Market Overview

Market Wrap For June 12: Iraq Concerns Dampens Bullish Momentum

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U.S. stocks declined as investors demonstrated concerns over recent escalations of violence in Iraq.

Crude oil rose as a wave of violence has seen Mosul and Tikrit (two cities key to Iraq's oil industry) fall to insurgent forces.

The Senate confirmed former Bank of Israel government Stanley Fischer as vice chairman of the Federal Reserve's board of governors.

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The Dow lost 0.65 percent, closing at 16,734.19.
The S&P 500 lost 0.71 percent, closing at 1,930.11.
The Nasdaq lost 0.79 percent, closing at 4,297.63.
Gold gained 0.99 percent, trading at $1,273.70 an ounce.
Oil gained 2.01 percent, trading at $106.50 a barrel.
Silver gained 1.94 percent, trading at $19.58 an ounce.

News of Note

Initial Jobless Claims rose 4,000 to 317,000, above the consensus of 309,000 and above last week's reading of 313,000. Continuing claims rose 11,000 to 2.61 million.

May Export prices rose 0.1 percent month over month, below the consensus calling for a 0.2 percent gain.

May Import prices rose 0.1 percent month over month, below the consensus calling for a 0.2 percent gain.

May Retail Sales rose 0.3 percent, below the consensus calling for a 0.6 percent gain. April's Retail Sales were revised to a gain of 0.5 percent after initially reporting a gain of 0.1 percent.

April Business Inventories rose 0.6 percent to 1,728.3 billion, ahead of the consensus calling for a 0.4 percent gain. Sales rose 0.7 percent to $1,337.4 billion while the Inventory/Sales ratio came in at 1.29.

EIA Natural Gas Inventory rose 107 bcf versus the consensus calling for a gain of 111 bcf.

The U.S. government budget turned negative in May posting a $130 billion deficit after posting at $106.9 billion surplus in April. The Congressional Budget Office is guiding towards a full year deficit (ending September 30) of $492 billion.

Analyst Upgrades and Downgrades of Note

Analysts at CRT Capital initiated coverage of American Eagle (NYSE: AEO) with a Fairly Valued rating and $11 price target. Shares lost 1.78 percent, closing at $11.06.

Analysts at RBC Capital Management upgraded Boeing (NYSE: BA) to Outperform from Sector Perform with an unchanged $145 price target. Shares lost 1.44 percent, closing at $132.17.

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Analysts at Nomura maintained a Buy rating on Coach (NYSE: COH) with a price target lowered to $50 from a previous $52. Shares hit new 52-week lows of $38.56 before closing the day at $38.67, down 1.18 percent.

Analysts at Macquarie downgraded DIRECTV (NYSE: DTV) to Neutral from Outperform with a price target lowered to $95 from a previous $100. Shares lost 0.08 percent, closing at $82.92.

Analysts at JPMorgan maintained an Overweight rating on Express (NASDAQ: EXPR) with a price target lowered to $16 from a previous $17. Shares lost 2.59 percent, closing at $13.55.

Analysts at Societe Generale downgraded Halliburton (NYSE: HAL) to Hold from Buy. Taking the opposite side, analysts at JPMorgan maintained an Overweight rating on Halliburton with a price target raised to $78 from a previous $77. Shares hit new 52-week highs of $68.14 before turning negative and closing the day at $66.65, down 0.43 percent.

Analysts at Nomura maintained a Buy rating on Micron Technology (NASDAQ: MU) with a price target raised to $40 from a previous $30. Shares lost 0.44 percent, closing at $30.85.

Analysts at Citigroup maintained a Neutral rating on Microsoft (NASDAQ: MSFT) with a price target raised to $41 from a previous $35. Shares lost 0.69 percent, closing at $40.58.

Analysts at Canaccord Genuity maintained a Buy rating on QUALCOMM (NASDAQ: QCOM) with a price target raised to $95 from a previous $90. Shares gained 0.16 percent, closing at $79.37.

Analysts at UBS removed Wal-Mart (NYSE: WMT) from its Most Preferred List. Shares lost 0.59 percent, closing at $75.71.

Equities-Specific News of Note

Tesla Motors (NASDAQ: TSLA) announced plans to build a factory in Europe once sales in the continent reach 160,000 annually. Shares lost 0.46 percent, closing at $203.52.

Consol Energy (NYSE: CNX) will form an MLP with Noble Energy (NYSE: NBL) for pipeline operations they jointly own in the Marcellus Shale. The MLP will launch an initial public offering by the end of the year. Shares of Consol Energy lost 4.62 percent, closing at $44.83 while shares of Noble Energy gained 0.56 percent, closing at $75.80.

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Ford (NYSE: F) announced it will make goodwill payments towards 200,000 owners and change its fuel economy ratings on six different hybrid vehicles. Shares lost 2.19 percent, closing at $16.53.

GT Advanced Technologies (NASDAQ: GTAT) won a contract to supply Qatar Solar Energy with its HICz 200 furnaces to create a 2.5GW manufacturing project. Shares gained 1.78 percent, closing at $17.72.

Amazon.com (NASDAQ: AMZN) launched Prime Music which provides ad-free music streaming of more than one million songs. Shares lost 2.77 percent, closing at $325.91.

Nokia (NYSE: NOK) has purchased Media Systems, a provider of mobile analytics that tracks user activities for apps and services and creates personalized content. Shares lost 0.12 percent, closing at $8.04.

Total (NYSE: TOT) announced that its Block 17 offshore production site near Angola will produce 700,000 barrels of oil per day, making the region its most prolific production site.

Twitter's (NYSE: TWTR) COO Ali Rowghani has resigned from his position but will act as a strategic adviser to the CEO. Shares gained 3.52 percent, closing at $36.79.

Winners of Note

Lands' End (NYSE: LE) reported that its same-stores ales rose 3.4 percent in the first quarter with revenue from its Direct segment rising 4.8 percent to $276 million. Revenue from the company's retail segment rose 2.3 percent to $54.4 million. Overall, the company's gross margin rate improved by 60bps to 49.0 percent. Shares gained 8.19 percent, closing at $28.81.

Decliners of Note

This morning, Lululemon Athletica (NASDAQ: LULU) posted its first quarter results. The company announced an EPS of $0.34, beating the consensus estimate of $0.32. Revenue of $384.6 million beat the consensus estimate of $381.24. Net income for the quarter fell to $18.98 million from $47.23 million in the same quarter a year ago despite comparable-store sales rising one percent and gross profit improving 150 bps to 50.9 percent. The company also authorized a $450 million share buyback program over two years. Despite the seemingly positive quarterly report, Lululemon issued guidance and sees its second quarter EPS being in a range of $1.71 to $1.78, below the consensus estimate of $1.89. Shares hit new 52-week lows of $37.00 before closing the day at $37.25, down 15.91 percent.

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On Monday, German based airliner Lufthansa cut its profit outlook for 2014 which, along with rising concerns over oil prices, generated a sell-off in airline stocks. Shares of United Continental Holdings (NYSE: UAL) lost 5.88 percent, closing at $42.60 while shares of Delta Air Lines (NYSE: DAL) lost 5.43 percent, closing at $38.50 and shares of American Airlines Group (NASDAQ: AAL) lost 4.94 percent, closing at $40.20.

Quote of the Day

“Yet, it is hugely important to stress that at no time since entering the Liquidity Trap over five years ago has the Fed had to give a moment's worry about inflation. To be sure, the FOMC has had to rhetorically beat back nattering nabobs of antiquated monetarism, who see the Fed's “bloated” balance sheet as inherently evil, the moral equivalent of a very fat man in Speedos: wrong, just wrong!” – Excerpt from Pimco's Paul McCulley's blog.

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