Market Wrap For May 30: 'Sell In May And Go Away' Proves To Be Bad Advice
U.S. stocks were mostly higher on the final trading day of May, as both the S&P 500 and Dow indices close at record highs, despite disappointing consumer spending data reported on Friday morning.
Loretta Mester, the soon to be Cleveland Fed President argued in a speech the importance of keeping inflation at low and stable levels.
“We cannot have full employment over the longer run without price stability over the longer run,” Mester said. “That is why understanding inflation is so important for Federal Reserve policymakers who aim to set policy to achieve both parts of their dual mandate.”
Mester also added: “The more we understand inflation dynamics, the more we will understand how inflation will respond to changes in monetary policy. These findings are going to be particularly relevant as the Fed, in response to improvements in economic conditions, returns to a more normal policy setting framework over time.”
- The Dow gained 0.10 percent, closing at 16,715.55.
- The S&P 500 gained 0.18 percent, closing at 1,923.51.
- The Nasdaq lost 0.13 percent, closing at 4,242.62.
- Gold lost 0.52 percent, trading at $1,250.60 an ounce.
- Oil lost 0.79 percent, trading at $102.76 a barrel.
- Silver lost 1.23 percent, trading at $18.78 an ounce.
News of Note
April Personal Income rose 0.3 percent month over month, below the 0.4 percent gain expected and below March's 0.5 percent gain.
April Personal Spending declined 0.1 percent month over month, below the 0.2 percent gain expected and below March's 1.0 percent gain.
May Chicago PMI rose to 65.5 from 63 in April and topped the consensus of 61.
May Reuters/UofM Consumer Sentiment rose to 81.9 from 81.8 in April but fell short of the 82.5 analysts were expecting.
Analyst Upgrades and Downgrades of Note
Analysts at Goldman Sachs maintained a Buy rating on Apple (NASDAQ: AAPL) with a price target raised to $720 from a previous $635. Shares hit new 52-week highs of $644.17 before closing the day at $632.99, down 0.38 percent.
Analysts at Barclays maintained an Overweight rating on Essex Properties (NYSE: ESS) with a price target raised to $184 from a previous $179. Shares gained 0.80 percent, closing at $180.96.
Analysts at FBR Capital maintained a Market Perform rating on Express (NYSE: EXPR) with a price target lowered to $13 from a previous $16. Shares hit new 52-week lows of $11.80 before closing the day at $12.61, down 7.48 percent.
Analysts at Bernstein downgraded Hillshire Brands (NYSE: HSH) to Market Perform from Outperform with a price target raised to $55 from a previous $41. Shares hit new 52-week highs of $53.41 before closing the day at $53.28, up 0.99 percent.
Equities-Specific News of Note
The New York Rangers have advanced to the Stanley Cup Finals, translating to extra cash flow and additional ticket sales at Madison Square Gardens (NYSE: MSG). Shares of MSG gained 3.30 percent, closing at $54.85.
According to Buzzfeed, Amazon.com (NASDAQ: AMZN) will begin offering a music streaming service which would likely compete against Pandora (NYSE: P). Shares of Amazon lost 0.39 percent, closing at $312.55 while shares of Pandora lost 3.50 percent, closing at $24.53.
Nokia (NYSE: NOK) has acquired Desti, a developer of natural language processing technology to personalize travel search results. Shares gained 2.65 percent, closing at $8.13.
Cott (NYSE: COT) has purchased the assets of Aimia Foods for $133 million. The company said that the acquisition will be accretive to earnings and free cash flow in the first year. Shares gained 4.11 percent, closing at $7.10.
Sanofi (NYSE: SNY) said that the FDA has agreed to review Genzyme's re-submission of its supplemental Biologics License Application. Shares gained 0.04 percent, closing at $53.30.
Total (NYSE: TOT) will sell its ten percent stake in the Shah Deniz field and the South Caucasus pipeline to Turkish owned TPAO for $1.5 billion. Shares lost 0.47 percent, closing at $69.45.
Analysts at Hedgeye predicted that Darden Restaurants (NYSE: DRI) could potentially be a long-term success if activist hedge fund Starboard receives board seats in the restaurant chain operator. Shares gained 0.48 percent, closing at $50.12.
Freeport McMoRan's (NYSE: FCX) CEO Richard Adkerson will travel to Indonesia next week in hopes of resolving the government's restrictions over copper and gold exports. Shares lost 0.64 percent, closing at $34.05.
Disney's (NYSE: DIS) $175 million film Maleficent opens this weekend in the U.S. and several other countries worldwide. Shares hit new 52-week highs of $84.39 before turning negative and closing the day at $84.01, down 0.02 percent.
Winners of Note
This morning, Big Lots (NYSE: BIG) reported its first quarter results. The company announced an EPS of $0.50, beating the consensus estimate of $0.44. Revenue of $1.28 billion beat the consensus estimate of $1.26 billion. Net income for the quarter fell to $3.35 million from $32.33 million in the same quarter a year ago as the company noted it took a 44 cent a share loss related to the company's Canadian unit. The company reported that comparable-store sales rose 0.9 percent in the quarter while the operating profit rate improved 50 bps to 4.8 percent. Big Lots issued guidance and sees its second quarter EPS to be in a range of $0.24 to $0.30 versus a consensus estimate of $0.28. For the full year fiscal 2014, the company is guiding its EPS to be in a range of $2.35 to $2.50 versus the consensus estimate of $2.38. Shares hit new 52-week highs of $43.20 before closing the day at $42.44, up 13.14 percent.
Cheniere Energy (NYSE: LNG) has agreed to a 20-year contract to sell 400,000 metric tons per year of liquefied natural gas to Iberdrola, a Spanish based power company. Shares hit new 52-week highs of $68.34 before closing the day at $67.81, up 8.46 percent.
NQ Mobile (NYSE: NQ) said that it expects its first quarter revenue to come in higher than previous guidance of $75 million to $76 million and ahead of the consensus estimate of $75.3 million. The company also said that its second quarter revenue is guided at $83 million to $84 million, above the consensus estimate of $78.9 million. Shares gained 11.78 percent, closing at $7.59.
Valeant (NYSE: VRX) boosted the cash portion of its bid for Allergan (NYSE: AGN) to $72 per share from a previous $58.30. The stock portion of 0.83 shares of Valeant remained unchanged. Bill Ackman's Pershing Square, who owns a 9.7 percent stake said that the hedge fund will only receive stock. Ackman said: “I offered to give up $600 million of value to the other Allergan shareholders and exchange our shares for Valeant stock if Valeant were prepared to increase its offer to the other Allergan shareholders. We believe that our gesture to the other Allergan owners makes an extraordinarily strong statement about our belief in the long-term value of this highly strategic business combination." Shares of Valeant gained 1.54 percent, closing at $131.21 while shares of Allergan gained 5.65 percent, closing at $167.46.
Decliners of Note
Glu Mobile (NASDAQ: GLUU) priced an offering at $3.50, roughly 19 percent below Thursday's closing price. The company will sell 8.58 million shares for total proceedings of $27.8 million. Shares lost 10.47 percent, closing at $3.63.
Earnings of Note
This morning, Ann (NYSE: ANN) reported its first quarter results. The company announced an EPS of $0.33, beating the consensus estimate of $0.31. Revenue of $590.6 million missed the consensus estimate of $598.25. Net income for the quarter fell to $5.2 million from $20.9 million in the same quarter a year ago as comparable-store sales fell 1.8 percent. Gross margin rate dipped 240 bps to 53.4 percent as the company noted it operated in a promotional heavy environment at Loft. Ann increased its total store count by 13 to 1,032. The company issued guidance and sees its total fiscal 2014 revenue to be $2.61 billion, roughly in-line with the consensus estimate of $2.62 billion. Shares gained 4.07 percent, closing at $38.87.
Quote of the Day
"I sleep four hours a night. No one works harder than our team. It's not like I'm making $10 million for showing up, staying at the office until 11 a.m., drinking a few cups of coffee and then playing golf the rest of the day. I haven't played a round of golf in years. I make a lot of money, but I earn it." – Nicholas Schorsch, Chief Executive of American Realty Capital Properties defending his $222.1 million incentive compensation pool that would make him one of the highest-paid executives of any REIT.
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