Market Wrap For May 14: Dow's Winning Streak Ends At Five Sessions
U.S. stocks declined a day after the S&P 500 and Dow indices traded at record-high levels. Investors and traders were likely paying attention to the ten-year Treasury yield which hit 2.5258, the lowest level since late October.
The bull market has paused, temporarily at least, until Thursday's economic releases which include industrial production and business activity from the New York and Philadelphia Feds.
Not helping the bull cause is the continued tension in Russia. Next week, Russian President Vladimir Putin will travel to Beijing where it is expected he will sign a major deal to deliver Russian gas to China.
- The Dow lost 0.61 percent, closing at 16,613.97.
- The S&P 500 lost 0.47 percent, closing at 1,888.53.
- The Nasdaq lost 0.72 percent, closing at 4,100.63.
- Gold gained 0.89 percent, trading at $1,306.30 an ounce.
- Oil gained 0.43 percent, trading at $102.14 a barrel.
- Silver gained 1.22 percent, trading at $19.78 an ounce.
News of Note
MBA Mortgage Composite Index rose 3.6 percent after rising 5.3 percent last week.
MBA Purchase Index declined 1.0 percent after rising 9.0 percent last week.
MBA Refinance Index rose 7.0 percent after rising 2.0 percent last week.
Producer Price Index rose 0.6 percent in April after rising 0.5 percent in March. Analysts were expecting the index to rise 0.2 percent in April.
Core PPI rose 0.5 percent in April after rising 0.6 percent in March. Analysts were expecting the PPI to rise 0.2 percent in April.
U.S. Crude Inventories rose by 0.947 million barrels versus expectations of a decline of 100,000 barrels. Gasoline inventories declined 0.8 million barrels versus expectations of a gain of 0.1 million barrels. Distillates declined 1.1 million barrels versus expectations of a gain of 0.6 million barrels.
The United Kingdom's unemployment rate stood at 6.8 percent in the first quarter, marking a five-year low.
Analyst Upgrades and Downgrades of Note
Analysts at JPMorgan maintained an Overweight rating on Cree (NASDAQ: CREE) with a price target lowered to $61 from a previous $72.50. Shares lost 0.31 percent, closing at $45.61.
Analysts at CRT Capital initiated coverage on Dick's Sporting Goods (NYSE: DKS) with a Buy rating and $65 price target. Shares lost 0.87 percent, closing at $52.30.
Analysts at Jefferies maintained a Buy rating on Home Depot (NYSE: HD) with a price target lowered to $90 from a previous $94. Shares lost 1.24 percent, closing at $76.31.
Analysts at Imperial Capital initiated coverage of InvenSense (NASDAQ: INVN) with an Outperform rating and $21 price target. Shares lost 1.85 percent, closing at $17.99.
Analysts at Northcoast Research reinstated coverage of Keurig Green Mountain (NASDAQ: GMCR) with a Sell rating. Shares lost 2.58 percent, closing at $116.00.
Analysts at Citigroup upgraded Legg Mason (NYSE: LM) to Buy from Neutral. Also, analysts at BMO Capital maintained an Underperform rating on Legg Mason with a $44 price target. Shares lost 1.05 percent, closing at $48.24.
Analysts at Jefferies maintained a Hold rating on Lowe's Company (NYSE: LOW) with a price target raised to $45 from a previous $44. Shares lost 1.29 percent, closing at $45.17.
Analysts at MKM Partners maintained a Buy rating on Pandora Media (NYSE: P) with a price target maintained at $35. Also, analysts at Nomura maintained a Neutral rating on Pandora with a price target lowered to $29 from a previous $32. Finally, analysts at Raymond James upgraded Pandora to Outperform from Market Perform with a $31 price target. Shares lost 0.63 percent, closing at $23.62.
Analysts at Bank of America maintained a Buy rating on Take-Two Interactive Software (NASDAQ: TTWO) with a price target raised to $25 from a previous $24. Analysts at Ascendiant Capital also maintained a Buy rating on Take-Two with a price target raised to $26 from a previous $25. Shares lost 7.95 percent, closing at $18.99.
Analysts at Pivotal Research upgraded Twitter (NYSE: TWTR) to Hold from Sell with an unchanged $34 price target. Shares lost 1.62 percent, closing at $32.85.
Analysts at Jefferies maintained a Buy rating on Wal-Mart (NYSE: WMT) with a price target raised to $92 from a previous $87. Shares lost 0.51 percent, closing at $78.74.
Analysts at Cowen & Company downgraded Walgreen (NYSE: WAG) to Market Perform from Outperform. Shares lost 1.38 percent, closing at $68.61.
Analysts at Nomura initiated coverage of Wells Fargo (NYSE: WFC) with a Buy rating and $60 price target. Shares lost 1.04 percent, closing at $49.29.
Equities-Specific News of Note
Boeing (NYSE: BA) has won a $3.8 billion contract to supply a Chinese low-cost airline with 50 next-generation 737s and 737 Max aircraft. Shares lost 0.34 percent, closing at $132.99.
Citigroup (NYSE: C) has fired 11 employees related to the probe of Banamex loan fraud including four managing directors, two of which were business heads in Mexico. Shares lost 0.63 percent, closing at $47.12.
Ford (NYSE: F) announced that its sales in Europe rose 6.6 percent in April to 99,700 vehicles. Shares lost 0.69 percent, closing at $15.75.
Analysts at Barclays noted that a potential deal between AT&T (NYSE: T) and DirecTV (NYSE: DTV) may actually be a positive for T-Mobile (NYSE: TMUS) which opens the possibility of a deal between T-Mobile and Dish Network (NASDAQ: DISH). Shares of AT&T gained 0.52 percent, closing at $36.39 while shares of DirecTV lost 0.95 percent, closing at $85.26. Shares of T-Mobile lost 0.24 percent, closing at $32.84 while shares of Dish lost 1.43 percent, closing at $60.18.
Yahoo! (NASDAQ: YHOO) has purchased Blink for an undisclosed amount. Blink offers an instant-messaging platform in which users send messages that “self-destruct” after a set amount of time. Shares lost 0.67 percent, closing at $34.17.
IBM's (NYSE: IBM) CFO reiterated prior guidance of earning $20 per share by 2015 during an investor briefing. The executive noted that the company is seeing growth out of software and services and facing challenges in hardware.
Southwest Airlines (NYSE: LUV) authorized a new $1 billion stock repurchase program, of which $200 million worth of shares can be bought back at an accelerated pace. Shares lost 0.28 percent, closing at $24.91.
The New York Times (NYSE: NYT) announced that Jill Abramson who is currently executive editor of the newspaper is unexpectedly leaving the company. Abramson will be replaced with the current managing editor Dean Baquet. Shares lost 4.50 percent, closing at $15.06.
BHP Billiton (NYSE: BHP) is reviewing options for its Western Australian Nickel West unit which includes the possibility of selling the division for as much as $700 million. Shares gained 0.76 percent, closing at $71.97.
Winners of Note
Following the termination of a lock-up period, insiders were allowed to sell shares of Zulily (NASDAQ: ZU) for the first time. Shares hit new 52-week lows of $28.75 in the morning but surged higher. It is likely many short-sellers covered their positions given the 63 percent short interest rate in the stock. Shares gained 9.31 percent, closing at $34.99.
This morning, Kate Spade (NYSE: KATE) reported its first quarter results. The company announced an EPS of -$0.06, missing the consensus estimate of -$0.04. Revenue of $328 million beat the consensus estimate of $201.28 million. Net income for the quarter rose to $46 million from a net loss of $52 million in the same quarter a year. However, results from continuing operations which include the planned wind-down of the Juicy Couture line and exclude results from the Lucky brand declined to a loss of $54.7 million from a loss of $39.6 million a year ago. Comparable net sales were $224 million, a rise of 43 percent from a year ago. Of note, the Kate Spade segment saw its revenue rise 54 percent to $76 million from a year ago. Finally, direct to consumer saw a sales growth of 22 percent as the company opened two global flagship stores in Houston and Tokyo. Shares gained 8.51 percent, closing at $37.60.
Decliners of Note
Sears Holdings (NASDAQ: SHLD) said that it is considering a move to either sell 51 percent of Sears Canada or put the whole division up for sale. Shares lost 5.85 percent, closing at $40.70 but traded as high as $47.00 in the morning.
Sony (NYSE: SNE) reported a net loss of 138 billion yen (approximately $1.3 billion) in its fourth quarter, compared to a profit of 93.2 billion yen in the same quarter a year ago despite revenue rising 8.1 percent year over year to 1.87 trillion. Sony issued guidance and says that the company is expected to post a net loss of 50 billion yen for the full fiscal year ending in March 2015. The guidance implies that Sony will post its sixth annual loss in seven years as problems at its electronic division continue to mount. Sony will see continued restructuring costs from the sale of its PC unit and other strategic initiatives. Shares lost 6.46 percent, closing at $16.50.
Earnings of Note
This morning, Coty (NASDAQ: COTY) reported its third quarter results. The company announced an EPS of $0.22, beating the consensus estimate of $0.09. Revenue of $1 billion was in-line with the consensus estimate. Net income for the quarter rose to $86.7 million from $68.4 million in the same quarter a year ago as the company saw solid gains in most regions, specifically in emerging markets where revenue grew 15 percent from a year ago. Revenue declined by 11 percent in the Americas to $382.2 million while sales in EMEA rose ten percent to $499.9 million and Asia Pacific saw the largest growth with sales rising 14 percent to $126.6 million. Overall, sales of Fragrances rose six percent to $508 million, Skin & Body Care sales rose eight percent to $156 million while Color Cosmetics sales declined six percent to $345 million. Shares gained 2.14 percent, closing at $15.77.
This morning, Deere & Company (NYSE: DE) reported its second quarter results. The company announced an EPS of $2.65, beating the consensus estimate of $2.50. Revenue of $9.95 billion beat the consensus estimate of $9.92 billion. Net income for the quarter fell to $1.662 billion from $1.734 billion in the same quarter a year ago as world-wide sales and revenues were nine percent higher a year ago. Sales of the company's Agriculture and turf division declined 12 percent from a year ago to $7.65 billion while sales of construction and forestry rose two percent to $1.60 billion. Deere issued guidance and cut its full year sales outlook and is expecting total sales to decline four percent compared to a previous guidance of a decline of three percent. Shares lost 2.04 percent, closing at $91.70.
This morning, SodaStream (NASDAQ: SODA) reported its first quarter results. The company announced an EPS of $0.08, beating the consensus estimate of $0.01. Revenue of $118.2 million beat the consensus estimate of $117.96 million. Net income for the quarter fell to $1.8 million from $12.1 million in the same quarter a year ago as sales in the Americas fell 28 percent to $48.3 million year over year. The company its sales rise in Western Europe by 17 percent to $53.3 million while Central & Eastern Europe, Middle East and Africa saw sales rise by 34 percent to $6.7 million. Overall, sales of consumables rose 11 percent and partially offset a decline of 10.8 percent in soda maker kits. SodaStream issued guidance and sees its full year fiscal 2014 revenue to rise by 15 percent to $647.11 million, coming ahead of the consensus estimate of $639.3 million. The company also guided its fiscal 2014 net income to rise by three percent to $42 million. Shares lost 1.22 percent, closing at $40.62.
This morning, Macy's (NYSE: M) reported its first quarter results. The company announced an EPS of $0.60, beating the consensus estimate of $0.59. Revenue of $6.28 billion missed the consensus estimate of $6.46 billion. Net income for the quarter rose to $224 million from $217 million in the same quarter a year ago as the company noted business improved in April when the weather moderated. Macy's saw its gross margin rate improve by 10 bp to 38.9 percent despite a drop of 1.6 percent in comparable-store sales. Macy's increased its share buyback allowance by $1.5 billion and is now authorized to buyback up to $2.5 billion worth of shares. Macy's reiterated previous guidance and sees its full year fiscal 2014 EPS to be $4.40 to $4.50. Shares lost 0.02 percent, closing at $57.83.
After the market closed, Cisco (NASDAQ: CSCO) reported its third quarter results. The company announced an EPS of $0.51, beating the consensus estimate of $0.48. Revenue of $11.54 billion beat the consensus estimate of $11.38 billion.
Quote of the Day
"Be Fearful When Others Are Greedy and Greedy When Others Are Fearful." - Warren Buffett
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