Market Overview

Market Wrap For February 27: Yellen Talks Pushes Markets Higher

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U.S. stocks rose after Federal Reserve boss Janet Yellen appeared in the hot-seat today speaking to the Committee on Financial Services and U.S. House of Representatives. Yellen said that it is too soon to determine the extent of which cold weather played a role in a recent batch of poor economic statistics.

“In the weeks and months ahead, my colleagues and I will be attentive to signals that indicate whether the recovery is progressing in line with our earlier expectations,” Yellen said in her testimony leading some to speculate that another round of taper could be a done deal when the Federal Reserve meets in March. It would take a “significant” change in the outlook for the Fed to alter the taper, Yellen further hinted.

Yellen's testimony was sufficient enough to push the S&P 500 to a new record close. The Dow and Nasdaq both pulled in strong performances.

  • The Dow gained 0.46 percent, closing at 16,272.71.
  • The S&P 500 gained 0.50 percent, closing at 1,854.30.
  • The Nasdaq gained 0.63 percent, closing at 4,318.93.
  • Gold gained 0.22 percent, trading at $1,330.90 an ounce.
  • Oil lost 0.30 percent, trading at $102.28 a barrel.
  • Silver gained 0.10 percent, trading at $21.31.

News of Note

Initial Jobless Claims rose 14,000 to 348,000, ahead of the 335,000 consensus. Continuing claims rose 8,000 to 2.96 million.

January Durable Goods declined 1.0 percent, less than the 1.6 percent decline expected.

EIA Natural Gas Inventory declined 95bcf.

February Kansas City Fed Manufacturing Survey read +4.0, above the +2.0 expected.

The average 30-year fixed mortgage rate rose to 4.37 percent from 4.33 percent a week ago, according to Freddie Mac's weekly survey.

Analyst Upgrades and Downgrades of Note

Analysts at Bank of America reiterated a Sell rating and $65 price target on Tesla Motors (NASDAQ: TSLA). Analysts at Wedbush raised his price target to $295 from a previous $225 while reiterating an Overweight rating. Finally, analysts at Baird maintained a Buy rating and $245 price target on shares. Shares lost 0.19 percent, closing at $252.53.

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Analysts at Deutsche Bank reiterated a Buy rating on Groupon (NASDAQ: GRPN) and maintained a $12 price target. Shares gained 3.03 percent, closing at $8.51.

Analysts at Baird upgraded First Solar (NASDAQ: FSLR) to Outperform from Neutral with a price target raised to $67 from a previous $62. Shares gained 8.44 percent, closing at $57.19.

Analysts at JPMorgan upgraded Care.com (NYSE: CRCM) to Overweight from Neutral with a price target raised to $25 from a previous $24. Shares gained 6.17 percent, closing at $20.11.

Analysts at Morgan Stanley resumed coverage of Verizon Communications (NYSE: VZ) with an Overweight rating and $52 price target. Shares gained 2.54 percent, closing at $47.53.

Analysts at Wedbush initiated coverage of several retail sector names. Urban Outfitters (NASDAQ: URBN) was initiated with an Outperform rating and $46. Zumiez (NASDAQ: ZUMZ) was initiated with a Neutral rating and $24 price target. Finally, TJX Companies (NYSE: TJX) was initiated with a Neutral rating and $63 price target. Shares of Urban Outfitters lost 0.74 percent, closing at $37.62, Zumiez lost 1.60 percent, closing at $23.33 and TJX gained 0.73 percent, closing at $60.73.

Analysts at Morgan Stanley downgraded Baidu (NASDAQ: BIDU) to Equal-Weight from Overweight with a price target lowered to $179.60 from a previous $185.40. Shares gained 3.56 percent, closing at $179.05.

Analysts at UBS reiterated a Buy rating on Celgene (NASDAQ: CELG) with a price target raised to $209 from a previous $200. Shares gained 1.06 percent, closing at $161.67.

Equities-Specific News of Note

Carl Icahn issued a new letter to eBay (NASDAQ: EBAY) in which he accepted a challenge to have an “honest, accurate” debate. Icahn says that he demanded that he be presented with all books and records related to the sale of Skype. Icahn equated Scott Cook's presence on the company's board to that of Seattle Seahawks coach Pete Carroll “sitting in when the Denver Broncos were constructing their game plan.” Shares hit new 52 week highs of $59.27 before closing the day at $58.34, up 1.74 percent.

Bank of America (NYSE: BAC) has disputed government claims that it should pay $2.1 billion after being found guilty of fraud over defective mortgages sold by its Countrywide unit. The Bank argued that the only penalty it should be responsible for was the profit it generated from selling the loans, which was nothing. Shares gained 0.92 percent, closing at $16.48.

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Blackstone (NYSE: BX) has agreed to acquire a 20 percent stake in Italian fashion house Versace. Blackstone will inject €150 million of capital in to Versace and purchase €60 million in stock from its parent holding company, GIVI Holding. Shares of Blackstone gained 0.89 percent, closing at $32.96.

According to Bloomberg, 3M (NYSE: MMM) is looking to sell parts of electronics business which the company thinks is under-performing for around $1 billion. Shares gained 1.11 percent, closing at $134.34.

DuPont (NYSE: DD) said it expects to generate as much as $500 million in revenue from high-tech farm data services over the coming decade. Shares hit new 52 week highs of $66.06 before closing the day at $66.00, up 0.75 percent.

Dan Loeb nominated three directors to Sotheby's (NYSE: BID) board, including himself as the activist investor initiates a proxy fight. Sotheby's, under pressure from Loeb recently announced a $150 million special dividend and $150 million share buyback program last month. Shares lost 1.11 percent, closing at $49.95.

Juniper (NASDAQ: JNPR) is offering $350 million worth of senior notes due 2024 following its recent announcement to spend over $2 billion on buybacks. Shares gained 0.45 percent, closing at $27.01.

Satya Nadella has resigned from Riverbed's board of director to devote more time to his new role as CEO of Microsoft. Shares of Riverbed lost 2.18 percent, closing at $20.65.

Exxon (NYSE: XOM) plans to cut spending on new wells, offshore platforms and fuel plants by 14 percent and plans to spend $6 billion annually on projects to reduce emissions linked to climate change and pollution. Shares gained 0.13 percent, closing at $95.91.

Cliffs Natural Resources (NYSE: CLF) extended its commercial agreement with ArcelorMittal to supply iron ore pellets until January 2017, with an option to extend for another year. Shares of Cliffs gained 2.73 percent, closing at $20.35.

Winners of Note

Last night, J.C. Penney (NYSE: JCP) reported its fourth quarter results. The company announced an EPS of -$0.68, beating the consensus estimate of -$0.85. Revenue of $3.78 billion missed the consensus estimate of $3.8 billion. Gross margin improved in the quarter by 460 bps to 28.4 percent in the quarter compared to 23.8 percent in the same quarter last year. Net income for the quarter totaled $35 million compared to a net loss of $552 million in the same quarter last year. J.C. Penney said that comparable sales will be up by a mid-single digit percentage for the fiscal year and the company expects “significant” gains in its gross profit margin. Shares surged 25.42 percent, closing at $7.47.

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This morning, E-Commerce China Dangdang (NYSE: DANG) reported its fourth quarter results. The company announced an EPS of $0.04, beating the consensus estimate of -$0.07. Revenue of $325.7 million beat the consensus estimate of $315.83 million. Net loss for the quarter totaled RMB21.7 million ($3.6 million) compared with a net loss of RMB122.1 in the same quarter last year. Gross margin for the quarter totaled rose to 17.6 percent in the quarter compared with 13.4 percent in the same quarter last year. The company noted that it gained 3.1 million new customers in the quarter as total members totaled 8.9 million active customers. Dangdang said that it plans to drive growth in 2014 by devoting resources to developing destination categories while seeking to expand market share in books and media market. Shares surged to new 52 week highs of $13.44 before closing the day at $13.11, up 31.49 percent.

This morning, Mylan (NYSE: MYL) reported its fourth quarter results. The company announced an EPS of $0.78, beating the consensus estimate of $0.75. Revenue of $1.81 billion was in-line with the consensus estimate. Net profit rose to $180.2 million from $162.0 million in the same quarter last year and gross margin increased to 44 percent from 43.1 percent in the same period. The company issued upside and sees its EPS to be $3.25 to $3.60 versus the consensus estimate of $3.38. Revenue is projected to be $7.8 billion to $8.2 billion, ahead of the consensus estimate of $7.75 billion. Shares hit new 52 week highs of $57.06 before closing the day at $56.27, up 9.43 percent.

Tessera (NASDAQ: TSRA) announced that it has settled a patent dispute with Taiwanese firm PTI. PTI is paying $196 million via two payments in 2015 and quarterly recurring payments from 2015 to 2018. As a result, Tessera upped its first quarter revenue guidance to $83 million to $86 million from a previous $33 million to $36 million. Shares gained 10.42 percent, closing at $22.25.

Decliners of Note

This morning, Catamaran (NASDAQ: CTRX) reported its fourth quarter results. The company announced an EPS of $0.56, beating the consensus estimate of $0.54. Revenue of $4.53 billion beat the consensus estimate of $4.04 billion. Gross profit for the quarter rose to $1.1 billion compared to $0.7 billion in the same quarter last year. Catamaran ended the quarter with $419 million in cash and $1.27 billion in debt. The company issued negative guidance and sees its full year 2014 EPS to b4 $2.04 to $2.19, below the consensus estimate of $2.41. Revenue is guided to be $20 billion to $21 billion, roughly in-line with the consensus estimate of $20.2 billion. Shares lost 10.89 percent, closing at $46.17.

This morning, Walter Investment Management (NYSE: WAC) reported its fourth quarter results. The company announced an EPS of $1.07, missing the consensus estimate of $1.24. Revenue of $402.8 million beat the consensus estimate of $396.22 million. Net income for the quarter totaled $253.5 million, compared to a net loss of $22.1 million in the same quarter last year. The company issued guidance and sees its full year 2014 EPS to be $5.25 to $6.25, in-line with the consensus estimate of $5.99. Shares hit new 52 week lows of $24.11 before closing the day at $25.90, down 8.42 percent.

In a 24 page report, Citron Research continued its attack on Questcor (NASDAQ: QCOR) and claimed that its research reveal that the company's Achtar gel is at risk of being pulled by the FDA. The full report can be viewed here. Shares lost 9.08 percent, closing at $67.47.

Earnings of Note

This morning, Best Buy (NYSE: BBY) reported its fourth quarter results. The company announced an EPS of $1.24, beating the consensus estimate of $1.01. Revenue of $14.47 billion missed the consensus estimate of $14.66 billion. Comparable store sales declined 1.7 percent but the company swung to a net profit of $293 million in the quarter compared to a loss of $409 million in the same quarter last year. Operating income as a percentage of revenue fell to 4.5 percent from 5.7 percent in the same quarter last year. Best Buy said that it gained market share due to its strategy to be price competitive but warned that it expects total comparable-store sales to drop slightly throughout the first half of 2014. Shares lost 1.12 percent, closing at $25.53 after trading as high as $28.20 in the morning.

Related: Is Best Buy A 'Best Buy' Following Its Earnings?

This morning, Sears Holdings (NASDAQ: SHLD) reported its fourth quarter results. The company announced an EPS of -$0.96, beating the consensus estimate of -$1.82. Revenue of $10.6 billion beat the consensus estimate of $10.57 billion. Net income for the quarter rose to $46 million from $26 million in the same quarter last year. Gross margin for the quarter fell to 23.4 percent from 25.8 percent in the same quarter last year. Sears announced that it grew its online and multi-channel sales by ten percent and as a whole the company generated $2.0 billion of liquidity versus an objective of $500 million through $1.0 billion in proceeds from real estate and $1.0 billion in five-year term loans. Inventory was reduced by $620 million, ahead of an objective of $500 million. Shares gained 6.46 percent, closing at $43.01.

This morning, Valeant Pharma (NYSE: VRX) reported its fourth quarter results. The company announced an EPS of $2.15, beating the consensus estimate of $2.07 billion. Revenue of $2.1 billion beat the consensus estimate of $986.3 million. The company swung to profitability with a net profit of $123.8 million in the quarter compared to a net loss of $89.1 million in the same quarter last year. Earnings received a boost from its acquisition of Bausch & Lomb. The company reaffirmed its 2014 guidance and sees its EPS to be $8.25 to $8.75, ahead of the consensus estimate of $8.63. Revenue is guided to be $8.2 billion to $8.6 billion, ahead of the $8.39 billion consensus estimate. Shares hit new 52 week highs of $153.10 before closing the day at $148.00, up 1.13 percent.

This morning, Ocwen Financial (NYSE: OCN) reported its fourth quarter results. The company announced an EPS of $0.74, missing the consensus estimate of $0.95. Revenue of $555.96 million beat the consensus estimate of $562.08. Net income for the quarter totaled $105.3 million, compared to $65.3 million in the same quarter last year. Management commented that it is working “cooperatively” with the New York Department of Financial Services over its proposed transaction with Wells Fargo. Shares of Ocwen gained 4.65 percent, closing at $38.47.

After the market closed, The Gap (NYSE: GPS) reported its fourth quarter results. The company announced an EPS of $0.68, beating the consensus estimate of $0.66. Revenue of $4.58 billion missed the consensus estimate of $4.60 billion. Shares were trading lower by 1.56 percent at $43.00 following the earnings report.

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After the market closed, Deckers Outdoor (NASDAQ: DECK) reported its fourth quarter results. The company announced an EPS of $4.04, beating the consensus estimate of $3.79. Revenue of $736 million beat the consensus estimate of $711.47 million. Shares were trading lower by 14.96 percent at $72.00 following the earnings report which included negative guidance.

After the market closed, Salesforce.com (NYSE: CRM) reported its fourth quarter results. The company announced an EPS of $0.07, beating the consensus estimate of $0.06. Revenue of $1.15 billion beat the consensus estimate of $1.13 billion. Shares were trading lower by 0.72 percent at $65.74 following the earnings report.

Quote of the Day

"In our opinion, having Mr Cook on the board while planning PayPal's future is akin to having Pete Carroll [the coach of the Seattle Seahawks] sitting in when the Denver Broncos were constructing their game plan for the Super Bowl. (Then again, maybe he did).” - Carl Icahn in a public letter to eBay stock holders.

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