Market Wrap For June 18: Markets Rally On Fed Comments And Tapering
U.S. stocks rose as investors and traders digested comments from the Federal Reserve.
The Federal Reserve Open Committee announced that it will further taper its asset purchases by another $10 billion. The Fed is now committing towards purchasing $35 billion of assets per month.
The Fed also hinted that its Fed Funds rate will be closer to 1.25 percent by the end of 2015, higher than previous guidance of 1.0 percent. By the end of 2016, the Fed Funds rate is now guided to be 2.5 percent from a previous 2.25 percent.
The Fed lowered its 2014 GDP growth forecast to 2.1 percent to 2.3 percent from a previous guidance of 2.8 percent to 3.0 percent growth. 2015 GDP projections for a growth of 3.0 percent to 3.2 percent remain unchanged. The Fed also left its 2016 GDP growth forecast unchanged at 2.5 percent to 3.0 percent growth.
The Fed sees the unemployment rate falling to 6.0 percent to 6.1 percent in 2014. The Fed expects the unemployment rate to decline even further to 5.4 percent to 5.7 percent in 2015 and 5.1 percent to 5.5 percent in 2016.
Finally, The Fed's Chief Janet Yellen confirmed that interest rates will remain low. for a "considerable time after the asset purchase program ends" and that there is “no mechanical formula for what a considerable time means."
- The Dow gained 0.58 percent, closing at 16,906.62.
- The S&P 500 gained 0.77 percent, closing at 1,956.99.
- The Nasdaq gained 0.59 percent, closing at 4,362.84.
- Gold gained 0.17 percent, trading at $1,274.20 an ounce.
- Oil lost 0.09 percent, trading at $105.77 a barrel.
- Silver gained 0.52 percent, trading at $19.83 an ounce.
News of Note
U.S. First Quarter Current Account declined further to -$111.2 billion from -$87.3 billion in the fourth quarter.
EIA Crude Inventories declined 0.6 million barrels, less than the decline of 1.1 million barrels expected.
EIA Gasoline Inventories rose 0.8 million barrels, exceeding expectations for a gain of 0.2 million barrels.
EIA Distillates Inventories gained 0.4 million barrels, exceeding expectations for a gain of 0.3 million barrels.
The rating agency S&P downgraded Argentina's long-term foreign currency rating to CCC- from CCC+ due to the rising probability the country will default on its foreign currency debt.
A pipeline which carries gas from Russia exploded in central Ukraine. Supplies to Europe were unaffected as they were rerouted through other pipelines.
According to Reuters, Sunni militants now control 75 percent of Iraq's Baiji refinery.
The Bank of England's latest minutes hint of an imminent rate increase by the end of the year.
Analyst Upgrades and Downgrades of Note
Analysts at Morgan Stanley reinstated coverage of Actavis (NYSE: ACT) with an Overweight rating and $246 price target. Shares gained 0.90 percent, closing at $217.00.
Analysts at Morgan Stanley initiated coverage of BlackBerry (NASDAQ: BBRY) with an Equal-weight rating. Shares gained 2.98 percent, closing at $8.29.
Analysts at Citigroup maintained a Neutral rating on BlackRock (NYSE: BLK) with a price target raised to $340 from a previous $315. Shares gained 2.50 percent, closing at $319.85.
Analysts at Morgan Stanley initiated coverage of Cisco (NASDAQ: CSCO) with an Overweight rating and $30 price target. Shares gained 0.53 percent, closing at $24.63.
Analysts at Barclays maintained an Equal-weight rating on Coach (NYSE: COH) with a price target lowered to $45 from a previous $48. Shares lost 3.97 percent, closing at $39.19.
Analysts at Buckingham Research upgraded DIRECTV (NYSE: DTV) to Buy from Neutral with a price target maintained at $95. Shares gained 0.78 percent, closing at $84.31.
Analysts at Canaccord Genuity upgraded The Gap (NYSE: GPS) to Buy from Hold with a price target raised to $51 from a previous $47. Shares gained 1.24 percent, closing at $41.75.
Analysts at Barclays upgraded Medtronic (NYSE: MDT) to Overweight from Equal-weight with a price target raised to $73 from a previous $67. Shares gained 3.56 percent, closing at $63.77.
Analysts at Morgan Stanley assumed coverage of Pandora Media (NYSE: P) with an Equal-weight rating and $28 price target. Shares gained 1.10 percent, closing at $27.53.
Analysts at JPMorgan downgraded SunPower (NASDAQ: SPWR) to Neutral from Overweight with a price target maintained at $40. Shares gained 0.34 percent, closing at $40.36.
Analysts at BMO Capital upgraded Tyson Foods (NYSE: TSN) to Outperform from Market Perform with a price target maintained at $43. Shares gained 1.61 percent, closing at $36.04.
Analysts at Macquarie maintained an Outperform rating on Verizon Communications (NYSE: VZ) with a $53 price target. Shares gained 0.43 percent, closing at $49.42.
Analysts at Barclays upgraded Walgreen (NYSE: WAG) to Overweight from Equal-weight with a price target raised to $92 from a previous $56. Shares hit new 52-week highs of $76.17 before closing the day at $76.08, up 4.08 percent.
Analysts at Argus Research maintained a Buy rating on Williams Companies (NYSE: WMB) with a price target raised to $65 from a previous $54. Shares gained 0.07 percent, closing at $57.35.
Equities-Specific News of Note
According to Bloomberg, V.F Corp (NYSE: VFC) or Adidas may be interested in acquiring Lululemon (NASDAQ: LULU). Shares of V.F. gained 0.84 percent, closing at $62.36 while shares of Lululemon gained 3.02 percent, closing at $39.88.
AIG (NYSE: AIG) will launch a commercial line of property insurance in several countries worldwide later this year. Shares hit new 52-week highs of $55.68 before closing the day at $55.59, up 0.67 percent.
Amazon.com (NASDAQ: AMZN) unveiled its Fire phone with a 4.7 inch display and a 2.2GHz Qualcomm Snapdragon CPU and a 13MP camera. The phone features a “dynamic perspective” providing depth effects for apps. A 32GB model will sell for $199 on a two-year contract with AT&T (NYSE: T) who is the exclusive carrier for the Fire phone. Shares of Amazon gained 2.69 percent, closing at $334.38 while shares of AT&T gained 0.51 percent, closing at $35.20.
General Motors (NYSE: GM) CEO Mary Barra returned to Capitol Hill to answer inquiries from a House subcommittee over the company's ignition switch recall. Shares lost 0.17 percent, closing at $36.30.
Valeant Pharmaceuticals (NYSE: VRX) announced that it began an exchange offer for the common stock of Allergan (NYSE: AGN). Allergan shareholders would be able to elect to exchange each of their Allergan shares for $72 in cash and 0.83 Valeant shares. Allergan's Board of Directors will review the offer and respond in a 14D-9 filing. Shares of Valeant lost 0.37 percent, closing at $118.43 while shares of Allergan gained 1.77 percent, closing at $162.41.
Statoil (NYSE: STO) announced that it discovered an addition two to three trillion cubic feet of natural gas in its offshore well near Tanzania. Shares gained 1.47 percent, closing at $31.83.
Apple (NASDAQ: AAPL) revealed a new 21.5 inch iMac which it plans to sell for $1,099. Shares gained 0.11 percent, closing at $92.18.
General Electric (NYSE: GE) is expected to present a new and improved offer to acquire France based Alstom whose board is set to finalize its decision by Monday. Shares gained 0.07 percent, closing at $26.89.
Winners of Note
This morning, FedEx (NYSE: FDX) reported its fourth quarter results. The company announced an EPS of $2.46, beating the consensus estimate of $2.36. Revenue of $11.8 billion beat the consensus estimate of $11.64 billion. Net income for the quarter rose to $730 million from $679 million in the same quarter a year ago as the company saw a two percent rise in express package shipments and an eight percent rise in ground shipments during the quarter. FedEx saw its operating margin improve by 40 bps to 10.0 percent. The company issued guidance and sees its full year fiscal 2015 EPS being $8.50 to $9.00 versus a consensus estimate of $8.76. Shares hit new 52-week highs of $149.37 before closing the day at $148.95, up 6.16 percent.
Air Products (NYSE: APD) announced that Seifi Ghasemi will serve as the company's new chairman, president and CEO as of July 1. Currently, Ghasemi is the chairman and CEO of Rockwood Holdings. The management shuffle comes at the expense of increasing pressure from Bill Ackman's Pershing Square who holds a 6.7 percent to overhaul its management team. Ackman previously stated that a new management team could double the stock's price over the next few years. Shares hit new 52-week highs of $131.48 before closing the day at $130.72, up 7.50 percent.
Decliners of Note
ConAgra Foods (NYSE: CAG) issued a warning that it will fall short when the company reports its fourth quarter results. The company said that it expects its EPS to be $0.55, below the consensuses estimate of $0.62 due to a seven percent decline in its consumer foods segment. The company revealed that its Chef Boyardee brand is partially responsible for the decline in sales forcing the company to take a non-cash impairment charge of $681 million due to the brand's decline in relevance and goodwill. Shares lost 7.25 percent, closing at $30.47.
Earnings of Note
After the market closed, Jabil Circuit (NYSE: JBL) reported its third quarter results. The company announced an EPS of -$0.06, beating the consensus estimate of -$0.08. Revenue of $3.8 billion beat the consensus estimate of $3.6 billion. Shares were trading higher by 1.04 percent at $20.31 following the earnings report.
Quote of the Day
“I still don't see that for equity prices broadly." - The Fed's Janet Yellen responding to whether she believes current equity prices are overvalued.
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