Market Wrap For June 16: M&A Frenzy Keep Indices In Positive Territory
U.S. stocks closed the day slightly higher as a mergers and acquisition heavy trading session eased fears over escalating violence in Iraq.
The New York Federal Reserve's Empire State index for June showed that business conditions in June rose from May.
In fact, June's reading proved to be the best since 2010.
- The Dow gained 0.03 percent, closing at 16,781.01.
- The S&P 500 gained 0.08 percent, closing at 1,937.78.
- The Nasdaq gained 0.24 percent, closing at 4,321.11.
- Gold lost 0.24 percent, trading at $1,271.10 an ounce.
- Oil gained 0.07 percent, trading at $106.24 a barrel.
- Silver lost 0.31 percent, trading at $19.59 an ounce.
News of Note
June Empire State Survey rose to 19.28 from 19.01, topping estimates for 15.0. New Orders rose to 18.36 from 10.44, Shipments fell to 14.14 from 17.44 while Inventories rose to 9.68 from 2.20.
June NAHB Housing Market Index rose to 49 from 45 in May, topping estimates of 47.
Ukraine faces gas sanctions from Russia's Gazprom after its deadline to pay $1.95 billion has passed. According to Russia's Energy Minister Yuri Prodan, “gas supplies to Ukraine have been reduced to zero.”
Analyst Upgrades and Downgrades of Note
Analysts at Bank of America upgraded AK Steel Holdings (NYSE: AKS) to Buy from Neutral with a price target raised to $10 from a previous $9. Shares gained 6.54 percent, closing at $6.84.
Analysts at Pacific Crest initiated coverage of American Express (NYSE: AXP) with a Sector Perform rating. Shares lost 0.51 percent, closing at $94.37.
Analysts at JPMorgan upgraded DISH Network (NASDAQ: DISH) to Overweight from Neutral with a price target raised to $72 from a previous $61. Shares gained 0.41 percent, closing at $59.20.
Analysts at BMO Capital Markets initiated coverage of EOG Resources (NYSE: EOG) with an Outperform rating and $130 price target. Shares hit new 52-week highs of $115.17 before closing the day at $114.03, up 0.01 percent.
Analysts at Summit Research initiated coverage of FireEye (NASDAQ: FEYE) with a Buy rating and $45 price target. Shares gained 4.88 percent, closing at $38.04.
Analysts at Oppenheimer maintained an Outperform rating on Lululemon (NASDAQ: LULU) with a price target lowered to $53 from a previous $63. Shares gained 1.70 percent, closing at $38.25.
Analysts at Baird upgraded Micron Technology (NASDAQ: MU) to Outperform from Neutral with a price target raised to $42 from a previous $25. Shares hit new 52-week highs of $32.19 before closing the day at $31.91, up 2.37 percent.
Analysts at Barclays maintained an Overweight rating on Oracle (NYSE: ORCL) with a price target raised to $47 from a previous $44. Shares finished the day unchanged at $42.14.
Analysts at JPMorgan maintained an Overweight rating on The Carlyle Group (NYSE: CG) with a price target raised to $45 from a previous $39.50. Shares gained 4.51 percent, closing at $33.58.
Analysts at Canaccord Genuity maintained a Buy rating on Zillow (NYSE: Z) with a price target raised to $130 from a previous $115. Shares hit new 52-week highs of $130.20 before closing the day at $130.01, up 5.72 percent.
Equities-Specific News of Note
Hillshire Brands (NYSE: HSH) officially withdrew its acquisition offer to acquire Pinnacle Foods (NYSE: PF) who is entitled to receive a $43 million termination fee that can be raised to $120 million. Shares of Hillshire Brands gained 0.25 percent, closing at $61.97 while shares of Pinnacle Foods gained 0.88 percent, closing at $33.33.
Pfizer (NYSE: PFE) unveiled a new 280,000 square-foot research facility in Massachusetts that will feature 1,000 scientists and host clinical programs for rare diseases, cardiovascular, inflammation, immunology among others. Shares gained 0.24 percent, closing at $29.60.
Domino's Pizza (NYSE: DPZ) reported a data breach in Europe in which 600,000 customers in Belgium and France are at risk of having personal information stolen. Shares lost 0.48 percent, closing at $72.19.
The Barnes Group (NYSE: B) announced it will partner with General Electric (NYSE: GE) and act as a licensed GE supplier to sell specific services for GE's engines directly to the market. Shares of Barnes Group gained 1.08 percent, closing at $38.41 while shares of General Electric lost 0.78 percent, closing at $26.83.
Winners of Note
Williams Companies (NYSE: WMB) has agreed to purchase the 50 percent stake of Access Midstream Partners which it currently does own for $6 billion. A jointly combined company would form a nearly $100 billion master partnership with substantial positions across the midstream business. Williams Companies expects the acquisition will result in $5 billion in earnings in 2015. Additionally, Williams Companies also raised its third-quarter dividend to $0.56 per share, a 32 percent hike. Shares of Williams Companies hit new 52-week highs of $59.68 before closing the day at $55.99, up 18.67 percent.
Level 3 Communications (NASDAQ: LVLT) has agreed to acquire TW Telecom (NASDAQ: TWTC) for $7.3 billion (including $1.6 billion of net debt) translating to $40.86 per share. Level 3 Communications expects the acquisition will be accretive to free cash flow per share after the first year of jointly combining together. Shares of Level 3 Communications lost 4.08 percent, closing at $42.29 while shares of TW Telecom hit new 52-week highs of $40.51 before closing the day at $38.99, up 7.29 percent.
SanDisk (NASDAQ: SNDK) has agreed to acquire Fusion-io (NASDAQ: FIO) for $1.1 billion, or $11.25 per share. SanDisk said that it expects the acquisition to be accretive to its non-GAAP earnings in the second half of fiscal 2015. Following the acquisition, analysts at Credit Suisse downgraded Fusion-io to Neutral from Outperform. Analysts at Piper Jaffray also downgraded Fusion-io to Neutral from Overweight. Shares of SanDisk hit new 52-week highs of $102.20 before closing the day at $102.00, up 3.58 while shares of Fusion-io surged 22.41 percent, closing at $11.36.
Over The weekend, Medtronic (NYSE: MDT) revealed that it will acquire Covidien (NYSE: COV) for $93.22 per share, a roughly 30 percent premium from Friday's closing price. Each share of Covidien will be converted into the right to receive $35.19 in cash and 0.956 Medtronic shares. Medtronic expects the acquisition to be accretive to its cash earnings in the first fiscal year following the closing of the deal and generate $850 million of annual pre-tax cost synergies before the end of fiscal 2018. Shares of Medtronic lost 1.10 percent, closing at $60.03 while shares of Covidien hit new 52-week highs of $92.68 before closing the day at $86.75, up 20.45 percent.
According to the Wall Street Journal, Nuance (NASDAQ: NUAN) is exploring a possible sale of itself. Names thrown around as potential acquirers include Samsung who may look for an acquisition to bolster its S-Voice platform. Shares of Nuance gained 9.71 percent, closing at $18.76.
Tesla Motors (NASDAQ: TSLA) announced that it expects to begin delivery of its Model X SUV vehicle in early 2015, as opposed to previous announcements that deliveries will begin in spring 2015. Shares gained 8.81 percent, closing at $224.61.
Decliners of Note
Alibaba reported first quarter metrics which showed signs of growth slowing. Alibaba's gross merchandise volume fell to 430 billion last quarter from 529 billion yuan in the previous quarter. Alibaba also reported that its operating margin fell to 45.3 percent from 51.3 percent in the same quarter a year ago. Shares of Yahoo! (NASDAQ: YHOO) didn't respond well to Alibaba's numbers as the firm is a major shareholder of Alibaba. Shares of Yahoo! lost 5.77 percent, closing at $34.81.
Over the weekend, DreamWorks Animation's (NYSE: DWA) How To Train Your Dragon 2 hit theaters. The animated film grossed around $50 million, trailing 22 Jump Street that grossed around $60 million over the same opening-weekend. Some figures had estimated that Dragon 2 would gross more than $65 million over the weekend following a four-year wait between the first Dragon movie. Shares lost 10.97 percent, closing at $24.35.
Quote of the Day
"I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much." - Gordon Gekko in the 1987 film Wall Street
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