Market Wrap For May 15: Bears Return In Full-Force As Dow Suffers Triple-Digit Point Loss
U.S. stocks declined for the second straight day after investors and traders digested disappointing earnings from retailers and economic reports were disappointing.
The Dow suffered a triple-digit point loss and declined one percent after the retailer giant Wal-Mart failed to "wow" investors. The S&P 500 and Nasdaq indices weren't too far behind, immediately selling off after the opening bell.
As would be expected, the Volatility Index (or "fear index") surged more than ten percent to trade near 14.
The government of Ukraine said that it is ready to pay Russia $4 billion for natural gas but wants Russia to revert back to a lower price. Russian President Vladimir Putin reiterated a new policy that the country will only deliver gas to Ukraine if the country pre-pays for the gas in cash.
- The Dow lost 1.01 percent, closing at 16,446.81.
- The S&P 500 lost 0.94 percent, closing at 1,870.85.
- The Nasdaq lost 0.76 percent, closing at 4,069.29.
- Gold lost 0.75 percent, trading at $1,296.10 an ounce.
- Oil lost 0.85 percent, trading at $101.50 a barrel.
- Silver lost 1.42 percent, trading at $19.50 an ounce.
News of Note
Initial Jobless Claims declined 24,000 to 297,000, below the consensus of 317,000 and a prior reading of 321,000.
May Empire State Survey rose to 19.01 in May from 1.29 in April and topping analyst expectations for a 6.0 level in May.
April Consumer Price Index rose 0.3 percent, in-line with estimates and higher than March's 0.2 percent gain. Core CPI rose 0.2 percent, topping expectations for a gain of 0.1 percent and matching March's 0.2 percent gain.
First Quarter E-Commerce Retail Sales slowed to 2.8 percent growth quarter over quarter to $71.2 billion after rising 3.4 percent in the fourth quarter.
May Philly Fed Business Outlook fell to +15.4 from +16.6 in April but beat expectations of 14.0.
NAHB Housing Market Index fell to 45.0 in May from 46.0 in April.
April Industrial Production declined 0.6 percent after rising 0.9 percent in March. Analysts were expecting a flat growth in April. Capacity utilization fell to 78.6 in April percent from 79.3 percent in March, missing expectations of 79.2 percent.
EIA Natural Gas Inventory rose 105 bcf, above expectations for a gain of 99 bcf.
The FCC voted in a 3-2 favor on chairman Tom Wheeler's net neutrality proposal.
Eurozone GDP grew 0.2 percent in the first quarter, matching growth set in the fourth quarter. However, economists were expecting a growth of 0.4 percent in the first quarter. On year, GDP in the eurozone rose 0.9 percent, falling short of analysts' expectations for a growth of 1.1 percent.
Japan's GDP rose to 5.9 percent on an annualized basis in the first quarter after rising only 0.3 percent last quarter. Analysts were expecting the economy to rise 4.2 percent in the first quarter.
Analyst Upgrades and Downgrades of Note
Analysts at UBS downgraded B/E Aerospace (NASDAQ: BEAV) to Neutral from Buy. Shares lost 1.57 percent, closing at $96.41.
Analysts at Deutsche Bank maintained a Hold rating on Campbell Soup (NYSE: CPB) with a price target raised to $42 from a previous $41. shares lost 0.62 percent, closing at $45.03.
Analysts at Credit Suisse maintained an Outperform rating on Deere & Company (NYSE: DE) with a price target raised to $104 from a previous $102. Shares lost 0.53 percent, closing at $91.21.
Analysts at Bank of America downgraded Huntington Ingalls (NYSE: HII) to Neutral from Buy with a price target raised to $106 from a previous $102. Shares lost 3.26 percent, closing at $96.45.
Analysts at Summer Street initiated coverage of Intercept (NASDAQ: ICPT) with a Buy rating and $650 price target. Shares gained 4.12 percent, closing at $282.11.
Analysts at Nomura maintained a Buy rating on Kate Spade (NYSE: KATE) with a price target raised to $43 from a previous $41. Shares lost 4.04 percent, closing at $36.08.
Analysts at Cowen & Company upgraded Plug Power (NASDAQ: PLUG) to Outperform from Market Perform with a price target lowered to $6 from a previous $7.50. Shares gained 5.50 percent, closing at $4.03.
Analysts at Citigroup maintained a Buy rating on SodaStream (NASDAQ: SODA) with a price target lowered to $47 from a previous $48. Shares lost 0.39 percent, closing at $40.46.
Analysts at Stifel Nicolaus maintained a Buy rating on Take-Two Interactive Software (NASDAQ: TTWO) with a price target raised to $24 from a previous $23. Shares lost 0.95 percent, closing at $18.81.
Analysts at FBR Capital downgraded Urban Outfitters (NASDAQ: URBN) to Market Perform from Outperform with a price target lowered to $37 from a previous $44. Meanwhile, analysts at Brean Capital maintained a Buy rating on Urban Outfitters with an unchanged price target of $43. Shares lost 3.57 percent, closing at $35.36.
Analysts at SunTrust Robinson Humphrey upgraded Zimmer Holdings (NYSE: ZMH) to Buy from Neutral with a price target raised to $120 from a previous $93. Shares lost 0.79 percent, closing at $100.13.
Equities-Specific News of Note
Murphy Oil (NYSE: MUR) is planning on selling as much as a 30 percent stake in its Malaysian oil and gas assets for approximately $2 billion. Shares gained 0.46 percent, closing at $61.10.
Perry Capital increased its stake in Herbalife (NYSE: HLF) to 4.8 million (good for a 4.9 percent stake) from three million shares in December. Shares gained 0.36 percent, closing at $61.46.
According to MGM Resorts' (NYSE: MGM) CEO James Murren, the company is predicting that a potential property in Japan could prove to be more lucrative and generate more revenue than its assets in Macau. shares closed the day unchanged at $24.21.
Amazon.com (NASDAQ: AMZN) announced the launch dates for three new series targeted at children. The first series, Tumble Leaf, will be available for streaming on May 23 with the other series available on June 27 and July 25. Shares lost 0.82 percent, closing at $295.19.
Chipotle Mexican Grill (NYSE: CMG) shareholders voted against the company's executive compensation plan which included a minimum of $24 million pay-day for each of its co-CEOs. Shares lost 1.68 percent, closing at $495.86.
Tesla's (NASDAQ: TSLA) CEO Elon Musk said that he believes the global auto industry will require 200 giga-factories to supply low-cost lithium-ion batteries for electric vehicles. Shares lost 1.06 percent, closing at $188.59.
General Motors (NYSE: GM) recalled 140,000 Chevrolet Malibu vehicles after discovering potential problems with its power braking system. Shares lost 1.66 percent, closing at $34.36.
The FCC voted 3-2 to restrict the amount of spectrum AT&T (NYSE: T) and Verizon (NYSE: VZ) could purchase in future spectrum auctions. Shares of AT&T gained 0.36 percent, closing at $36.53 while shares of Verizon lost 0.10 percent, closing at $47.96.
Credit Suisse (NYSE: CS) will plead guilty to charges accusing the bank of helping customers with tax evasion. The fine of $2.5 billion will be divided between the New York State Department of Financial Services, the Fed, and the Department of Justice. Shares lost 1.62 percent, closing at $29.11.
21st Century Fox (NYSE: FOXA) and Apollo Global Management (NYSE: APO) have struck a preliminary deal to create a $2 billion TV production joint venture. Shares of 21st Century lost 0.76 percent, closing at $34.02 while shares of Apollo lost 1.60 percent, closing at $25.28.
AstraZeneca's (NYSE: AZN) board of directors and CEO acknowledged that they are open to negotiate a deal with Pfizer (NYSE: PFE) if what they consider to be an attractive offer is made. Shares of AstraZeneca gained 2.85 percent, closing at $80.52 while shares of Pfizer lost 0.14 percent, closing at $29.06.
Boston Scientific (NYSE: BSX) has agreed to acquire Bayer's Interventional device business for $415 million.
eBay (NASDAQ: EBAY) launched Spanish and Portuguese versions of its auction platform across South and Central America. Shares lost 0.54 percent, closing at $51.37.
Winners of Note
Last night, Cisco Systems (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. Net income for the quarter slipped to $2.6 billion from $2.7 billion in the same quarter ago but the company's gross margin improved 14p bps quarter over quarter to 62.7 percent, topping previous guidance of 61 percent to 62 percent. Cisco's product revenue fell eight percent in the quarter after falling 11 percent in the previous quarter while services revenue rose three percent. Cisco saw strong growth in the U.S. where revenue rose seven percent year over year while Northern Europe also gained four percent. Cisco issued guidance and sees its fourth quarter EPS being $0.51 to $0.53 versus a consensus estimate of $0.51. Analysts at Deutsche Bank maintained a Hold rating on Cisco with a price target raised to $25 from a previous $24. Meanwhile, analysts at Oppenheimer, BMO Capital, Raymond James and Pacific Crest all maintained an Outperform rating with $27, $27, $28 and $26 price targets, respectively. Analysts at FBR, on the other hand, maintained a Market Perform rating with a price target raised to $23 from a previous $19. Shares gained 6.01 percent, closing at $24.18.
Teva Pharmaceutical lost a case in court in which the company attempted to have the release of generic forms of Copaxone from its competitors delayed. Following the decision, analysts at Maxim group said that Momenta Pharmaceuticals (NASDAQ: MNTA) generic version of Copaxone could be launched as early as June. Shares of Momenta gained 10.98 percent, closing at $11.93.
Clovis Oncology (NASDAQ: CLVS) announced that it will reveal results for its three cancer treatments during the American Society of Clinical Oncology's meeting which runs from May 30 to June 3. Shares gained 15.97 percent, closing at $59.25.
Rackspace Hosting (NYSE: RAX) has reportedly hired financial advisers to explore strategic options. Shares gained 7.12 percent, closing at $30.68.
Decliners of Note
Greece's GDP declined 1.1 percent in the first quarter and is only projected to grow 0.6 percent this year, causing shares of National Bank of Greece (NYSE: NBG) to tumble 16.18 percent, closing at $2.90.
For the second time in recent history, NQ Mobile (NYSE: NQ) announced that it will delay reporting its 2013 annual report. The company previously disclosed on April 30 that it will file its report within fifteen days. Shares plunged 28.93 percent, closing at $7.27.
Bristol-Myers (NYSE: BMY) reported disappointing clinical trial data for an experimental cancer treatment. The company said revealed that its phase-two data showed that its immune-oncology candidate nivolumab saw a response rate of 22 percent in non-small-cell lung patients with the rate of adverse events was 48 percent. Analysts at BMO Capital downgraded Bristol-Myers to Market Perform from Overweight with a price target lowered to $55 from a previous $60. Meanwhile analysts at Barclays maintained an Overweight rating on Bristol-Myers with a price target unchanged at $65. Also, analysts at Cowen & Company maintained an Outperform rating on Bristol-Myers with an unchanged price target of $59. Shares lost 6.12 percent, closing at $48.93. Shares lost 6.12 percent, closing at $48.93.
Earnings of Note
This morning, Kohl's (NYSE: KSS) reported its first quarter results. The company announced an EPS of $0.60, missing the consensus estimate of $0.63. Revenue of $4.07 billion missed the consensus estimate of $4.22 billion. Net income for the quarter fell to $125 million from $147 million in the same quarter a year ago as comparable-store sales fell by 3.4 percent in the quarter. The company admitted that it did not achieve its first quarter sales goals despite ending the quarter with 1,160 stores, five more than a year ago. Kohl's announced that it extended its current credit card agreement with Capital One for an additional five years until March 2023. Shares lost 3.37 percent, closing at $52.21.
This morning, Wal-Mart (NYSE: WMT) reported its first quarter results. The company announced an EPS of $1.10, missing the consensus estimate of $1.15. Revenue of $114.9 billion missed the consensus estimate of $116.29 billion. Net income for the quarter fell to $3.59 billion from $3.78 billion in the same quarter a year ago as comparable-store sales growth in the U.S. was flat with traffic declining 1.4 percent.. Weather issues translated in to a $0.03 per share hit in the company's earnings despite Walmart U.S. revenue rising 2.0 percent to $67.85 billion in the quarter and Sam's Club revenue rising 0.1 percent to $13.89 billion. International sales fell 1.4 percent to $32.42 billion. E-commerce sales rose 27 percent and added 30 bps to Wal-Mart's comps. Wal-Mart issued guidance and sees its second quarter EPS to be $1.15 to $1.25, below the consensus estimate of $1.28. Shares lost 2.43 percent, closing at $76.83.
After the market closed, J.C. Penney (NYSE: JCP) reported its first quarter results. The company announced an EPS of -$1.16, beating the consensus estimate of -$1.26. Revenue of $2.8 billion beat the consensus estimate of $2.73 billion. Shares surged 24.85 percent at $10.45 following the earnings release.
After the market closed, Nordstrom (NYSE: JWN) reported its first quarter results. The company announced an EPS of $0.72, beating the consensus estimate of $0.68. Revenue of $2.93 billion beat the consensus estimate of $2.86 billion. Shares were trading higher by 10.18 percent at $67.75 following the earnings release.
Quote of the Day
“I'm not saying go short, I'm just saying don't be too fricking long right now.” – David Tepper speaking at the SALT conference in Las Vegas.
Bonus Quote of the Day
“There's times to make money and there's times not to lose money. This is probably (a time when) you're supposed to think about preserving some of your money. If you're 120 percent invested, it's probably too much. You can still be long, but you probably should have some cash." – David Tepper speaking at the SALT conference in Las Vegas.
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