Market Overview

Dow Flirts With 19,000, S&P 500 Approaches 2,000 & NASDAQ Trading At 14-Year Highs

U.S. stocks rose as geopolitical events took a back seat and investors found positives in housing and consumer price index data released Tuesday.

The markets followed the lead of Apple which closed at an all-time split-adjusted high of $100.53. Earnings from Home Depot and TJX Companies also contributed to create further momentum in the market.

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  • The Dow gained 0.48 percent, closing at 16,919.59.
  • The S&P 500 gained 0.50 percent, closing at 1,981.60.
  • The NASDAQ gained 0.43 percent, closing at 4,527.51.
  • Gold lost 0.22 percent, trading at $1,296.40 an ounce.
  • Oil lost 0.86 percent, trading at $92.94 a barrel.
  • Silver lost 0.87 percent, trading at $19.47 an ounce.

News Of Note

ICSC Retail Store Sales rose 3.8 percent year over year, matching last week's gain.

July Housing Starts rose 15.7 percent to 1.09 million versus estimates of 0.963 million.

July Housing Permits rose 8.1 percent to 1.05 million.

July Consumer Price Index rose 0.1 percent, in-line with estimates.

Redbook Chain Store Sales rose 3.7 percent year over year after rising 4.8 percent last week.

Analyst Upgrades And Downgrades Of Note

Analysts at Citigroup downgraded BHP Billiton (NYSE: BHP) to Neutral from Buy. Shares lost 3.75 percent, closing at $70.03.

Analysts at Deutsche Bank maintained a Buy rating on Dollar General (NYSE: DG) with a price target raised to $73 from a previous $69. Shares lost 0.86 percent, closing at $63.59.

Analysts at Cleveland Research initiated coverage of Dunkin' Brands (NASDAQ: DNKN) with a Buy rating. Shares gained 0.92 percent, closing at $44.05.

Analysts at Piper Jaffray downgraded Guess? (NYSE: GES) to Neutral from Overweight with a price target lowered to $25 from a previous $32. Shares lost 1.83 percent, closing at $25.76.

Analysts at JPMorgan initiated coverage of Jazz Pharmaceuticals (NASDAQ: JAZZ) with an Overweight rating and $190 price target. Shares gained 2.86 percent, closing at $156.87.

Analysts at Citigroup maintained a Neutral rating on McDonald's (NYSE: MCD) with a price target lowered to $101 from a previous $103. Shares gained 0.21 percent, closing at $94.45.

Analysts at Dougherty & Company initiated coverage of Mobileye (NYSE: MBLY) with a Buy rating and $45 price target. Shares gained 9.78 percent, closing at $36.60.

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Analysts at SunTrust Robinson Humphrey downgraded Monster Beverage (NASDAQ: MNST) to Neutral from Buy with a price target raised to $90 from a previous $80. Also, analysts at Goldman Sachs maintained a Buy rating on Monster Beverage with a price target raised to $125 from a previous $87. Shares gained 0.68 percent, closing at $89.04.

Analysts at Baird downgraded SolarCity (NASDAQ: SCTY) to Neutral from Outperform with an unchanged $87 price target. Shares lost 1.75 percent, closing at $70.79.

Analysts at KeyBanc upgraded Wolverine World Wide (NYSE: WWW) to Buy from Hold with a $30 price target. Shares gained 2.63 percent, closing at $25.35.

Equities-Specific News Of Note

According to Bloomberg, Dollar Tree (NASDAQ: DLTR) may walk away from a potential battle to acquire Family Dollar (NYSE: FDO) and accept a $305 million breakup fee as a consolation prize. Shares of Dollar Tree gained 0.83 percent, closing at $54.71 while shares of Family Dollar hit new 52-week highs of $80.10 before closing the day at $79.70, down 0.14 percent.

McDonald's (NYSE: MCD) announced it will begin selling McCafe coffee in grocery stores next year through a partnership with Kraft Foods Group. Shares of McDonald's gained 0.21 percent, closing at $94.45.

According to Reuters, PetSmart (NASDAQ: PETM) could announce its intention to explore strategic alternatives, including a sale of itself as soon as this week. Shares gained 1.84 percent, closing at $69.70.

According to The Wall Street Journal, Citi (NYSE: C) is considering a sale of its retail operation in Japan. Shares gained 0.38 percent, closing at $49.70.

GameStop (NYSE: GME) announced that its CEO Paul Raines is recovering following an operating to remove a cancerous brain tumor last week. Shares gained 0.57 percent, closing at $40.88.

AMD (NYSE: AMD) announced it will enter the PC SSD market with its Radeon R7 SSD line. The company will offer 120GB, 240GB and 480GB drives. Shares gained 1.43 percent, closing at $4.27.

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BHP Billiton (NYSE: BHP) officially announced its de-merger plans. The company will form a new global metals and mining company composed of its aluminium, coal, manganese, nickel and silver assets. The newly formed company will be listed on the Australian and South African stock exchanges. Shares lost 3.75 percent, closing at $70.03.

Winners Of Note

This morning, Home Depot (NYSE: HD) reported its second quarter results. The company announced an EPS of $1.52, beating the consensus estimate of $1.45. Revenue of $23.81 billion beat the consensus estimate of $23.61 billion. Net earnings for the quarter rose to $2.05 billion from $1.795 billion in the same quarter a year ago as comparable-store sales rose 5.8 percent and comp growth in the U.S. was 6.4 percent. The total number of customer transactions rose 4.2 percent from a year ago to 409.7 million, while the average ticket total rose 1.8 percent to $58.43; sales per square foot rose 5.5 percent to $403.90. Purchases under $50 rose 3.1 percent in the quarter, while purchases of more than $900 rose 8.4 percent. The company noted that its spring seasonal business rebounded, and the core of the store across all geographies performed strongly. Home Depot said it will repurchase $3.5 billion worth of shares in fiscal 2014 with a total buyback guidance of $7 billion. The company issued guidance and sees its net sales rising 4.8 percent in the fiscal year, while earnings per share is expected to be $4.52, above the consensus estimate of $4.41. Shares hit new 52-week highs of $88.99 before closing the day at $88.23, up 5.55 percent.

This morning, TJX Companies (NYSE: TJX) reported its second quarter results. The company announced an EPS of $0.75, beating the consensus estimate of $0.73. Revenue of $6.91 billion beat the consensus estimate of $0.73. Net income for the quarter rose to $517.624 million from $479.559 million in the same quarter a year ago as consolidated comparable-store sales rose 3 percent. Marmaxx saw a 2 percent comp growth in the quarter; HomeGoods comps grew by 5 percent; TJX Canada's comps grew by 3 percent, while TJX Europe saw its comps grow 6 percent. The company ended the quarter with 3,279 worldwide stores after beginning the quarter with 3,256. Gross square feet rose to 94.8 million from 94.3 at the beginning of the quarter. The company issued guidance and sees its full-year EPS being in a range of $3.10 to $3.18, while comparable store sales growth is expected to be between 1 percent and 2 percent. Shares gained 8.65 percent, closing at $58.56.

Allergan (NYSE: AGN) has approached Salix Pharmaceuticals (NASDAQ: SLXP) and at least one other company over a potential takeover in a bid to avert Valeant Pharmaceuticals (NYSE: VRX) hostile takeover plans. According to sources, Allergan could announce a deal with Salix (or another company) as soon as next month which would make an acquisition by Valeant more difficult. Shares of Allergan gained 3.99 percent, closing at $161.82 while shares of Salix Pharmaceuticals hit new 52-week highs of $162.38 before closing the day at $160.62, up 15.41 percent.

Aeropostale (NYSE: ARO) pre-announced its second quarter results last night. The company expects its EPS to be in a range of -0.42 to -$0.45, an improvement over the consensus estimate of -$0.58. Revenue of $396.2 million came in better than the consensus estimate of $395.4 million. The company also announced that the company's former CEO Julian Geiger will return and assume top ranks at the company two years after resigning. The current CEO Thomas Johnson will step down as CEO and leave the company's board. Shares gained 19.44 percent, closing at $3.87.

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Orange Capital disclosed a 5.3 percent stake in Bellatrix Exploration (NYSE: BXE) with the intent of engaging management to maximize shareholder value. The activist fund wants the company to seek out and evaluate strategic alternatives including a sale or IPO of some of its midstream assets. Shares gained 10.21 percent, closing at $7.99.

The U.S. District Court for the District of New Jersey ruled in favor of DepoMed (NASDAQ: DEPO) in its patent suit against Actavis (NYSE: ACT). The suit prevents Actavis from selling a generic version of Depomed's postherpetic neuralgia drug Gralise until 2024. Shares of DepoMed gained 13.53 percent, closing at $14.94.

Decliners Of Note

This morning, Elizabeth Arden (NASDAQ: RDEN) reported its fourth quarter results. The company announced an EPS of -$1.04, missing the consensus estimate of -$0.34. Revenue of $201.20 million missed the consensus estimate of $241.64 million. Net loss for the quarter worsened to $155.94 million from $5 million in the same quarter a year ago as the company saw harsh sale declines in its celebrity fragrances endorsed by Justin Bieber and Taylor Swift, among others. The net loss for the quarter included a valuation allowance of $89.5 million recorded as a non-cash charge recorded against U.S. deferred tax assets. North American sales fell 14 percent from a year ago, while International sales fell 8 percent. The company's gross profit rate plunged 2,300 basis points to 21.4 percent. The company said that it sees a continued weakness in the fragrance market persisting in to the first quarter of 2015, and net sales are expected to only increase in the second half of fiscal 2015. The company also disclosed it received a $50 million investment from a private equity firm Rhone Capital. The firm acquired 7.6 percent of the company at a valuation of $20.39 per share. Shares hit new 52-week lows of $14.65 before closing the day at $15.05, down 23.25 percent.

Earnings Of Note

This morning, Dick's Sporting Goods (NYSE: DKS) reported its second quarter results. The company announced an EPS of $0.67, beating the consensus estimate of $0.65. Revenue of $1.69 billion beat the consensus estimate of $1.65 billion. Net income for the quarter fell to $69.47 million from $84.16 million in the same quarter a year ago as the golf and hunting businesses continued to experience negative comps which was consistent with management's expectations. Comparable-store sales rose 3.2 percent in the quarter, beating the company's guidance for a one percent to three percent gain. Same-store sales rose 4.1 percent at Dick's Sporting Goods while Golf Galaxy saw a 9.3 percent decline in same-store sales. Inventory rose 11.2 percent in the quarter to $1.418 billion while the company added 41 stores, bringing its total count to 642. The company issued guidance and sees its full-year comp store growth being one percent to three percent. EPS is expected to come in a range of $2.70 to $2.85. Shares gained 1.59 percent, closing at $44.21.

This morning, Medtronic (NYSE: MDT) reported its first quarter results. The company announced an EPS of $0.93, beating the consensus estimate of $0.92. Revenue of $4.27 billion beat the consensus estimate of $4.25 billion. Net earnings for the quarter fell to $871 million from $953 million in the same quarter a year ago despite revenue gains in all but one of its segments. Cardiac Rhythm & Heart Failure saw its revenue rise 5.3 percent from a year ago to $1.256 billion; Coronary & Structural Heart revenue rose 2.4 percent to $766 million; Aortic & Peripheral revenue rose 5.9 percent to $232 million; Spine revenue declined 2.9 percent to $743 million; Neuromodulation revenue rose 11.9 percent to $479 million; Surgical Technologies revenue rose 5.5 percent to $381 million and Diabetes Group rose 12.7 percent to $416 million. The company issued guidance and sees its fiscal 2015 revenue growing by three percent to five percent and expects its EPS to be $4.00 to $4.10. Shares gained 0.82 percent, closing at $64.01.

Quote Of The Day

“I had not spent any time really contemplating my post-Microsoft life until my last day with the company. In the six months since leaving, I have become very busy. I see a combination of the Clippers, civic contribution, teaching and study taking a lot of time. I have confidence in our approach of mobile-first, cloud-first, and in our primary innovation emphasis on platforms and productivity and the building of capability in devices and services as core business drivers. I hold more Microsoft shares than anyone other than index funds and love the mix of profits, investments and dividends returned in our stock. I expect to continue holding that position for the foreseeable future.” – Steve Balmer, in a resignation letter to Microsoft's CEO Satya Nadella.

Bonus Quote Of The Day

“First, thank you for all of your support during my transition this year and for the past 34 years. It's been a great privilege to have worked with you and learned from you. Under your leadership, we created an incredible foundation that we continue to build on — and Microsoft will thrive in the mobile-first, cloud-first world.” – Microsoft CEO Satya Nadella responding to Steve Ballmer.

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