Market Overview

Market Wrap For June 5: Markets Positive Before Friday's Employment Report

Market Wrap For June 5: Markets Positive Before Friday's Employment Report
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U.S. stocks were positive after the European Central Bank implemented steps to fight disinflation, including negative interest rates.

On the home-front, initial jobless claims rose last week but that didn't stand in the way of the S&P 500 and Dow Jones indices trading at historical all-time highs.

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  • The Dow gained 0.59 percent, closing at 16,836.11.
  • The S&P 500 gained 0.65 percent, closing at 1,940.46.
  • The Nasdaq gained 1.05 percent, closing at 4,296.23.
  • Gold gained 0.74 percent, trading at $1,253.50 an ounce.
  • Oil lost 0.06 percent, trading at $102.58 a barrel.
  • Silver gained 1.24 percent, trading at $19.02.

News of Note

May Challenger Job-Cut report rose 31 percent to 52,961.

Initial Jobless Claims rose 8,000 to 312,000, above the consensus of 310,000 and a prior reading of 304,000. Continuing claims declined 20,000 to 2.6 million.

EIA Natural Gas Inventory rose 119 bcf, ahead of the consensus for a gain of 117 bcf.

The European Central Bank cut its benchmark refinancing rate from 0.25 percent to 0.15 percent. Also cut were the deposit rate from 0.00 percent to negative 0.10 percent. The ECB's marginal lending facility has also been cut from 0.75 percent to 0.40 percent.

The Bank of England left its benchmark rate unchanged at 0.5 percent and made no changes to its 375 billion pound quantitative easing program.

The International Monetary Fund is urging China to lower its 2015 GDP growth projection to 7 percent versus the country's target growth rate of 7.5 percent for 2014.

Analyst Upgrades and Downgrades of Note

Analysts at Barclays upgraded Broadcom (NASDAQ: BRCM) to Equal-weight from Underweight with a price target raised to $40 from a previous $28. Shares hit new 52-week highs of $37.96 before closing the day at $37.61, up 1.46 percent.

Analysts at Stifel Nicolaus upgraded Clovis Oncology (NASDAQ: CLVS) to Buy from Hold. Shares gained 6.17 percent, closing at $40.77.

Analysts at JPMorgan maintained a Neutral rating on Enbridge Energy (NYSE: EEQ) with a price target raised to $33 from a previous $30. Shares gained 0.23 percent, closing at $30.34.

Analysts at Wedbush initiated coverage of The Gap (NYSE: GPS) with a Neutral rating and $44 price target. Share gained 0.09 percent, closing at $41.19.

Analysts at Credit Suisse maintained an Outperform rating on IntercontinentalExchange (NYSE: ICE) with a price target lowered to $215 from a previous $220. Also, analysts at Barclays maintained an Outperform rating on ICE with a price target lowered to $225 from a previous $232. Shares lost 1.28 percent, closing at $190.38.

Analysts at Sterne Agee upgraded Lululemon (NASDAQ: LULU) to Neutral from Underperform while removing a previous $43 price target. Shares lost 0.26 percent, closing at $42.87.

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Analysts at FBR Capital upgraded Microsoft (NASDAQ: MSFT) to Outperform from Market Perform with a price target raised to $49 from a previous $43. Shares gained 2.21 percent, closing at $41.21.

Analysts at Belus Capital initiated coverage of Wal-Mart (NYSE: WMT) with a Sell rating and $71 price target. Shares gained 0.25 percent, closing at $77.32.

Analysts at Imperial Capital initiated coverage of Whole Foods (NYSE: WFM) with an Outperform rating and $48 price target. Shares gained 4.48 percent, closing at $40.10.

Analysts at SunTrust Robinson Humphrey downgraded Zillow (NYSE: Z) to Hold from Buy with an unchanged $110 price target. Shares lost 0.38 percent, closing at $117.48.

Equities-Specific News of Note

Costco (NASDAQ: COST) reported its May same-store sales rose six percent. Total sales rose eight percent year over year to $8.78 billion. Shares gained 1.24 percent, closing at $117.75.

L Brands (NYSE: LB) reported its May same-store sales rose three percent. Total sales rose four percent year over year to $763.6 million. Shares gained 0.74 percent, closing at $58.92.

Panera Bread (NASDAQ: PNRA) announced that 100 percent of its franchisees have committed to the company's ecommerce platform as part of its “2.0” transformation. Shares gained 0.80 percent, closing at $155.69.

Newmont Mining (NYSE: NEM) said that it plans to put most of its employees at its copper mine in Indonesia on leave with reduced pay as the company continues to negotiate with the government over an export tax that was initiated back in January. Shares gained 0.57 percent, closing at $23.02.

Bill Ackman's Pershing Square is requesting the withdrawal of Allergan's (NYSE: AGN) Preliminary Proxy Statement filed on May 13 in a letter to the SEC. Shares gained 0.18 percent, closing at $165.90.

Barnes & Noble (NYSE: BKS) announced it will partner with Samsung to sell a co-branded Samsung Galaxy Tab Nook tablet. Shares of Barnes & Noble gained 3.54 percent, closing at $19.57.

General Motors (NYSE: GM) said that 15 employees have lost their jobs due to their handling of the company's ignition switch fiasco. The company's CEO Mary Barra admitted to some mistakes but emphasized an independent investigation's finding that there was no internet conspiracy. Shares lost 0.68 percent, closing at $36.28.

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Chimera Investment (NYSE: CIM) estimated its book value per share as of the end of March was $3.01, up from $2.82 per share at the end of 2013. The company also declared a $0.09 quarterly dividend for the rest of 2014. Shares closed at its new 52-week highs of $3.30, up 4.43 percent.

Twitter (NYSE: TWTR) has purchased Namo Media, a maker of a native ad platform for mobile apps for around $50 million. Shares gained 3.01 percent, closing at $33.89

Baidu (NASDAQ: BIDU) will offer $1 billion of notes priced at 2.75 percent due in 2019 Shares gained 1.86 percent, closing at $166.42.

Deutsche Bank (NYSE: DB) has priced its 8.5 billion euro equity offering at 22.50 euro per share, higher than the previously rumored 21 euro to 21.50 euro price. Shares hit new 52-week lows of $38.94 before closing the day at $39.44, down 2.69 percent.

Statoil (NYSE: STO) is set to make additional cuts in its capital expenditure and eliminated staff as part of an objective to save $5 billion a year. Shares gained 2.35 percent, closing at $30.95.

Microsoft (NASDAQ: MSFT) will lower the prices of its tablets and smartphones to stay competitive and gain market share. The company will offer certain Windows phones for under $200. Shares gained 2.21 percent, closing at $41.21.

Winners of Note

This morning, Ciena (NASDAQ: CIEN) reported its second quarter results. The company announced an EPS of $0.17, beating the consensus estimate of $0.13. Revenue of $560 million beat the consensus estimate of $559 million. Net income for the quarter rose to $19.4 million from $2.2 million in the same quarter a year ago as the company saw solid revenue gains in all of its segments. Converged packet optical sales rose 63.7 percent year over year to $356.8 million as the company continues to benefit from the shift towards on-demand networking models. The company's 43.1 percent gross margin rate dipped from 43.4 percent last quarter but rose from 42.5 percent a year ago. The company issued guidance and sees its third quarter revenue coming in a range of $585 million to $615 million, higher than the consensus estimate of $583.3 million. Gross margin is guided to be in the low-mid 40s. Shares gained 18.38 percent, closing at $22.48.

This morning, Joy Global (NYSE: JOY) reported its second quarter results. The company announced an EPS of $0.76, beating the consensus estimate of $0.71. Revenue of $930 million missed the consensus estimate of $933 million. Net income for the quarter fell to $73.95 million from $181.56 million in the same quarter a year ago as demand for underground mining equipment contributed to a total 32 percent decline in total sales. Bookings for the quarter fell 7.2 percent from a year ago to $1.047.6 billion. Sales in the underground mining equipment business fell 24.1 percent year over year to $517.9 million while surface mining equipment sales fell 37.8 percent from a year ago to $443.6 million. Despite declining sales in the quarter the company reaffirmed prior guidance for its full fiscal year and sees its EPS being $3.10 to $3.50 versus a consensus estimate of $3.24. Revenue for the full fiscal year was also reaffirmed and is estimated to be $3.6 billion to $3.8 billion versus the consensus estimate of $3.76 billion. Shares gained 6.66 percent, closing at $61.70.

Just Energy (NYSE: JE) will sell its water heater and HVAC home services unit to Reliance comfort Limited for $505 million. Shares gained 6.93 percent, closing at $6.02.

Decliners of Note

This morning, Vera Bradley (NASDAQ: VRA) reported its first quarter results. The company announced an EPS of $0.16, missing the beating the consensus estimate of $0.13. Revenue of $113.5 million missed the consensus estimate of $118.4 million. Net income for the quarter fell to $6.6 million from $9.2 million in the same quarter a year ago as the company admitted it continues to face a difficult environment “that is proving much more challenging than we anticipated just two short months ago.” Comparable-store sales in the quarter dipped 9.4 percent while gross margin rate fell 230 bps to 53.3 percent due to overhead costs de-leveraging and a higher year-over-year promotional activity environment. Shares lost 5.39 percent, closing at $23.89.

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Rite Aid (NYSE: RAD) reported its May same-store sales rose 3.5 percent. Total sales rose 2.5 percent year over year to $2.48 billion. In addition to May's sales metrics, the company revised its full year EPS guidance from $0.31 to $0.42 to a new range of $0.30 to $0.40 versus a consensus estimate of $0.39. Shares lost 7.41 percent, closing at $7.87.

Speaking at an investor conference on Wednesday, Zynga's (NASDAQ: ZNGA) CEO Don Mattrick admitted that the company is “nowhere near where we should be when we ultimately executed.” Mattrick failed to impress investors and did not offer any hints of products that could hit the market in the future. Analysts at Sterne Agee said that Mattrick appeared to be less upbeat than usual while adding that Mattrick's “evasiveness” on future products could make investors concerned over the company's future. Shares lost 9.17 percent, closing at $2.97.

Earnings of Note

This morning, J.M. Smucker (NYSE: SJM) reported its fourth quarter results. The company announced an EPS of $1.21, beating the consensus estimate of $1.16. Revenue of $1.24 billion was in-line with the consensus estimate. Net income for the quarter fell to $118.5 million from $130.3 million in the same quarter a year ago due to price adjustments in the quarter and the company exiting several product lines. U.S. retail coffee sales declined 12 percent year over year to $473.5 million, U.S. retail consumer food sales declined four percent year over year to $465.8 million while international food service and natural foods sales declined seven percent to $295.0 million over the same time period. Shares gained 1.44 percent, closing at $104.31.

Quote of the Day

“I got Jack [Ma] drunk in Hong Kong and afterwards asked him if he'd invest, and he said 'okay'. The discussions were finished within 15 minutes yesterday morning.” – Chinese billionaire Xu Jiayin explaining how he got Ma (Alibaba's founder) to invest $192 million in his soccer club, Guangzhou Evergrande.

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