Market Wrap For May 5: Dow Erases Triple-Digit Loss, All Three Major Indices Positive
U.S. stocks rose as investors found that the positives in the U.S. services sector outweighed concerns over an escalating conflict in Ukraine.
The Institute for Supply Management said that its service-sector index rose to 55.2.
Any reading above 50.0 indicates an expansion. Also, the index grew at the fastest pace since August 2013 which provided investors and traders with confidence that the economy is expanding.
Ukraine has dispatched its special forces to Odessa following pro-Russian forces storming a police station. The developments follows violence seen over the weekend in which 42 people were killed in the South-Western port city.
- The Dow gained 0.11 percent, closing at 16,530.55.
- The S&P 500 gained 0.19 percent, closing at 1,884.66.
- The Nasdaq gained 0.34 percent, closing at 4,138.06.
- Gold gained 0.61 percent, trading at $1,310.80 an ounce.
- Oil lost 0.34 percent, trading at $99.42 a barrel.
- Silver gained 0.48 percent, trading at $19.64 an ounce.
News of Note
U.S. April PMI Services Index rose to 55 from 55.3 in March.
U.S. April ISM Non-Manufacturing Index rose to 55.2 from 53.1 and topping the consensus estimate of of 54.1.
April Global Manufacturing PMI fell to 51.9 from 52.4 in March.
China's HSBC PMI rose to 48.1 in April from 48 in March but missed the flash figure of 48.3.
The European Commission is forecasting the eurozone GDP to grow 1.2 percent in 2014 and 1.7 percent in 2015.
Greece is asking the eurozone to extend its loan repayments to fifty years from thirty years and for a lower interest rate on some of its debt.
Analyst Upgrades and Downgrades of Note
Analysts at Morgan Stanley maintained an Overweight rating on Agnico-Eagle Mines (NYSE: AEM) with a price target raised to $37 from a previous $36. Shares lost 0.87 percent, closing at $32.03.
Analysts at Barclays maintained an Overweight on CVS Caremark (NYSE: CVS) with a price target raised to $85 from a previous $74. Shares gained 1.52 percent, closing at $74.98.
Analysts at Raymond James upgraded Chipotle Mexican Grill (NYSE: CMG) with a price target of $560. Shares gained 2.17 percent, closing at $512.68.
Analysts at Brean Capital maintained a Buy rating on DIRECTV (NYSE: DTV) with a price target raised to $92 from a previous $85. Shares lost 0.04 percent, closing at $79.84.
Analysts at BMO Capital downgraded Estee Lauder (NYSE: EL) to Market Perform from Outperform with a price target unchanged at $76. Taking the opposite side, analysts at UBS maintained a Buy rating on Estee Lauder with a price target raised to $87 from a previous $81. Also, analysts at Stifel Nicolaus maintained a Buy rating with a price target raised to $80 from a previous $78. Shares lost 2.06 percent, closing at $74.06.
Analysts at Barclays maintained an Equal-weight rating on Exxon Mobil (NYSE: XOM) with a price target raised to $100 from a previous $95. Shares hit new 52-week highs of $103.13 before closing the day at $102.91.
Analysts at Deutsche Bank initiated coverage of FireEye (NASDAQ: FEYE) with a Hold rating and $45 price target. Shares gained 0.73 percent, closing at $40.23.
Analysts at MKM Partners downgraded Hyatt Hotels (NYSE: H) to Neutral from Buy with a price target raised to $64 from a previous $61. Shares lost 0.28 percent, closing at $57.83.
Analysts at Citigroup maintained a buy rating on JPMorgan Chase (NYSE: JPM) with a price target lowered to $68 from a previous $72. Shares lost 2.45 percent, closing at $54.22.
Analysts at Citigroup maintained a Buy rating on Johnson & Johnson (NYSE: JNJ) with a price target raised to $117 from a previous $114. Shares gained 0.69 percent, closing at $100.00.
Analysts at UBS maintained a Neutral rating on MGM Resorts (NYSE: MGM) with a price target raised to $27 from a previous $26. Shares lost 1.13 percent, closing at $26.19.
Analysts at Goldman Sachs maintained a Neutral rating on Office Depot (NYSE: ODP) with an unchanged price target of $4.75. Shares lost 1.88 percent, closing at $4.17.
Analysts at ISI Group upgraded Salesforce.com (NYSE: CRM) to Buy from Hold with a price target unchanged at $65. Shares gained 2.31 percent, closing at $53.65.
Analysts at ISI Group upgraded SanDisk (NYSE: SNDK) to Strong Buy from Neutral with a price target raised to $110 from a previous $87. Shares gained 1.42 percent, closing at $86.86.
Analysts at Oppenheimer downgraded Sina (NASDAQ: SINA) to Market Perform from Outperform while removing a previous $90 price target. Shares lost 0.44 percent, closing at $47.94.
Analysts at Benchmark downgraded Take-Two Interactive (NASDAQ: TTWO) to Hold from Buy. Shares lost 0.63 percent, closing at $20.64.
Analysts at Topeka upgraded Walt Disney Company (NYSE: DIS) to Buy from Hold with a price target raised to $91 from a previous $78. Shares gained 1.13 percent, closing at $81.22.
Analysts at Wolfe Research downgraded Whole Foods Market (NYSE: WFM) to Underperform from Outperform. Shares lost 2.76 percent, closing at $48.28.
Equities-Specific News of Note
Target's (NYSE: TGT) chairman and CEO Gregg Steinhafel has resigned from the company and will be replaced by the CFO John Mulligan on an interim basis. Shares lost 3.45 percent, closing at $59.87.
A six-month luck-up of nearly half a billion shares of Twitter (NYSE: TWTR) expires today. Separately, Twitter users will now be able to automatically add Amazon.com merchandise to their shopping carts by using the hashtag #AmazonCart. Shares of Twitter lost 0.69 percent, closing at $38.75.
SAP (NYSE: SAP) saw its executive board member for products and innovation chief Vishal Sikka leave the company for “personal reasons.” Shares lost 1.89 percent, closing at $78.50.
The French government announced that it is opposed to General Electric's (NYSE: GE) $13.5 billion offer to acquire France based Alstom's energy assets. Shares of General Electric lost 0.37 percent, closing at $26.58.
Staples (NASDAQ: SPLS) has agreed to acquire PNI Digital Media, a provider of digital media software and services for retailers for C$73.1 million, approximately $67 million. Shares of Staples lost 0.55 percent, closing at $12.55.
Walgreens (NYSE: WAG) announced that its same-store sales rose 7.6 percent year over year in April. Shares gained 1.44 percent, closing a $69.85.
Third Point's Dan Loeb has agreed to discontinue his proxy challenge and will join Sotheby's (NYSE: BID) board along with two other Third Point nominees. Sotheby will discontinue its poison pill while Third Point's stake in the company cannot exceed 15 percent. Shares of Sotheby's gained 3.25 percent, closing at $44.80.
Citigroup (NYSE: C) won a contract to provide custody and securities lending services to Norway's nearly $900 billion sovereign wealth fund. Separately, Citigroup could be targeted by the Department of Justice over Banamex according to analysts at FBN. Shares lost 1.15 percent, closing at $47.18.
The FDA approved Alexion Pharmaceuticals' (NASDAQ: ALXN) supplemental Biologics License Application for its Soliris therapy. Shares gained 2.95 percent, closing at $159.70.
BlackBerry (NASDAQ: BBRY) announced that it plans to sell the majority of its Canadian real estate space for C$305 million which is approximately $278 million. Shares lost 2.94 percent, closing at $7.91.
The FDA approved Teva Pharmaceutical's (NASDAQ: TEVA) Synribo injection for chronic myeloid leukemia patients that can be administered at home. Shares gained 1.58 percent, closing at $50.65.
Winners of Note
B/E Aerospace (NASDAQ: BEAV) is considering a sale of the company, divesting its parts or splitting itself up. The company has hired bankers at Citigroup and have cancelled its investor day. The company hinted in the prior weeks that it is looking to be buyers, not sellers. Shares hit new 52-week highs of $100.25 before closing the day at $97.22, up 9.29 percent.
A total of nine research firms initiated coverage of King Digital Entertainment (NYSE: KING) with bullish ratings following the termination of the "quiet period." Piper Jaffray, the lone non-bull initiated coverage with a Neutral rating. Shares gained 8.49 percent, closing at $19.05.
Decliners of Note
This morning, Tyson Foods (NYSE: TSN) reported its second quarter results. The company announced an EPS of $0.60, missing the consensus estimate of $0.63. Revenue of $9.03 billion beat the consensus estimate of $9.11 billion. Net income for the quarter rose to $213 million from $95 million in the same quarter a year ago. During the company's conference call, management blamed its EPS miss on harsh winter weather and hog virus concerns. During the quarter, chicken sales price fell 0.3 percent, beef rose 13 percent and pork rose 12.5 percent. Looking forward, the company sees its chicken segment above a normalized range of five percent to seven percent, beef below a normalized range of 2.5 percent to 4.5 percent and pork at a normalized range of six percent to eight percent. Tyson issued guidance and sees its full year earnings to be $2.78, below the consensus estimate of 2.93. Shares lost 9.87 percent, closing at $38.44.
KBR (NYSE: KBR) announced that it will refile its 2013 financial statements as the company discovered material charges in connection with the preparation of its first quarter 10-Q. The company noted that it overstated revenue recognition in a long-term project by around $9 million. Shares hit new 52-week lows of $24.22 before closing the day a penny higher at $24.23, down 6.23 percent.
Earnings of Note
This morning, Pfizer (NYSE: PFE) reported its first quarter results. The company announced an EPS of $0.57, beating the consensus estimate of $0.55. Revenue of $11.29 billion missed the consensus estimate of $12.07 billion. Net income for the quarter fell to $2.33 billion from $2.75 billion in the same quarter a year ago as the company saw revenue declines in many of its segments. Sales in its GEP division fell 13 percent to $5.99 billion, while sales of its GIP division fell seven percent to $3.1 billion. Sales from its Consumer division fell 6.2 percent to $761 million while global vaccines, global oncology and other segments were the few gainers. Pfizer noted that it can not provide guidance due to U.K. takeover restrictions and previous guidance should be considered no longer valid. Shares lost 2.57 percent, closing at $29.96.
This morning, Occidental Petroleum (NYSE: OXY) reported its first quarter results. The company announced an EPS of $1.75, beating the consensus estimate of $1.70. Revenue of $6.08 billion missed the consensus estimate of $6.21 billion. Net income for the quarter rose to $1.39 billion from $1.36 billion in the same quarter a year ago as the company benefited from higher crude oil and natural gas prices. The company noted that its oil and gas production fell to 745,000 barrels of energy per day from 763,000 a year ago which was offset by higher commodity prices. The price for crude oil rose one percent to $99 per barrel over a year ago while crude prices rose 4.8 percent to $95.94 per barrel over the same time period. Shares gained 0.28 percent, closing at $94.70.
After the market closed, American International Group (NYSE: AIG) reported its first quarter results. The company announced an EPS of $1.21, beating the consensus estimate of $1.06. Revenue of $8.23 billion missed the consensus estimate of $9.35 billion. Shares were trading lower by 2.52 percent at $51.39 following the earnings release.
Quote of the Day
“The news at Target could be summed up rather quickly: the culture of Target, which is to move very methodically, hindered parting ways with a company lifer immediately after an event that caused a material weakness in the business. In truth, Mr. Steinhafel should have been pushed aside coming into the key spring selling season AND before starting to set strategies for the upcoming holiday season of 2014 (and even, back to school). The fact he wasn't is a knock on Target's board.” – Belus Capital Advisor's CEO and Chief Equities Strategist Brian Sozzi in a note to clients on Monday following Target's decision to part ways with Steinhafel.
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