Market Overview

Market Wrap For May 21: Fed's Minutes Support Wednesday's Bull Run

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U.S. stocks rose at the opening bell and continued to rise throughout the trading session. Investors and traders breathed a sigh of relief when the Federal Reserve indicated a rate hike is not likely in the short term.

According to the Fed, it is examining multiple strategies to tighten its monetary policy, but no decisions on when, or how to proceed has been made.

“A staff presentation outlined several approaches to raising short-term interest rates when it becomes appropriate to do so, and to controlling the level of short-term interest rates once they are above the effective lower bound, during a period when the Federal Reserve will have a very large balance sheet,” according to the Federal Reserve's minutes from its April meeting. “The Committee's discussion of this topic was undertaken as part of prudent planning and did not imply that normalization would necessarily begin sometime soon.”

The Senate confirmed Stanley Fischer as a member of the Federal Reserve, but the former Bank of Israel chief will have to wait for a separate vote before assuming the title of vice chairman and the number two slot, right behind Janet Yellen.

As widely expected, Russia's Gazprom signed a deal to provide 38 billion cubic meters of gas annually for 30 years to China National Petroleum beginning in 2018. The deal has an expected value at more than $400 billion and opens up a completely new market for Moscow in the face of threatened sanctions from Western countries.

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  • The Dow gained 0.97 percent, closing at 16,533.06.
  • The S&P 500 gained 0.81 percent, closing at 1,888.03.
  • The Nasdaq gained 0.85 percent, closing at 4,131.54.
  • Gold lost 0.24 percent, trading at $1,291.50 an ounce.
  • Oil gained 1.54 percent, trading at $103.91 a barrel.
  • Silver gained 0.01 percent, trading at $19.40 an ounce.

News of Note

MBA Composite Index rose 0.9 percent after rising 3.6 percent last week.

MBA Purchase Index declined 3.0 percent after declining 1.0 percent last week.

MBA Refinance Index rose 4.0 percent after rising 7.0 percent last week.

EIA Crude Inventories declined 7.2 million barrels after rising 0.9 million barrels last week.

EIA Gasoline Inventories gained 1.0 million barrels after declined 0.8 million barrels last week.

EIA Distillates Inventories gained 3.4 million barrels after declining 1.1 million barrels last week.

The Bank of Japan left its key interest rate unchanged at 0.1 percent and maintained its program of expanding the monetary base by 60 trillion to 70 trillion yen ($580 billion to $680 billion) a year unchanged.

Analysts at Morgan Stanley raised their Indian GDP forecast from 5.3 percent to 5.4 percent for the year ending March 2015 while raising the following years GDP forecast from 6.2 percent to 6.5 percent growth. The analysts called the recent election results “an inflection point for India's story.”

Analyst Upgrades and Downgrades of Note

Analysts at Goldman Sachs upgraded American International Group (NYSE: AIG) to Buy from Neutral with a price target raised to $63 from a previous $50. Shares hit new 52-week highs of $54.03 before closing the day at $53.51, up 1.94 percent.

Analysts at Barclays maintained an Equal-weight rating on AstraZeneca (NYSE: AZN) with a price target raised to $40 from a previous $38. Shares gained 2.04 percent, closing at $73.67.

Analysts at MKM Partners initiated coverage of Bank of America (NYSE: BAC) with a Buy rating and $18 price target. Shares gained 0.55 percent, closing at $14.61.

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Analysts at Stifel Nicolaus maintained a Buy rating on Cisco Systems (NASDAQ: CSCO) with a price target raised to $28 from a previous $25. Shares gained 1.49 percent, closing at $24.48.

Analysts at Citigroupmaintained a Buy rating on ConocoPhillips (NYSE: COP) with a price target raised to $100 from a previous $85. Shares lost 0.01 percent, closing at $78.53.

Analysts at BMO Capital upgraded Dick's Sporting Goods (NYSE: DKS) to Market Perform from Underperform with an unchanged price target of $46. Taking the opposite side, analysts at JPMorgan downgraded Dick's to Neutral from Overweight with a price target lowered to $60 from a previous $63. Also, analysts at Credit Suisse downgraded Dick's to Neutral from Outperform with a price target lowered to $49 from a previous $65. Shares hit new 52-week lows of $42.61 before closing the day at $42.61, down 1.72 percent.

Analysts at Canaccord Genuity maintained a Buy rating on Edwards Lifesciences (NYSE: EW) with a price target raised to $96 from a previous $86. Shares lost 0.20 percent, closing at $84.98.

Analysts at Citigroup maintained a Hold rating on Exxon Mobil (NYSE: XOM) with a price target lowered to $102 from a previous $108. Shares gained 1.35 percent, closing at $102.03.

Analysts at Citigroup maintained a Buy rating on General Motors (NYSE: GM) with a price target lowered to $47 from a previous $48. Shares gained 1.18 percent, closing at $33.46.

Analysts at Raymond James maintained a Strong Buy on Intuit (NASDAQ: INTU) with a price target raised to $89 from a previous $84. Shares gained 0.82 percent, closing at $77.47.

Analysts at MKM Partners initiated coverage of JPMorgan (NYSE: JPM) with a Buy rating and $65 price target. Shares gained 0.74 percent, closing at $54.12.

Analysts at Jefferies upgraded Nokia (NYSE: NOK) to Buy from Hold. Shares gained 5.10 percent, closing at $7.62.

Analysts at Raymond James downgraded Potash (NYSE: POT) to Market Perform from Outperform with a $38.50 price target. Shares lost 0.46 percent, closing at $37.05.

Analysts at Citigroup maintained a Buy rating on Salesforce.com (NYSE: CRM) with a price target lowered to $71 from a previous $81. Also, analysts at Canaccord Genuity maintained a Buy rating on Salesforce with a price target lowered to $65 from a previous $80. Finally, analysts at Barclays maintained an Overweight rating on Salesforce with a price target lowered to $63 from a previous $69. Shares lost 5.10 percent, closing at $50.19.

Equities-Specific News of Note

Google (NASDAQ: GOOG) said in a letter to regulators that it plans to use $20 billion to $30 billion in overseas cash to finance future global acquisitions. Shares gained 1.73 percent, closing at $538.94.

Renewable Energy (NASDAQ: REGI) has agreed to acquire Tyson Foods' (NYSE: TSN) 50 percent stake in Dynamic Fuels for $18 million upfront and up to $35 million in future payments. Shares of Renewable Energy gained 1.00 percent, closing at $10.15 while shares of Tyson Foods lost 2.12 percent, closing at $39.78.

FireEye's (NASDAQ: FEYE) lockup expiration expired today. Shares gained 2.67 percent, closing at $31.13.

Analysts at ITG Research said that their checks indicate that Facebook's (NASDAQ: FB) second quarter revenue is tracking $100 million above the consensus estimate of $2.8 billion. Shares gained 3.30 percent, closing at $60.49.

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General Electric's (NYSE: GE) CEO Jeff Immelt said that “we wouldn't have started if we didn't think we could finish,” referring to the company's proposed deal to acquire France's Alstom's energy assets. Shares gained 0.72 percent, closing at $26.49.

Boeing (NYSE: BA) reaffirmed previous fiscal 2014 guidance at its annual general meeting and sees its EPS being in a range of $7.15 to $7.35 on revenue of $87.5 billion to $90.5 billion. The company said it has backlogs of $374 billion in commercial airplanes and $67 billion in defense related airplanes. Shares gained 1.06 percent, closing at $130.96.

eBay (NASDAQ: EBAY) said that it was a victim of a cyberattack and urged all users to change passwords. The company said that there is no evidence to conclude that financial or credit card information was stolen from the hack which occurred earlier this year. Shares lost 0.17 percent, closing at $51.87.

Netflix (NASDAQ: NFLX) revealed plans that it will launch its streaming service in six more European countries later on this year. The countries include France, Germany, Austria, Switzerland, Belgium and Luxembourg. Shares gained 5.09 percent, closing at $390.60.

Cisco (NASDAQ: CSCO) has purchased ThreatGRID, a developer of malware-protection and threat-intelligence software for an undisclosed amount. Shares gained 1.49 percent, closing at $24.48.

Winners of Note

This morning, Tiffany & Co (NYSE: TIF) reported its first quarter results. The company announced an EPS of $0.97, beating the consensus estimate of $0.77. Revenue of $1.01 billion beat the consensus estimate of $955.05 million. Net earnings for the quarter rose to $126 million from $84 million in the same quarter a year ago as comparable-store sales rose 11 percent. Tiffany's saw growth across all major geographical regions with sales rising eight percent in the Americas to $439 million and sales rising 17 percent to $261 million in Asia Pacific. Tiffany's saw sales grow the most in fine and statement jewelry and the Atlas collection. The company raised its full year fiscal 2014 EPS guidance to a range of $4.15 to $4.25 from a previous $4.05 to $4.15, versus a consensus estimate of $4.17. Shares hit new 52-week highs of $97.40 before closing the day at $96.30, up 9.15 percent.

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PHH (NYSE: PHH) is in talks with Canadian based Element Financial to sell its fleet leasing business for around $1.35 billion in cash. Shares gained 12.38 percent, closing at $23.78.

Decliners of Note

This morning, American Eagle Outfitters (NYSE: AEO) reported its first quarter results. The company announced an EPS of $0.02, beating the consensus estimate of $0.00. Revenue of $646 million missed the consensus estimate of $648.73 million. Net income for the quarter fell to $3.87 million from $27.98 million in the same quarter a year ago as comparable-store sales fell ten percent while the gross profit rate declined 420 bps to 34.9 percent. American Eagle announced that it will close 150 stores over the next three years but warned that same-store sales are expected to decline in the high-single digit percent range in the foreseeable future. Shares hit new 52-week lows of $10.50 before closing the day at $10.60, down 6.44 percent.

This morning, PetSmart (NASDAQ: PETM) reported its first quarter results. The company announced an EPS of $1.04, beating the consensus estimate of $1.01. Revenue of $1.73 billion missed the consensus estimate of $1.77 billion. Net income for the quarter rose to $103.77 million from $102.42 million in the same quarter a year ago despite comparable-store sales declining 0.6 percent and comparable transactions decreasing 2.2 percent. PetSmart issued guidance and sees its same-store sales for the rest of the fiscal year being relatively flat. Additionally, the company sees its full year fiscal 2014 EPS to be $4.29 to $4.39, below the consensus estimate of $4.45. Shares lost 8.31 percent, closing at $57.02.

Earnings of Note

This morning, Lowe's Companies (NYSE: LOW) reported its first quarter results. The company announced an EPS of $0.65, beating the consensus estimate of $0.60. Revenue of $13.4 billion missed the consensus estimate of $13.86 billion. Net earnings for the quarter rose to $624 million from $540 million in the same quarter a year ago as comparable sales rose 0.9 percent, helping its gross margin rate improve by 70 bps to 35.5 percent. Lowe's expects its total sales for the whole fiscal year to increase around five percent from 2013 with comparable sales to rise around four percent. The company plans to open ten home improvement stores and five hardware stores in the year. Shares lost 0.24 percent, closing at $45.41.

This morning, Target (NYSE: TGT) reported its first quarter results. The company announced an EPS of $0.70, missing the consensus estimate of $0.71. Revenue of $17.05 billion beat the consensus estimate of $17.02 billion. Net earnings for the quarter fell to $418 million from $498 million in the same quarter a year ago as the number of transactions fell 2.3 percent and comparable-store sales in the U.S. fell 0.3 percent. Gross margin rate in the U.S. segment fell 120 bps to 29.5 percent while the gross margin rate in Canada sank to 18.7 percent from 38.4 percent a year ago. Target lowered its previous full year EPS guidance of $3.85 to $4.15 to a new range of $3.60 to $3.90, below the consensus estimate of $4.15. During the conference call, management said that the company does not expect to repurchase shares in the second quarter and future share buybacks could be put on hold until there is more clarity on the financial toll caused by the data breach. Shares gained 1.04 percent, closing at $57.20.

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After the market closed, NetApp (NASDAQ: NTAP) reported its fourth quarter results. The company announced an EPS of $0.84, beating the consensus estimate of $0.79. Revenue of $1.64 billion missed the consensus estimate of $1.67 billion. Shares were trading lower by 0.93 percent at $34.17 following the earnings release.

After the market closed, Williams-Sonoma (NYSE: WSM) reported its first quarter results. The company announced an EPS of $0.48, beating the consensus estimate of $0.44. Revenue of $974.33 million beat the consensus estimate of $941.88 million. Shares were trading higher by 4.91 percent at $66.86 following the earnings release.

Quote of the Day

“Federal Reserve communications garnered significant attention from market participants over the period but appeared to have only a modest net effect on their expectations for monetary policy. The communications following the conclusion of the March FOMC meeting were interpreted as somewhat less accommodative than expected. However, subsequent communications--including the release of the minutes of the March FOMC meeting--appeared to mostly reverse the earlier change in expectations.” – Federal Reserve minutes in its minutes from April's meetings.

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