Market Wrap For May 12: Dow And S&P Close At Record Highs
U.S. stocks rose as both the Dow and S&P 500 indices closed at record highs.
With over 90 percent of S&P 500 companies reported earnings, investor focus has shifted to renewed merger and acquisition activity that provides a higher level of confidence that the economy is expanding.
The Dow rose to historical all-time highs of 16,704.84 during Monday's trading session. The S&P 500 also rose to a historical all-time high of 1,897.13.
With the month nearing its half-way point, the slogan "sell in May" appears to be a flawed approach for the bulls.
- The Dow gained 0.68 percent, closing at 16,695.47.
- The S&P 500 gained 0.97 percent, closing at 1,896.65.
- The Nasdaq gained 1.77 percent, closing at 4,143.86.
- Gold gained 0.68 percent, trading at $1,296.30 an ounce.
- Oil gained 0.68 percent, trading at $100.67 a barrel.
- Silver gained 2.22 percent, trading at $19.55 an ounce.
News of Note
The head of the Federal Communications Commission intends to revise proposed rules for regulating the Internet, including offering assurances that it will not allow companies to split up traffic into “fast” and “slow” lanes.
Former Treasury Secretary Timothy Geithner released his memoir of the financial crisis, named “Stress Test.”
Japan's current account surplus fell to 116.4 billion yen ($1.14 billion) in March from 612.7 billion yen in February and missing the consensus of 347.7 billion yen in March.
India's national elections are due on Friday with Narendra Modi expected to win. Modi is from the business-friendly Bharatiya Janata Party who has pledged to repair the ailing high-inflation economy that has suffered the worst slowdown since the 1980s.
Saudi Arabia's Oil Minister Ali al-Naimi said that his country could step up its oil production if the ongoing tension between Ukraine and Russia causes energy shortages in the international market. The oil-rich country's announcement comes at a time when Russian based Gazprom is threatening to pull the plug and cease supplying gas to Ukraine on June 3 unless the country begins making payments.
Analyst Upgrades and Downgrades of Note
Analysts at RBC Capital upgraded Actavis (NYSE: ACT) to Top Pick from Outperform with a price target raised to $259 from a previous $252. Shares gained 3.56 percent, closing at $203.17.
Analysts at Goldman Sachs downgraded Apollo Global Management (NYSE: APO) to Neutral from Buy. Meanwhile, analysts at Deutsche Bank maintained a Hold rating on Apollo Global with a price target lowered to $27 from a previous $29. Shares lost 2.06 percent, closing at $25.65.
Analysts at Barclays maintained an Equal-weight rating on Avis Budget (NYSE: CAR) with a price target raised to $46 from a previous $42. Shares gained 3.07 percent, closing at $53.46.
Analysts at Jefferies maintained a Buy rating on Bank of America (NYSE: BAC) with a price target lowered to $18.00 from a previous $18.50. Shares gained 2.24 percent, closing at $15.07.
Analysts at Jefferies maintained a Buy rating on DISH Network (NASDAQ: DISH) with a price target raised to $70 from a previous $63. Shares gained 0.56 percent, closing at $60.97.
Analysts at Barclays maintained an Overweight rating on Deere & Company (NYSE: DE) with a price target maintained at $101. Taking the opposite side, analysts at Longbow Research downgraded Deere to Underperform from Neutral with an $80 price target. Shares lost 0.75 percent, closing at $93.63.
Analysts at Deutsche Bank maintained a Buy rating on Dick's Sporting Goods. (NYSE: DKS) Meanwhile, analysts at Credit Suisse initiated coverage of Dick's Sporting with an Outperform rating and $65 price target. Shares gained 0.93 percent, closing at $53.13.
Analysts at Barclays maintained an Overweight rating on Hilton Worldwide (NYSE: HLT) with a price target raised to $26 from a previous $25. Also, analysts at UBS upgraded Hilton to Buy from Neutral. Shares lost 0.39 percent, closing at $22.98.
Analysts at Jefferies maintained a Buy rating on JPMorgan Chase (NYSE: JPM) with a price target lowered to $65 from a previous $68. Shares gained 1.27 percent, closing at $54.69.
Analysts at MKM Partners upgraded Pandora Media (NYSE: P) to Buy from Neutral with a price target lowered to $32 from a previous $39. Shares gained 6.06 percent, closing at $23.99.
Analysts at Credit Suisse downgraded Ralph Lauren (NYSE: RL) to Neutral from Outperform with a $165 price target. Shares lost 0.98 percent, closing at $147.35.
Analysts at Craig-Hallum downgraded Stratasys (NASDAQ: SSYS) to Hold from Buy with a price target lowered to $90 from a previous $135. Meanwhile, analysts at Jefferies and UBS each maintained a Buy rating with price targets of $140 (lowered from $155) and $120 (lowered from $130), respectively. Shares lost 0.53 percent, closing at $89.42.
Analysts at Guggenheim Securities upgraded The Travelers Companies (NYSE: TRV) to Buy from Neutral with a price target raised to $117 from a previous $98. Shares hit new 52-week highs of $92.93 before closing the day at $92.05, up 0.82 percent.
Analysts at SunTrust Robinson Humphrey upgraded Twitter (NYSE: TWTR) to Buy from Neutral with a price target lowered to $45 from a previous $50. Shares gained 5.87 percent, closing at $33.93.
Equities-Specific News of Note
AIG (NYSE: AIG) will name either Peter Hancock, head of the company's property-casualty unit or Jay Wintrob, head of the company's life-insurance and retirement business to replace outgoing CEO Robert Benmosche who is scheduled to retire in early 2015. Shares hit new 52-week highs of $53.44 before closing the day at $53.37, up 2.08 percent.
Pfizer (NYSE: PFE) said that its five-year pledge to retain 20 percent of its R&D staff in the U.K. should be considered a legally binding promise if it acquires AstraZeneca. (NYSE: AZN) Shares of Pfizer gained 0.31 percent, closing at $29.12 while shares of AstraZeneca gained 0.82 percent, closing at $77.87.
General Motors (NYSE: GM) plans to begin offering 4G Wi-Fi on certain 2015 car models. The Internet signal will be part of the Onstar connectivity system and cost $5 a month. Shares gained 1.69 percent, closing at $34.81.
BP (NYSE: BP) announced it will invest $1.5 billion in Egypt to increase its production of natural gas in the country. Shares gained 0.27 percent, closing at $50.69.
J.C. Penney (NYSE: JCP) will get rid of its ritzy office building on Lafayette Street in SoHo Manhattan in which the company's previous CEO Ron Johnson planned to build a 30,000 square foot retail space. Shares gained 4.32 percent, closing at $9.18.
Bill Ackman denied any involvement in Herbalife's (NYSE: HLF) discovery of listening devices at its headquarters in Los Angeles. Shares lost 0.78 percent, closing at $61.22.
Alcoa (NYSE: AA) will cut back its aluminum production in Brazil and enter into energy trading as power prices soar in the country. Shares gained 4.23 percent, closing at $13.81.
Allergan's (NYSE: AGN) board of directors unanimously rejected Valeant Pharmaceuticals' (NYSE: VRX) $46 billion acquisition offer. Allergan stated “After careful review and consideration, our Board of Directors has unanimously determined that Valeant's unsolicited proposal substantially undervalues Allergan and does not reflect the value of the Company's leading market positions, sales and marketing foundation, industry-leading research and development efforts, as well as future revenue and earnings growth.” Shares of Allergan lost 1.02 percent, closing at $159.66 while shares of Valeant lost 0.65 percent, closing at $130.32.
Winners of Note
Pinnacle Foods (NYSE: PF) has agreed to be acquired by Hillshire Brands for $6.6 billion in cash and stock. The deal translates to a buyout price of $36.02, a roughly 18 percent premium to Pinnacle's closing price of $30.45 on Friday. The newly combined company is expected to be immediately accretive to Hillshire and provide annual synergies of $140 million by the end of the third year following the merger. Shares of Pinnacle Foods surged to new 52-week highs of $35.67 before closing the day at $34.47, up 13.20 percent.
Tesaro's (NASDAQ: TSRO) Rolapitant drug which is intended to prevent chemotherapy-induced nausea and vomiting has met the primary and secondary goals of a Phase III study involving 532 patients. The company intends to apply for FDA approval of Rolapitant in mid-2014. Shares surged 20.99 percent, closing at $29.05.
This morning, GOGO (NASDAQ: GOGO) reported its first quarter results. The company announced an EPS of -$0.20, beating the consensus estimate of -$0.24. Revenue of $95.7 million beat the consensus estimate of $94.58. Net income for the quarter narrowed to $16.87 million from $32.45 million in the same quarter a year ago as service revenue rose 32 percent year over year to $72.3 million (and fares positively from the previous quarter's 44 percent decline) and equipment revenue rose 48 percent to $23.4 million. GOGO issued guidance and reiterated full year revenue to be $400 million to $422 million versus a consensus estimate of $412.9 million. The company also guided its adjusted EBITDA for the full year to be $8 million to $18 million. Shares gained 6.20 percent, closing at $12.67.
Decliners of Note
Core Labs (NYSE: CLB) issued downside guidance for its second quarter and full year fiscal 2015 due to North American clients projecting sampling and analyzing less than previously expected levels of fluids. The company sees its second quarter EPS to be $1.32 to $1.35, below the consensus estimate of $1.51. Second quarter revenue is guided to be $265 million to $270 million, below the consensus estimate of $284 million. For full year fiscal 2015 the company is guiding its EPS to be $5.80 to $6.00, below the consensus estimate of $7.10. Shares lost 11.68 percent, closing at $167.02.
Earnings of Note
After the market closed, McKesson (NYSE: MCK) reported its fourth quarter results. The company announced an EPS of $2.55, beating the consensus estimate of $2.40. Revenue of $38.1 billion beat the consensus estimate of $35.89 billion. Shares were trading higher by 2.16 percent at $178.00 following the earnings report.
Quote of the Day
“Meetings are life in Washington. Often they're just for show, a way to suggest motion or commitment to an issue. Sometimes their main purpose is to make people feel included. But occasionally they're the real thing, a forum for actual policy making. I got into the habit of walking into crowded meetings in Larry's [Summers] office and joking: ‘Is this a real meeting or a fake meeting?' In other words, are we talking about a policy that requires a decision, or just talking? When it was a real meeting, I'd usually suggest that we skip the throat-clearing and fast-forward to the end of the PowerPoint deck so we could get to the debate about options. I wore my impatience too openly.” - Passage from Timothy Geithner's Book "Stress Test."
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