Market Overview

Ukraine Tension Prominent As Dow Suffers Triple Digit Loss; S&P 500 & NASDAQ Also Lower

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U.S. stocks declined and erased Monday's gains following reports that Russian troops were lining on the borders of Ukraine and preparing for an invasion, according to comments made by Poland's Foreign Minister.

“Unfortunately, Russia has restored its combat readiness on the Ukraine border with more than a dozen battalion-sized combat groups,” Poland's Foreign Minister Radoslaw Sikorski told European media sources. “There's a lot of equipment. This is the sort of thing one does to exert pressure or to invade.”

The CBOE Volatility Index rose more than 9 percent, as Russia's Vladimir Putin shows no signs of backing down over Ukraine following a continuation of U.S. and European sanctions.

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  • The Dow lost 0.84 percent, closing at 16,429.47.
  • The S&P 500 lost 0.97 percent, closing at 1,920.21.
  • The NASDAQ lost 0.71 percent, closing at 4,352.84.
  • Gold gained 0.01 percent, trading at $1,289.00 an ounce.
  • Oil lost 0.94 percent, trading at $97.37 a barrel.
  • Silver lost 2.02 percent, trading at $19.83 an ounce.

News Of Note

ICSC Retail Store Sales rose 4.5 percent year over year after rising 4.6 percent last week.

Redbook Chain Store Sales rose 4.6 percent year over year after rising 3 percent last week.

July U.S. PMI Services Index fell to 60.8 from 61 in June.

July ISM Non-Manufacturing Index rose to 58.7 from 56.0 in June.

June Factory Orders rose 1.1 percent after declining 0.5 percent in May. Analysts were expecting orders to increase by 0.6 percent in June.

July Global Services PMI declined to 56.0 from 58.8 in June.

July U.S. Global Composite Index rose to 55.5 from 55.4 in June.

Analyst Upgrades And Downgrades Of Note

Analysts at Credit Suisse maintained an Outperform rating on Cardinal Health (NYSE: CAH) with a price target raised to $80 from a previous $76. Shares gained 0.55 percent, closing at $70.67.

Analysts at Jefferies maintained a Buy rating on China Telecom (NYSE: CHA) with a price target raised to $63.20 from a previous $51.50. Shares lost 1.96 percent, closing at $54.41.

Analysts at Barclays maintained an Overweight rating on FIVE9 (NASDAQ: FIVN) with a price target lowered to $9 from a previous $10. Also, analysts at Pacific Crest downgraded FIVE9 to Sector Perform from Outperform while removing a previous $10 price target. Shares lost 13.65 percent, closing at $6.58.

Analysts at Morgan Stanley upgraded Lorillard (NYSE: LO) to Equal-Weight from Underweight with a price target raised to $65 from a previous $57. Shares gained 0.10 percent, closing at $60.57.

Analysts at Citigroup maintained a Neutral rating on Michael Kors Holding (NYSE: KORS) with a price target lowered to $87 from a previous $98. Also, analysts at Nomura maintained a Buy rating on Michael Kors with a price target lowered to $87 from a previous $98. Taking a bearish stance, analysts at Barclays maintained an Underweight rating on Michael Kors with a price target lowered to $78 from a previous $82. Shares gained 2.71 percent, closing at $79.10.

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Analysts at Oppenheimer downgraded Ocwen Financial (NYSE: OCN) to Market Perform from Outperform while removing a previous $36 price target. Shares lost 1.41 percent, closing at $26.60.

Analysts at RBC Capital downgraded RetailMeNot (NASDAQ: SALE) to Sector Perform from Outperform with a price target lowered to $24 from a previous $42. Meanwhile, analysts at Jefferies maintained a Buy rating on RetailMeNot with a price target lowered to $36 from a previous $47. Also, analysts at Credit Suisse maintained a Neutral rating on RetailMeNot with a price target lowered to $32 from a previous $43. Shares hit new 52-week lows of $17.95 before closing the day at $18.15, down 28.26 percent.

Equities-Specific News Of Note

According to Re/code, Apple (NASDAQ: AAPL) may hold an iPhone event on September 9. Shares lost 0.49 percent, closing at $95.12.

Sycamore Partners, the private equity firm that already owns Talbots and Hot Topic, is considering a bid to acquire Sears' (NASDAQ: SHLD) Canadian operation.

U.S. authorities are investing General Motors (NYSE: GM) and its financing division over sub-prime auto loans it had made since 2007. Shares lost 0.74 percent, closing at $33.36.

Telefonica (NYSE: TEF) offered 6.7 billion euros ($9 billion) to acquire Vivendi's Brazilian operator, GVT. Shares of Telefonica lost 3.17 percent, closing at $15.59.

BlackBerry's (NASDAQ: BBRY) CEO John Chen wrote in a memo that the company's restructuring phase is over, and the company is ready to begin growing its headcount in certain areas like product development, sales, and customer service. Shares gained 2.36 percent, closing at $9.37.

Merck (NYSE: MRK) finalized its acquisition offer to acquire Idenix Pharmaceuticals (NASDAQ: IDIX) for $24.50 per share. Shares of Merck lost 1.81 percent, closing at $56.03 while shares of Idenix closed the day at $24.50.

According to Bloomberg, Dollar General (NYSE: DG) may also make a move to acquire Family Dollar (NYSE: FDO). Shares of Dollar General gained 3.36 percent, closing at $57.79, while shares of Family Dollar hit new 52-week highs of $79.93 before closing the day at $77.25, up 2.01 percent.

Coca-Cola (NYSE: KO) plans to invest an additional $5 billion in Africa as part of a long-term growth initiative. Shares lost 0.56 percent, closing at $39.18.

American International Group's (NYSE: AIG) Peter Hancock said during the company's earnings call that there will be no abrupt changes in the company's strategy when he takes over as CEO on September 1. Shares lost 0.91 percent, closing at $52.20.

According to The Wall Street Journal, T-Mobile U.S. (NYSE: TMUS) rejected Iliad's request to access its books and won't change unless the France based company presents a better acquisition offer. Shares gained 0.65 percent, closing at $33.91.

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Gannet (NYSE: GCI) announced that it plans to separate itself into two separate companies following its purchase of Classified Ventures and Cars.com. One of the newly-formed companies will focus on broadcasting and digital, while the other will focus on the publishing side of the business. Shares hit new 52-week highs of $35.70 before reversing negative and closing the day at $33.87, down 1.31 percent.

Peabody Energy (NYSE: BTU) raised its third quarter EPS guidance to a loss of $0.36 to $0.49 from a previous guidance of a loss of $0.40 to $0.53 per share. Shares gained 0.84 percent, closing at $15.61.

Tyson Foods (NYSE: TSN) plans to issue $3.25 billion dollars' worth of debt to help finance its acquisition of Hillshire Brands. Shares of Tyson Foods lost 1.34 percent, closing at $36.74.

Winners Of Note

After the market closed, Twenty-First Century Fox (NASDAQ: FOXA) revealed that it officially withdrew its offer to acquire Time Warner. At the same time, the company authorized a $6 billion share repurchase program Shares of Twenty-First Century were trading higher by 7.67 percent at $33.70 in after-hours trading.

According to Bloomberg, China's National Energy Administration may soon announce policies that support solar projects, especially in industrial zones. Additionally, local governments may also be allowed to offer more distributed solar subsidies, as the country is aiming for 8GW of solar installations for 2014. Shares of Trina Solar (NYSE: TSL) gained 8.13 percent, closing at $11.57. Shares of JinkoSolar Holding (NYSE: JKS) gained 7.14 percent, closing at $25.37

Decliners Of Note

This morning, Bloomin' Brands (NASDAQ: BLMN) reported its second quarter results. The company announced an EPS of $0.27, missing the consensus estimate of $0.29. Revenue of $1.10 billion beat the consensus estimate of $1.09 billion. Net income for the quarter fell to $26.4 million from $74.89 million in the same quarter a year ago, as the company admitted dinner traffic did not recover as expected following the harsh first quarter weather. Additionally, the company admitted it is having difficulties in Korea given “significant” macro-issues and an increasingly competitive environment. As a whole, comp sales at Fleming's Prime Steakhouse and Wine Bar rose 3.6 percent from a year ago; Outback comp sales rose 0.9 percent and Bonefish Grill saw its comp sales grow by 0.3 percent. Carrabba's Italian Grill was the lone comp sales that declined from a year ago at 1.2 percent. Restaurant-level operating margin improved by 10 basis points to 16.1 percent. Bloomin' Brands issued guidance and sees its full-year fiscal 2014 EPS being in a range of $1.05 to $1.10, lower than the consensus estimate of $1.23. The company also expects its comp sales to increase anywhere form 0.0 percent to 1.0 percent. Shares hit new 52-week lows of $15.01 before closing the day at $15.06, down 23.98 percent.

Target (NYSE: TGT) lowered its second quarter EPS estimates to $0.78 from a previous range of $0.85 to $1.00. The company noted that it incurred $148 million in fees related to the data breach, of which $38 million will be offset by insurance payments. Shares lost 4.40 percent, closing at $58.03.

Walgreens (NYSE: WAG) will purchase the remaining 55 percent of European-based Alliance Boots that it does not already own. However, Walgreens is expected to keep its headquarters in the United States rather than moving to a country like the United Kingdom or Switzerland to take advantage of favorable tax benefits. Shares of Walgreens lost 4.15 percent, closing at $69.12.

Earnings Of Note

This morning, Regeneron Pharmaceuticals (NASDAQ: REGN) reported its second quarter results. The company announced an EPS of $2.47, beating the consensus estimate of $2.28. Revenue of $666.0 million beat the consensus estimate of $647.61 million. Net income for the quarter rose to $92.7 million from $87 million in the same quarter a year ago, as the company saw sales progress across all business aspects. Sanofi collaboration revenue rose to $142.6 million from $85.53 million a year ago; Bayer HealthCare collaboration revenue rose to $97.3 million from $31.1 million, while Technology licensing and other revenues rose to $7.79 million from $7.12 million. Regeneron issued guidance and sees its full-year fiscal 2014 Eylea sales being in a range of $1.7 billion to $1.8 billion, while capital expenditure of $350 million to $425 million was reaffirmed. Shares gained 2.38 percent, closing at $333.20.

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This morning, CVS Caremark (NYSE: CVS) reported its second quarter results. The company announced an EPS of $1.13, beating the consensus estimate of $1.10. Revenue of $34.60 billion beat the consensus estimate of $33.47 billion. Net income for the quarter rose to $1.2 billion from $1.1 billion in the same quarter a year ago, as the company grew its Pharmacy services while same-store retail pharmacy sales rose 3.3 percent from a year ago. Pharmacy Services revenue rose 16.2 percent from a year ago to $21.8 billion driven by net new business, growth in specialty pharmacy including the acquisition of Coram and the impact of Specialty Connect drug inflation and product mix. Pharmacy network claims processed during the quarter rose 2.2 percent to 210.4 million. Retail Pharmacy sales rose 4.5 percent from a year ago to $16.9 billion while pharmacy same-store prescription volumes rose 3.9 percent. Front store same-store sales were positively impacted from the shift of the Easter holiday to April. The company noted that front store same-store sales would have been higher by 110 basis points if tobacco and the estimated associated basket sales were excluded. CVS Caremark issued guidance and sees its full year fiscal 2014 guidance being in a range of $4.43 to $4.51 from a previous $4.36 to $4.50. Third quarter EPS is now guided to a range of $1.11 to $1.14 from a previous range of $1.04 to $1.07. Finally, guidance for the company's full-year cash flow from operations was raised to a range of $7.2 billion to $7.5 billion from a previous $7.0 billion to $7.3 billion. Shares lost 0.13 percent, closing at $77.27.

This morning, Coach (NYSE: COH) reported its fourth quarter results. The company announced an EPS of $0.59, beating the consensus estimate of $0.53. Revenue of $1.14 billion beat the consensus estimate of $1.09 billion. Net income for the quarter fell to $75.28 million from $221.34 million in the same quarter a year ago partially because of North American sales falling 16 percent from a year ago to $691 million, while comps fell 17 percent and the company's gross profit rate fell 360 basis points to 69.4 percent. However, international sales rose seven percent from a year ago to $414 million and inventory rose 0.4 percent to $526 million. During the quarter, the company recorded charges of $132 million related to its transformation strategy. The company expects further costs in fiscal 2015 but expects to capture $70 million in savings related to its transformation in fiscal 2015 with this figure rising to $150 million on an annual basis in fiscal 2016 Shares gained 4.34 percent, closing at $35.80.

This morning, Office Depot (NYSE: ODP) reported its second quarter results. The company announced an EPS of -$0.02, in-line with the consensus estimate. Revenue of $3.80 billion missed the consensus estimate of $3.81 billion. Net loss for the quarter worsened to $190 million from a net loss of $64 million in the same quarter a year ago, as consolidated same-store sales declined three percent in the quarter. Total revenue rose by $1.4 billion because of the inclusion of OfficeMax sales in 2014 but were 2 percent lower than combined pro forma sales of $3.9 billion in the same quarter a year ago. However, gross margin did improve by 40 bps to 23.0 percent during the quarter. At the end of the quarter the company controlled 1,870 retail stores of which 1,067 were Office Depot stores and 803 were OfficeMax stores. Office Depot issued guidance and sees its full-year fiscal 2014 operating income to be not less than $200 million, an increase from a prior outlook of not less than $160 million. The company noted that the revised outlook is because of accelerated synergies and improving executions. The company also noted it plans to close at least 400 locations by the end of 2016 with 165 closures occurring in 2014. Finally, the company claimed that it expects its annual run-rate synergies from this initiative to be at least $100 million by the end of 2016, up from a prior estimate of at least $75 million. Shares lost 3.33 percent, closing at $4.94.

After the the market closed, Groupon (NASDAQ: GRPN) reported its second quarter results. The company announced an EPS of -$0.01, beating the consensus estimate of -$0.03. Revenue of $757.60 million beat the consensus estimate of $738.40 million. Shares were trading lower by 16.25 percent at $5.92 following the earnings release.

After the market closed, Jazz Pharmaceuticals (NASDAQ: JAZZ) reported its second quarter results. The company announced an EPS of $1.61, missing the consensus estimate of $1.79. Revenue of $246.90 million missed the consensus estimate of $254.86 million. Shares were trading higher by 4.52 percent at $141.94 following the earnings release.

After the market closed, FireEye (NASDAQ: FEYE) reported its second quarter results. The company announced an EPS of -$0.55, beating the consensus estimate of -$0.60. Revenue of $94.50 million beat the consensus estimate of $90.19 million. Shares were trading flat at $34.75 following the earnings release.

Quote Of The Day

“Unless one has lived under a rock for the better part of a year, Target's latest earnings warning should be a zero shock event. What SHOULD be a shock is that the earnings warning for the second quarter comes following Target's reduced guidance offered on the first quarter earnings call (dropped full year guidance by $0.25 from previous outlook) and investments in price in the U.S. to lure in customers afraid to shop the entire store. Furthermore, the mention by Target of softer than expected Canadian results, in light of management's incrementally positive tone on the first quarter earnings call regarding the segment's turnaround, is frankly disturbing.” – Retail analyst Brian Sozzi on Target's lowered guidance.

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