Market Overview

Market Wrap For June 4: Markets Slightly Higher On Light Volume, Beige Book

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U.S. stocks were moderately higher as the S&P 500 continues to reach new highs.

Investors found plenty of positives after the Federal Reserve released its summary of commentary on current economic conditions, also known as the “Beige Book.”

“All twelve Federal Reserve Districts report that economic activity expanded during the current reporting period,” the report said. “The pace of growth was characterized as moderate in the Boston, New York, Richmond, Chicago, Minneapolis, Dallas, and San Francisco Districts, and modest in the remaining regions. Compared with the previous report, the pace of growth picked up in the Cleveland and St. Louis Districts but slowed slightly in the Kansas City District.”

Investors will be closely following Thursday's European Central Bank meeting as well as Friday's nonfarm payroll report.

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  • The Dow gained 0.09 percent, closing at 16,737.53.
  • The S&P 500 gained 0.19 percent, closing at 1,927.88.
  • The Nasdaq gained 0.41 percent, closing at 4,251.64.
  • Gold lost 0.09 percent, trading at $1,243.40 an ounce.
  • Oil lost 0.17 percent, trading at $102.49 a barrel.
  • Silver gained 0.06 percent, trading at $18.77.

News of Note

MBA Mortgage Composite Index declined 3.1 percent after declining 1.2 percent last week.

MBA Mortgage Purchase Index declined 3.6 percent after declining 1.1 percent last week.

MBA Mortgage Refinance Index declined 2.9 percent after declining 1.4 percent last week.

May ADP Jobs Report rose 179,000, below the consensus of 210,000 and below April's 215,000 gain.

April Trade Balance widened to -$47.2 billion from -$44.2 billion in March. Analysts were expecting April's trade balance to come in at -$41 billion.

First Quarter Productivity and Costs declined 3.2 percent, worse than the 2.9 percent decline expected and fourth quarters' reading of -1.7 percent. Unit labor costs rose 5.7 percent, ahead of the 5.2 percent expected.

May Gallup US Job Creation Index rose to +27 from April's +25.

May US PMI Services Index rose to 58.1 from 55 in April and topping estimates of 58.4.

May ISM Non-Manufacturing Index rose to 56.3 from April's 55.2 and topping estimates of 55.3.

EIA Crude Inventories declined 3.4 million after rising 1.7 million barrels last week. Analysts were expecting a decline of 0.3 million barrels.

EIA Gasoline Inventories rose 0.2 million barrels after declining 1.8 million barrels last week. Analysts were expecting a gain of 0.3 million barrels.

EIA Distillates Inventories rose 2 million barrels after declining 0.2 million barrels last week. Analysts were expecting a gain of 0.7 million barrels.

The Bank of Canada left its benchmark policy unchanged at 1.0 percent.

Analyst Upgrades and Downgrades of Note

Analysts at Stifel Nicolaus upgraded AutoZone (NYSE: AZO) to Buy from Hold with an unchanged price target of $570. Shares gained 2.48 percent, closing at $541.23.

Analysts at Drexel Hamilton upgraded Broadcom (NASDAQ: BRCM) to Buy from Hold. Shares hit new 52-week highs of $37.14 before closing the day at $37.06, up 3.29 percent.

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Analysts at Citigroup maintained a Neutral rating on Clovis Oncology (NASDAQ: CLVS) with a price target lowered to $53 from a previous $109. Shares hit new 52-week lows of $36.11 before rebounding and closing the day at $38.40, up 0.44 percent.

Analysts at Sterne Agee downgraded Coach (NYSE: COH) to Neutral from Buy with a price target lowered to $41 from a previous $51. Shares hit new 52-week lows of $38.70 before closing the day at $39.00, down 2.55 percent.

Analysts at Goldman Sachs upgraded Credit Suisse (NYSE: CS) to Conviction Buy from Neutral. Shares gained 1.77 percent, closing at $29.88.

Analysts at Macquarie initiated coverage of Halliburton (NYSE: HAL) with an Outperform rating and $72 price target. Shares lost 0.26 percent, closing at $65.40.

Analysts at Credit Suisse initiated coverage of Monster Beverage (NASDAQ: MNST) with an Outperform rating and $82 price target. Shares gained 2.07 percent, closing at $68.12.

Analysts at Maxim Group initiated coverage of Oracle (NYSE: ORCL) with a Buy rating and $48 price target. Shares lost 0.26 percent, closing at $41.70.

Analysts at Macquarie initiated coverage of Schlumberger (NYSE: SLB) with an Outperform rating and $119 price target. Shares lost 0.14 percent, closing at $103.70.

Analysts at Raymond James maintained a Strong Buy rating on Skyworks Solutions (NASDAQ: SWKS) with a price target raised to $55 from a previous $50. Shares hit new 52-week highs of $46.79 before closing the day at $46.76, up 2.43 percent.

Analysts at Jefferies upgraded Under Armour (NYSE: UA) to Buy from Hold with a price target raised to $65 from a previous $50. Shares gained 4.95 percent, closing at $53.63.

Analysts at Macquarie maintained an Underperform rating on Walter Energy (NYSE: WLT) with a price target lowered to $4 from a previous $5. Shares lost 0.46 percent, closing at $4.33.

Analysts at Citigroup maintained a Neutral rating on Whole Foods Market (NYSE: WFM) with a price target lowered to $41 from a previous $55. Shares gained 1.78 percent, closing at $38.38.

Analysts at Deutsche Bank maintained a Buy rating on Yingli Green Energy (NYSE: YGE) with a price target lowered to $6 from a previous $8. Shares lost 4.24 percent, closing at $2.83.

Equities-Specific News of Note

UnitedHealth Group (NYSE: UNH) announced that it renewed its share repurchase program with the company authorized to repurchase 100 million shares of its stock. Additionally, the company raises its quarterly dividend to $0.375 per share from the $0.28 per share the company paid at the beginning of the second quarter. Shares gained 0.78 percent, closing at $80.50.

Energi XXI (NASDAQ: EXXI) announced that it's acquisition of EPL Oil & Gas for $2.3 billion has been finalized. The company expects its fourth quarter production to average 45,000 to 46,000 barrels of energy per day. Shares lost 1.04 percent, closing at $20.89.

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LinkedIn (NYSE: LNKD) will begin offering a $10 per month subscription offer in addition to rolling out new features for premium subscribers. shares gained 0.35 percent, closing at $156.36.

Stifel Financial (NYSE: SF) has agreed to purchase Legg Mason (NYSE: LM) Investment Counsel & Trust for an undisclosed amount. The Legg Mason unit provides investment advisory and trust services to institutions as well as individuals and has more than $9 billion in assets under management. Stifel will combine the division with its global wealth management business. Shares of Stifel gained 1.65 percent, closing at $45.62 while shares of Legg Mason hit new 52-week highs of $50.21 before closing the day at $50.18, up 2.01 percent.

Northrop Grumman (NYSE: NOC) won a five-year $9.9 billion contract to modernize the U.S. Air Force's fleet of B-2 bombers. Shares gained 0.61 percent, closing at $122.23.

AT&T (NYSE: T) plans to sell $2.9 billion worth of euro-denominated bonds with ten and 20 year maturities. Shares lost 0.43 percent, closing at $35.05.

Amazon.com (NASDAQ: AMZN) has scheduled a launch event for a mystery device on June 18. Shares lost 0.13 percent, closing at $306.78.

Pandora (NYSE: P) disclosed that its active listeners in May rose to 77 million from 76 million in April. Listener hours rose 1.7 percent month over month to 1.73 billion hours. Pandora estimates that its U.S. radio listening market share dipped to 9.13 percent from 9.28 percent in April. Shares lost 0.37 percent, closing at $24.52.

Walgreen (NYSE: WAG) reported that its sales rose six percent year over year in May to $6.57 billion. Comparable-store sales rose 4.4 percent while prescription sales comps gained 5.5 percent. The average basket size rose 3.1 percent, however traffic in comparable stores declined 0.5 percent. Shares hit new 52-week highs of $75.16 before closing the day at $74.54, up 4.16 percent.

Wal-Mart's (NYSE: WMT) Sam's Club will team up with MasterCard (NYSE: MA) to create a new credit card with an embedded chip. Shares of Wal-Mart gained 0.55 percent, closing at $77.13 while shares of Mastercard lost 0.04 percent, closing at $76.32.

Winners of Note

Japanese based insurer Dai-ichi Life Insurance has offered to acquire Protective Life (NYSE: PL) for $5.7 billion, or $70 per share. The acquisition offer represents a more than 30 percent premium from Tuesday's closing price. Shares of Protective Life hit new 52-week highs of $69.49 before closing the day at $69.36, up 18.12 percent.

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NQ Mobil (NYSE: NQ) announced that its special committee investigating allegations of fraud had uncovered no evidence that the company's revenues were “inconsistent with public disclosures,” as claimed by Muddy Waters. Shares soared 30.93 percent, closing the day at $9.99.

Decliners of Note

Annie's (NASDAQ: BNNY) announced that its accounting firm PriceWaterhouseCoopers will no longer assume duties as the company's accounting firm. The accounting firm found “an insufficient complement of finance and accounting resources” while Annie's said that there was “material weakness in internal control over financial reporting.” Shares lost 7.76 percent, closing at $30.07.

Earnings of Note

This morning, Brown-Forman (NYSE: BF-B) reported its fourth quarter results. The company announced an EPS of $0.62, beating the consensus estimate of $0.58. Revenue of $893 million missed the consensus estimate of $923.7 million. Net income for the quarter rose to $132 million from $113 million in the same quarter a year ago partly due to the strong performance of Jack Daniels family of brands that grew net sales by eight percent. The company's super and ultra-premium whiskey brands grew by 19 percent as Finlandia's family of brands grew by four percent. The company saw solid sales growth throughout the world including 21 percent rise in Russia, eight percent rise in both the U.K. and Germany, four percent rise in the U.S. and a two percent rise in Australia. Mexico, the lone declining region saw sales decline by four percent. Shares gained 0.27 percent, closing at $93.15.

This morning, Hovnanian Enterprises (NYSE: HOV) reported its second quarter results. The company announced an EPS of -$0.05, missing the consensus estimate of $0.03. Revenue of $449.9 million missed the consensus estimate of $476.7 million. Net income for the quarter turned to negative $7.9 million from a net income of $1.3 million in the same quarter a year ago as the company saw the number of deliveries decline 6.5 percent year over year to 1,331 homes. The dollar value of net contracts rose 1 percent to $703 million while the number of contracts declined 2.2 percent to 1,907 homes. Shares lost 2.18 percent, closing at $4.48.

After the market closed, PVH (NYSE: PVH) reported its first quarter results. The company announced an EPS of $1.47, missing the consensus estimate of $1.49. Revenue of $1.96 billion missed the consensus estimate of $1.98 billion. Shares were trading lower by 5.88 percent at $123.00 following the earnings report.

Quote of the Day

“Labor market conditions generally strengthened in the latest reporting period, with hiring activity steady to stronger across most of the country, and several Districts reporting shortages of skilled workers. In most Districts, wage increases have remained generally subdued, though Chicago and Dallas noted increased costs for health benefits. Prices of both inputs and finished goods and services were mostly steady to up slightly.” – Federal Reserve comments from its Beige Book.

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