rating with a price target raised to $35 from a previous $32. Analysts at Goldman Sachs maintained a bullish tone with an unchanged Sell rating and a price target raised to $17 from a previous $16. Shares gained 0.60 percent, closing at $26.93.

Analysts at JPMorgan maintained a Neutral rating on Johnson & Johnson (NYSE: JNJ) with a price target raised to $107 from a previous $102. Meanwhile, analysts at Citigroup maintained a Buy rating on Johnson & Johnson with a price target raised to $114 from a previous $111. Shares lost 0.46 percent, closing at $98.74.

Analysts at Canaccord Genuity initiated coverage of Regeneron Pharmaceuticals (NASDAQ: REGN) with a Buy rating and $350 price target. shares gained 4.19 percent, closing at $300.14.

Analysts at Sterne Agee imitated coverage of Teva Pharmaceuticals (NASDAQ: TEVA) with a Neutral rating and $53 price target. shares gained 0.58 percent, closing at $49.90.

Analysts at Sterne Agee upgraded Twitter (NYSE: TWTR) to Neutral from Underperform with a price target of $43. Shares lost 2.22 percent, closing at $44.51.

Analysts at Citigroup maintained a Hold rating on Under Armour (NYSE: UA) with a price target raised to $54 from a previous $53.50. Shares gained 2.48 percent, closing at $53.75.

Analysts at JPMorgan maintained a Neutral rating on United States Steel (NYSE: X) with a price target raised to $29 from a previous $25. Shares lost 0.68 percent, closing at $26.92.

Analysts at Citigroup upgraded Yelp (NASDAQ: YELP) to Buy from Neutral. Shares gained 4.30 percent, closing at $65.77.

Analysts at Jefferies reinstated coverage of Yahoo! (NASDAQ: YHOO) with a Buy rating (previously rated as Hold) with a price target raised to $50 from a previous $24. Meanwhile, analysts at Susquehanna maintained a Neutral rating on Yahoo! with a price target raised to $42 from a previous $39. Shares gained 6.26 percent, closing at $36.35.

Analysts at Standpoint Research initiated coverage of Yandex N.V. (NASDAQ: YNDX) with a Buy rating and $36 price target. Shares gained 2.61 percent, closing at $28.09.

Equities-Specific News of Note

According to ITG Research, Facebook's (NASDAQ: FB) ad prices fell quarter over quarter which will result in an in-line or below consensus quarter report on April 23. shares gained 1.07 percent, closing at $59.72.

Analysts at Janney Capital conducted a survey of McDonald's franchisees and concluded that the restaurant will report positive same-store sales growth for March and April. Shares finished the day unchanged at $100.83.

KING Digital (NYSE: KING) has partnered with Chinese based Tencent to bring Candy Crush Saga to Tencent's users. Shares of KING Digital gained 3.44 percent, closing at $18.03.

The Gap (NYSE: GPS) told investors during a meeting that it plans to increase its online growth beginning with its reserve in stores service to all stores by the end of the second quarter. The company also is guiding towards $1 billion in sales in China within three years. Shares gained 1.64 percent, closing at $39.00.

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3D Systems (NYSE: DDD) has acquired Robtec, the largest additive manufacturing service bureau and 3D printer and scanner building in Latin America. Shares of 3D Systems gained 3.13 percent, closing at $48.79.

IMAX (NYSE: IMAX) inked a delivery agreement with Chinese based cable provider Wasu Group. Shares of IMAX gained 0.90 percent, closing at $27.99.

BHP Billiton (NYSE: BHP) expects to produce 217 million metric tons of iron ore from its mines in Australia. The company previously guided to produce 212 million tons. shares gained 1.36 percent, closing at $71.02.

General Motors (NYSE: GM) could ask a federal bankruptcy judge to protect itself from legal liability in the ignition switch recall issue for actions the company took before its bankruptcy in 2009. shares gained 1.83 percent, closing at $33.97.

Winners of Note

SodaStream (NASDAQ: SODA) is considering selling a stake of ten percent to 16 percent. The company has a price tag of around $52 per share in mind, according to Israeli news source, Calcalist who speculated that PepsiCo, Starbucks and Dr. Pepper Snapple are all potential suitors. Shares of SodaStream gained 8.12 percent, closing at $40.75.

According to Barron's Icahn Enterprises (NYSE: IEP) “looks undervalued once again.” According to Barron's, The best way to value the company is through what Icahn Enterprises calls its "indicative net asset value," which is based on the value of its investments -- including estimates for some illiquid holdings--less debt. The indicative NAV stood at about $78 per unit at year-end 2013 and could have risen to around $80 by the end of February, based on comments by company executives on an earnings conference call last month. Our estimate is that the NAV now is below $80 based on the recent market selloff that has depressed notable Icahn investments like Federal Mogul, Apple and Herbalife. This suggests that the units now trade at about a 10% premium to estimated NAV. While the units have sometimes in the past traded at a discount to NAV, the current premium looks reasonable given the 78-year-old Icahn's success as an investor. Shares of Icahn Enterprises gained 8.30 percent, closing at $98.29.

Decliners of Note

Yamana Gold (NYSE: AUY) and Agnico Eagle Mines (NYSE: AEM) announced a “friendly acquisition” and have agreed to acquire Canadian based Osisko Mining for C$3.9 billion, approximately 11 percent higher than Goldcorp's previous bid. Shares of Yamana Gold lost 4.42 percent, closing at $8.02 while shares of Agnico Eagle Mines lost 8.56 percent, closing at $27.88.

Earnings of Note

This morning, PNC Financial Services (NYSE: PNC) reported its first quarter results. The company announced an EPS of $1.82, beating the consensus estimate of $1.64. Revenue of $3.77 billion missed the consensus estimate of $3.69 billion. Net income rose to $1.06 billion from $995 million in the same quarter last year as the company grew loans and deposits while lowering expenses. Net interest income declined eight percent year over year to $2.2 billion due to a lower interest-earnings asset yields and the decline in purchase accounting accretion. The bank's Tier 1 capital ratio rose to 9.7 percent from 9.4 percent at the end of 2013 and 8.0 percent a year ago. Tangible book value per share rose to $56.33 from $54.57 at the end of 2013 and $50.30 a year ago. Shares gained 2.71 percent, closing at $84.38.

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This morning, Bank of America (NYSE: BAC) reported its first quarter results. The company announced an (adjusted) EPS of $0.35, beating the consensus estimate of $0.27. Revenue of $22.8 billion beat the consensus estimate of $22.38 billion. Net income for the quarter fell to a net loss of $276 million from a net income of $1.5 billion in the same quarter last year as litigation expenses of $6 billion weighted on the headline EPS loss of $0.05. Non-interst expenses rose to $22.2 billion from $19.5 billion a year ago but excluding litigation, expenses fell $1.2 billion year over year. Basel III Common equity ratio rose to 11.8 percent from 11.7 percent at the end of 2013. Tangible book value per share rose to $13.81 from $13.79 at the end of 2013 and $13.36 a year ago. Shares lost 1.59 percent, closing at $16.13.

This morning, Abbott Laboratories (NYSE: ABT) reported its first quarter results. The company announced an EPS of $0.41, beating the consensus estimate of $0.36. Revenue of $5.24 billion missed the consensus estimate of $5.29 billion. Net income for the quarter fell to $375 million from $544 million in the same quarter last year as the company dealt with unfavorable currency exchange rates and a supplier recall which resulted in lower baby formula sales. Abbott Laboratories confirmed its full year 2014 EPS guidance to be in a range of $2.16 to $2.26. shares gained 1.08 percent, closing at $38.38.

After the market closed, Google (NASDAQ: GOOG) reported its first quarter results. The company announced an EPS of $6.27, missing the consensus estimate of $6.42. Revenue of $15.42 billion missed the consensus estimate of $15.51 billion. Shares were trading lower by 5.73 percent at $524.65 following the earnings release.

After the market closed, Kinder Morgan (NYSE: KMI) reported its first quarter results. The company announced an EPS of $0.28, beating the consensus estimate of $0.33. Revenue of $4.04 billion beat the consensus estimate of $3.87 billion. Shares were trading lower by 3.33 percent at $32.20 following the earnings release.

After the market closed, American Express (NYSE: AXP) reported its first quarter results. The company announced an EPS of $1.33, beating the consensus estimate of $1.30. Revenue of $8.19 billion missed the consensus estimate of $8.36 billion. Shares were trading lower by 1.49 percent at $86.10 following the earnings release.

After the market closed, IBM (NYSE: IBM) reported its first quarter results. The company announced an EPS of $2.54, missing the consensus estimate of $2.55. Revenue of $22.48 billion missed the consensus estimate of $22.93 billion. Shares were trading lower by 4.13 percent at $188.28 following the earnings release.

Quote of the Day

"The FOMC's current outlook for continued, moderate growth is little changed from last fall. In recent months, some indicators have been notably weak, requiring us to judge whether the data are signaling a material change in the outlook. The unusually harsh winter weather in much of the nation has complicated this judgment, but my FOMC colleagues and I generally believe that a significant part of the recent softness was weather related." - Janet Yellen speaking at the Economic Club of New York.

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