Earnings Continue Driving Markets Higher
U.S. stocks rose as investors and traders find comfort in corporate earnings that continue to come in at better-than-expected levels.
Although it's still very early in to earning season, Intel Corp. (NASDAQ: INTC) reported better-than-expected results and stronger-than-expected PC sales, indicating that business and consumer spending remains strong.
The Fed's Beige Book, meanwhile, stated the pace of economic growth is split between moderate and modest across its 12 districts, with most districts maintaining an optimistic outlook for growth. The Beige Book also noted labor market conditions improved, while some districts are having difficulties in finding workers for skilled positions.
- The Dow gained 0.45 percent, closing at 17,138.20.
- The S&P 500 gained 0.42 percent, closing at 1,981.57.
- The NASDAQ gained 0.22 percent, closing at 4,425.97.
- Gold gained 0.14 percent, trading at $1,298.50 an ounce.
- Oil gained 1.35 percent, trading at $101.31 a barrel.
- Silver lost 0.52 percent, trading at $20.78 an ounce.
News Of Note
MBA Mortgage Composite Index declined 3.6 percent after rising 1.9 percent last week.
MBA Mortgage Purchase Index declined eight percent after rising four percent last week.
MBA Mortgage Refinance Index declined 0.1 percent after rising 0.4 percent last week.
June Producer Price Index rose 0.4 percent after rising 0.6 percent in May. Analysts were expecting the index to rise 0.3 percent in June.
June Core PPI rose 0.2 percent after declining 0.1 percent in May. June's reading was in-line with expectations.
June Industrial Production rose 0.2 percent, less than expectations of a 0.4 percent rise.
June Capacity Utilization remained unchanged from May at 79.1 percent but fell short of expectations of 79.3 percent.
July NAHB Housing Market Index rose to 53 from 49, topping estimates of 51.
EIA Crude Inventories declined 7.5 million barrels, more than the 2.6 million barrel decline expected.
EIA Gasoline Inventories gained 0.2 million barrels, less than the expected 0.6 million barrel gain.
EIA Distillates Inventories gained 2.5 million barrels, more than the 1.8 million gain expected.
U.K.'s unemployment fell to 6.5 percent, the lowest rate since December 2008.
China's GDP rose 7.5 percent in the second quarter, according to the country's statistics bureau.
Analyst Upgrades And Downgrades Of Note
Analysts at JPMorgan maintained a Buy rating on Abercrombie & Fitch (NYSE: ANF), with a price target raised to $45 from a previous $42. Shares lost 2.0 percent, closing at $40.22.
Analysts at Atlantic Equities initiated coverage of American Airlines (NASDAQ: AAL) with an Overweight rating and $51 price target. Shares lost 0.50 percent, closing at $43.48.
Analysts at JPMorgan maintained an Underweight rating on American Express Company (NYSE: AXP) with a price target raised to $95 from a previous $82. Shares gained 0.02 percent, closing at $94.47.
Analysts at Citigroup maintained a Neutral rating on CSX Corp (NYSE: CSX) with a price target raised to $32 from a previous $31. Shares hit new 52-week highs of $31.30 before closing the day at $31.19, up 0.13 percent.
Analysts at Nomura maintained a Buy rating on Coca-Cola Company (NYSE: KO) with a price target raised to $54 from a previous $53.50. Shares gained 0.05 percent, closing at $42.12.
Analysts at Goldman Sachs upgraded FireEye (NASDAQ: FEYE) to Buy from Neutral. Shares gained 2.22 percent, closing at $34.57.
Analysts at UBS maintained a Buy rating on Ford Motor (NYSE: F) with a price target raised to $23 from a previous $22. Shares gained 1.48 percent, closing at $17.80.
Analyst sat JPMorgan maintained an Underweight rating on Goldman Sachs Group (NYSE: GS), with a price target raised to $150 from a previous $148. Also, analysts at UBS maintained a Neutral rating on Goldman Sachs with a price target raised to $185 from a previous $175. Shares gained 0.77 percent, closing at $170.47.
Analysts at Credit Suisse downgraded The Hershey Company (NYSE: HSY) to Neutral from Outperform. Also, analysts at JPMorgan maintained an Overweight rating on Hershey, with a price target lowered to $99 from a previous $100. Shares lost 2.45 percent, closing at $92.34.
Analysts at UBS upgraded Intel (NASDAQ: INTC) to Buy from Neutral with a price target raised to $37.50 from a previous $30. Also, analysts at B Riley upgraded Intel to Buy from Neutral, with a price target raised to $40 from a previous $33.50. Of note, analysts at Jefferies maintained a Buy rating on Intel, with a price target raised to $45 from a previous $40, while analysts at Barclays maintained an Equal-weight rating on Intel with a price target raised to $30 from a previous $28.
Shares surged to new 52-week highs of $34.74 before closing the day at $34.65, up 9.27 percent.
Analysts at Deutsche Bank maintained a Hold rating on Johnson & Johnson (NYSE: JNJ), with a price target raised to $107 from a previous $102. Also, analysts at Citigroup maintained a Buy rating on Johnson & Johnson, with a price target raised to $122 from a previous $117. Shares lost 1.03 percent, closing at $102.22.
Analysts at William Blair downgraded Michael Kors (NYSE: KORS) to Market Perform from Outperform. Shares gained 2.09 percent, closing at $81.10.
Analysts at Berenberg initiated coverage of Monsanto Company (NYSE: MON) with a Buy rating and $141 price target. Shares gained 0.17 percent, closing at $120.18.
Analysts at Deutsche Bank maintained a Buy rating on PepsiCo (NYSE: PEP) with a price target raised to $96 from a previous $94. Shares gained 0.18 percent, closing at $90.50.
Analysts at Deutsche Bank maintained a Hold rating on SodaStream International (NASDAQ: SODA), with a price target lowered to $32 from a previous $37. Shares gained 1.46 percent, closing at $29.94.
Analysts at Deutsche Bank maintained a Buy rating on UnitedHealth Group (NYSE: UNH) with a price target raised to $92 from a previous $88. Shares lost 0.17 percent, closing at $83.76.
Analysts at CRT Capital maintained a Fairly Valued rating on Yahoo! (NASDAQ: YHOO), with a price target lowered to $38 from a previous $41. Shares lost 5.11 percent, closing at $33.79.
Equities-Specific News Of Note
VMware (NYSE: VMW) plans to form a joint venture with SoftBank to bring vCloud Hybrid infrastructure service in Japan. At the same time, VMware is partnering with China Telecom (NYSE: CHA) to also offer vCloud Hybrid infrastructure services. Shares of VMware lost 0.81 percent, closing at $94.05 while shares of China Telecom gained 0.43 percent, closing at $53.40.
Tesla (NASDAQ: TSLA) announced its third-generation car will be named Model E, and will go on sale in 2016 or 2017 with an estimated $35,000 price target. Shares lost 1.10 percent, closing at $217.16.
Barrick Gold (NYSE: ABX) announced a management shakeup, which will include the departure of its CEO Jamie Sokalsky. Shares gained 3.06 percent, closing at $18.89.
On Tuesday, Apple (NASDAQ: AAPL) and IBM (NYSE: IBM) announced an enterprise mobility partnership to create more than 100 industry-specific enterprise solutions (security, mobile device management, big data) for iPhone and iPad apps. The two companies will also collaborate on developing IBM's cloud services optimized for iOS use.
Separately, Apple agreed to a conditional $450 million e-books antitrust accord. Shares of Apple hit new 52-week highs of $97.10 before reversing and closing the day at $94.78, down 0.57 percent. Shares of IBM gained 2.05 percent, closing t $192.36.
Ilumina (NASDAQ: ILMN) acquired Myraqa, a consulting firm that specializes in In Vitro diagnostics with an expertise in regulatory strategy and application support. Shares lost 0.38 percent, closing at $171.09.
3M (NYSE: MMM) announced it will acquire Sumitomo Electric Industries' 25 percent stake in Sumitomo 3M for $885 million. 3M will now fully own its Japanese subsidiary. Shares hit new 52-week highs of $146.25 before closing the day at $146.17, up 0.77 percent.
Glu Mobile (NASDAQ: GLUU) said that its single-day revenue for ### #######: Hollywood exceeded Deer Hunter 2014's single-day record in 16 of the last 18 days. Shares gained 0.46 percent, closing at $6.52.
Rio Tinto (NYSE: RIO) said it produced a record 139.5 million metric tons of iron ore in the first half of 2014, good for a ten percent rise from a year ago. The company also reported a 23 percent increase in copper production in the first half of the year. Shares gained 1.88 percent, closing at $57.40.
Amazon.com (NASDAQ: AMZN) plans to start testing a $9.99-a-month e-book subscription service, with access to more than 600,000 e-books. Shares gained 0.41 percent, closing at $355.90.
Precision Drilling (NYSE: PDS) entered into a strategic technology and service agreement alliance with Schlumberger Limited (NYSE: SLB) for unconventional drilling in the U.S. and Canada. Shares of Precision Drilling gained 4.55 percent, closing at $14.01 while shares of Schlumberger gained 1.24 percent, closing at $115.88.
Analysts at Janney Capital revealed in its proprietary study that McDonald's (NYSE: MCD) sales outlook for the next six months is the worst it's been in over a decade. Shares lost 1.03 percent, closing at $99.27.
Treehouse Foods (NYSE: THS) confirmed prior guidance and expects its second quarter sales will rise 18 percent from a year ago to $625 million. Shares lost 0.91 percent, closing at $76.47.
Under Armour (NYSE: UA) plans to partner with Samsung, to develop a portfolio of wearing devices.
Winners Of Note
As previously reported, Gtech has agreed to acquire International Game Technology (NYSE: IGT) for $4.7 billion, or $15.50 per share. The acquisition represents a roughly 18 percent premium to International Game Technology's closing price. The combination of the two companies will create the world's main provider of lottery systems with the largest slot-machine maker. Gtech's CEO Marco Sala will maintain control of the joint company, which is expected to be completed in the first or second quarter of 2015. Shares of International Game Technology gained 9.16 percent, closing at $16.92.
Time Warner (NYSE: TWX) rejected an $80 billion offer (approximately $85 per share) to be acquired by 21st Century Fox. (NASDAQ: FOXA) Rupert Murdoch's 21st Century Fox is still determined to acquire Time Warner and will sell off CNN, as would likely be required for regulatory approval. Time Warner's board of directors stated that “there are considerable strategic, operational, and regulatory risks to executing a combination with Twenty-First Century Fox.” Shares of Time Warner surged to new 52-week highs of $84.40 before closing the day at $83.13, up 17.07. Meanwhile, shares of 21st Century Fox lost 6.22 percent, closing at $33.00.
According to analysts at William Blair, and quoted in Bloomberg, Joy Global (NYSE: JOY) could see itself as a takeover target. Shares hit new 52-week highs of $65.36 before closing the day at $65.01, up 8.08 percent.
Decliners Of Note
Shares of BlackBerry (NASDAQ: BBRY) were under heavy selling pressure following Apple's collaboration plans with IBM. Analysts at IDC stated that the agreement “is not a crushing blow at this early stage, but it is a negative for BlackBerry.” Shares lost 11.77 percent, closing at $9.97.
Interactive Intelligence (NASDAQ: ININ) announced yesterday that it expects its second quarter revenue to be in a range of $78 million to $80 million, below its prior guidance of $86 million to $88 million and below the consensus estimate of $87 million. The company noted contract delays and revenue recognition deferrals as reasons for the updated guidance. Shares hit new 52-week lows of $40.35 before closing the day at $42.42, down 15.13 percent.
Lannet (NYSE: LCI) received a subpoena from the State of Connecticut's Office of the Attorney General, related to an investigation involving the company's pricing of its digoxin therapy. The Attorney General is investigating the possibility of “fixing, maintaining or controlling prices of digoxin or allocating and dividing customers or territories relating to the sale of digoxin.” Shares lost 17.09 percent, closing at $39.04.
Taiwan Semiconductor Manufacturing Company (NYSE: TSM) reported its next-generation 16nm FinFet 3D transistor won't see noticeable production scale until the third quarter of 2015. The company estimated that its 2015 16nm share will fall short of a “major competitor.” However, the company guided toward regaining share in 2016 and beyond. Shares lost 6.85 percent, closing at $20.93.
Earnings Of Note
On Wednesday morning Textron (NYSE: TXT) reported its second quarter results. The company announced an EPS of $0.51, beating the consensus estimate of $0.46. Revenue of $3.51 billion missed the consensus estimate of $3.52 billion. Net income for the quarter rose to $144 million from $113 million in the same quarter a year ago as revenues at Textron Aviation, Bell and Industrial were all higher. The Textron Aviation segment saw its revenue rise to $1.183 billion from $560 million a year ago, while Bell saw its revenue grow to $1.12 billion from $1.03 billion. Industrial sales rose to $894 million from $801 while Textron Systems saw a drop in revenue to $282 million from $422 million a year ago. The results also reflect a full-quarter impact from its acquisition of Beechraft. Textron reaffirmed its full-year 2014 guidance and expects its EPS to be $1.92 to $2.12. Shares gained 1.64 percent, closing at $39.00.
BlackRock (NYSE: BLK) also reported its second quarter results. The company announced an EPS of $4.89, beating the consensus estimate of $4.46. Revenue of $2.78 billion beat the consensus estimate of $2.72 billion. Net income for the quarter rose to $837 million from $722 million in the same quarter a year ago as the company's assets under management rose 19 percent from a year ago to $4.593 trillion. The investment management firm saw $38 billion long-term net inflows in the quarter with second quarter retail net inflows totaling $13.1 billion. iShares inflows for the quarter were $30.4 billion, bringing the iShares total assets under management to $993.83 billion. BlackRock's operating margin rose 620 bps from a year ago to 40.4 percent. Shares hit new 52-week highs of $331.90 before closing the day at $325.17, up 0.44 percent.
Also on Wednesday morning, Bank of America (NYSE: BAC) reported its second quarter results. The company announced an EPS of $0.41, beating the consensus estimate of $0.29. Revenue of $21.96 billion beat the consensus estimate of $21.62 billion. Net income for the quarter fell to $2.3 billion from $4.0 billion in the same quarter a year ago as the company realized a pretax litigation expense of $4 billion. Net interest income for the quarter fell five percent from a year ago to $10.226 billion. Noninterest income fell four percent from a year to $11.734 billion while Consumer and Business banking net income rose 29 percent from a year ago to $1.788 billion.
The bank saw its Consumer Real Estate Services rise to $2.8 billion from $930 million a year ago, while Global Wealth and Investment Management net income fell to $724 million from $759 million a year ago. However, Global Banking net income improved to $1.353 billion from $1.3 billion a year ago. In the quarter the bank settled with AIG over all MBS issues for $650 million. The bank's tangible book value per share rose to $14.24 from $13.81 last quarter. Shares lost 1.90 percent, closing at $15.51.
Abbot Laboratories (NYSE: ABT) also reported its second quarter results on Wednesday. The company announced an EPS of $0.54, beating the consensus estimate of $0.51. Revenue of $5.55 billion beat the consensus estimate of $5.52 billion. Net earnings for the quarter fell to $466 million from $476 million in the same quarter a year ago as the company saw its SG&A expenses rising 4.3 percent to $1.788 billion. International revenues rose 2.7 percent from a year ago to $3.99 billion while U.S. revenues rose 0.1 percent to $1.561 billion. Diagnostics saw the largest percentage gain in revenue, at 4.8 percent to $1.189 billion, while Nutrition sales rose 1.6 percent to $1.731 billion and Medical Devices saw revenues grow 1.3 percent to $1.373 billion.
Pharmaceuticals saw its revenues decline 0.2 percent to $1.216 billion. Abbot Laboratories raised its full year fiscal 2014 ongoing EPS guidance to $2.19 to $2.29 from a previous $2.16 to $2.26. Shares lost 0.29 percent, closing at $41.05.
After the market closed, Las Vegas Sands (NYSE: LVS) reported its second quarter results. The company announced an EPS of $0.85, missing the consensus estimate of $0.81. Revenue of $3.62 billion missed the consensus estimate of $3.84 billion. Shares were trading lower by 2.34 percent at $72.07 following the earnings report.
After the market closed, eBay (NASDAQ: EBAY) reported its second quarter results. The company announced an EPS of $0.69, beating the consensus estimate of $0.68. Revenue of $4.36 billion missed the consensus estimate of $4.34 billion. Shares were trading higher by 1.18 percent at $51.30 following the earnings report.
Quote of the Day
“We're good at building a simple experience and in building devices. The kind of deep industry expertise you would need to really transform the enterprise isn't in our DNA. But it is in IBM's.” - Apple's CEO Tim Cook commenting on his company's alliance with IBM.
Latest Ratings for AAL
|Dec 2014||Credit Suisse||Maintains||Outperform|
|Dec 2014||Bank of America||Upgrades||Neutral||Buy|
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