Market Wrap For January 16: Markets End Two Day Winning Streak
The market took a bit of a breather Thursday following two strong days of gains.
Earnings from two major banks failed to keep the momentum alive and investors focused on Best Buy's (NYSE: BBY) disappointing holiday guidance which contradicts the strong retail sales report earlier this week.
- The Dow lost 0.39 percent, closing at 16,417.01.
- The Nasdaq gained 0.09 percent, closing at 4,218.69.
- The S&P 500 lost 0.13 percent, closing at 1,845.89.
- Gold gained 0.29 percent, trading at $1,241.90 an ounce.
- Oil lost 0.07 percent, trading at $94.10 a barrel.
- Silver lost 0.22 percent, trading at $20.09 an ounce.
News of Note
Initial Jobless Claims fell 2K to 326K, below the consensus of 327K. Continuing claims rose 174K to 3.03 million.
December Consumer Price Index rose 0.3 percent, in line with expectation. Core CPI rose 0.1 percent, in line with expectation.
The House has passed the $1.01 trillion spending bill that will fund the government through the end of September.
The number of foreclosure filings fell to the lowest level since 2007 in 2013. According to RealtyTrac 1.36 million properties foreclosed.
NAHB Housing Market Index read 56.0, lower than the consensus estimate of 57.5.
January Philly Fed Business Outlook read +9.4, higher than the +8.6 expected.
EIA Natural Gas Inventory declined 287bcf.
Eurozone CPI rose 0.3 percent on month in December after falling 0.1 percent in November. On year, inflation increased 0.8 percent, well below the ECB's target of just under two percent.
Equities-Specific News of Note
Analysts at Bank of America upgraded Hewlett Packard (NYSE: HPQ) to Buy from Neutral with a price target raised to $39 from a previous $29. The analysts noted that the company's momentum in 2013 will carry over in 2014 driving shares higher. The analysts noted specifically the company will close the P/E multiple gap on peers and commit to returning 50 percent of free cash flow to investors in the form of dividends and buybacks. Shares hit new 52 week highs of $29.82 before closing the day at $29.56, up 2.50 percent.
Analysts at JMP upgraded Micron Technology (NASDAQ: MU) to Market Outperform from Market Perform with a price target of $31. The analysts noted that the company will benefit from favorable chip prices in a stabilizing PC market and the company's possible contribution to the “Internet of things.” Analysts at Sterne Agee reiterated a Buy rating on the company with a $28 price target. The analysts noted that his checks suggest that “Dram pricing should continue to be stable despite weak PC builds into MarQ, as much of OEM demand is satisfied by qualified supply from Micron-Samsung.” Shares lost 0.90 percent, closing at $23.12.
Analysts at Raymond James downgraded Family Dollar Stores (NYSE: FDO) to Underperform from Market Perform. The analysts noted that the company is losing market share and recent management departures accelerate its EBIT percentage falling form recent highs. Shares lost 0.70 percent, closing at $64.81.
Analysts at Deutsche Bank lowered their price target on shares of General Motors (NYSE: GM) to $52 from a previous $55 while reiterating a Buy rating following the company's somewhat conservative outlook at the Detroit Auto Show. Shares lost 0.96 percent, closing at $39.00.
Analysts at Nomura noted that steel stocks like AK Steel (NYSE: AKS), U.S. Steel (NYSE: X) and Steel Dynamics (NASDAQ: STLD) to pullback. The analysts see prices weakening going in to the second quarter which will then offer a better entry point in to the names. Shares of AK Steel lost 1.72 percent, closing at $7.44 while U.S. Steel lost 1.39 percent, closing at $28.33 and Steel Dynamics gained 0.38 percent, closing at $18.65.
Analysts at Jefferies raised their price target on Bank of America to $20 from a previous $19 while reiterating a Buy rating. The analysts noted that “positive deltas include higher NIM, better I-banking fees, and a lower tax rate, with higher revenue-related costs, less reserve release, and elevated near-term litigation costs partial offsets.” Shares lost 0.47 percent, closing at $17.07.
Analysts at Morgan Stanley downgraded Ralph Lauren (NYSE: RL) to Equal Weight with a NA price target. The analysts noted that “Our bear view is Ralph Lauren's old China licensee's brand mismanagement will take a decade to undo and Ralph Lauren lacks the appropriate brand position to compete in accessories.” Shares lost 2.84 percent, closing at $163.31.
Facebook (NASDAQ: FB) has launched its “trending topics” which includes descriptions of why each trend is popular. Shares lost 0.71 percent, closing at $57.19.
Microsoft (NASDAQ: MSFT) is reportedly considering Ericsson's CEO Hans Vestberg as a potential replacement for the retiring Steve Ballmer. Shares gained 0.35 percent, closing at $36.89.
Illumina (NASDAQ: ILMN) reached an agreement with Amgen (NASDAQ: AMGN) to develop an oncology companion diagnostic test. Shares of Illumina hit new 52 week highs of $127.00 before closing the day at $125.26, up 3.42 percent. Amgen gained 0.44 percent, closing at $119.03.
Yahoo!'s (NASDAQ: YHOO) CEO Marissa Mayer has fired the company's second in command and COO Henrique de Castro following a tense relationship with Mayer. Separately, the company is looking to add two new directors to bring the board size to nine. Shares lost 1.78 percent, closing at $40.34.
UnitedHealth (NYSE: UNH) CEO Stephen Hemsley said that Obamacare and medicare funding will result in the company reporting a $1.50 less in 2014 earnings. Shares lost 2.77 percent, closing at $72.77.
A hacker has shown that Starbucks' (NASDAQ: SBUX) mobile app is far from secure. Starbucks said that it will fix the error which was leaving data trails on the phone in plain text instead of encrypting the file. Shares lost 1.18 percent, closing at $75.29.
Hershey (NYSE: HSY) announced it will collaborate with 3D Systems (NYSE: DDD) to incorporate 3D printing technologies in food products. Shares of Hershey gained 1.32 percent, closing at $99.50 while 3D Systems gained 2.68 percent, closing at $92.17.
J.C. Penney (NYSE: JCP) announced that it will close 33 stores and eliminate 2,000 jobs by May. The cuts will save the company $65 million a year. Shares lost 1.75 percent, closing at $6.90 and are trading near its 52 week lows of $6.24.
China's Commerce Ministry has conditionally approved Thermo Fisher Scientific's (NYSE: TMO) $13.6 billion acquisition of Life Technologies. (NASDAQ: LIFE) Thermo Fisher will have to sell its 51 percent holding in China's Lanzhou National Hyclone Bio-engineering and lower the prices of two types of its products it sells in China. Shares of Thermo Fisher hit new 52 week highs of $116.16 before closing the day at $116.11, up 0.51 percent. Life Technologies also hit new 52 week highs of $75.96, up 0.01 percent which was the day's closing price,
TransCanada (NYSE: TRP) CEO Russ Girling said the company will have no choice but to build rail terminals to transport its oil if Keystone XL is not approved by the Obama administration. Shares gained 0.66 percent, closing at $44.24.
Marvell Technology Group (NASDAQ: MRVL) said that it is not talking with KKR (NYSE: KKR) about a buyout or any other transaction. KKR disclosed a 6.8 percent stake in the firm two weeks ago. Shares of Marvell lost 4.90 percent, closing at $14.76 while KKR gained 0.31 percent, closing at $25.83.
Winners of Note
LinkedIn (NYSE: LNKD) has hired Derek Shen, a former CEO of a Baidu (NASDAQ: BIDU) subsidiary to lead the company's newly created Chinese unit. Shares of LinkedIn gained 6.74 percent, closing at $230.56.
Apollo Global (NYSE: APO) has agreed to acquire CEC Entertainment (NYSE: CEC) best known as being the parent company of Chuck E. Cheese. The price tag on the acquisition is $54 a share. CEC adopted a poison pill with a trigger of 10 percent in order to ensure “a fair and orderly process and to maximize shareholder value in connection with the company's sale.” Shares of CEC Entertainment gained 13.05 percent, closing at $54.75 while Apollo Global gained 0.84 percent, closing at $36.05.
Analysts at Deutsche Bank (NYSE: DB) initiated coverage of SolarCity (NASDAQ: SCTY) with a Buy rating and $90 price target. The analysts noted that the company's installed base will double through 2015 and 2016 as the company continues to benefit from accelerated growth of demand for solar power as an alternative for retail electricity customers. Shares hit new 52 week highs of $77.24 before closing the day at $76.80, up 12.12 percent.
Analysts at William Blair began coverage of FireEye (NASDAQ: FEYE) with an Outperform rating. The analysts noted that the company's $1.1 billion deal to acquire Mandiant “provides a significant catalyst for FireEye to expand into new product categories such as IPS, endpoint and threat intelligence.” Shares hit new 52 week highs of $71.53 before closing the day at $70.99, up 8.46 percent.
Sarepta (NASDAQ: SRPT) announced yesterday that its Eteplirsen treatment for Duchenne Muscular Dystrophy has performed well in a Phase IIB study. Shares surged 40.14 percent, closing at $28.00.
Decliners of Note
Following a damaging report from a Chinese newspaper which claimed that Nu Skin (NYSE: NUS) is operating illegally, the company acknowledged a Chinese investigation is underway. The company issued a press release at around 1:30 stating that it will cooperate with Chinese investigators but warned investors that its bottom line is likely to be impacted. Shares of Nu Skin lost 26.41 percent, closing at $84.80 but traded as low as $67.51. News of Nu Skin also brought down shares of Herbalife (NYSE: HLF) that lost 9.76 percent, closing at $71.63 and USANA Health Sciences (NYSE: USNA) that lost 10.15 percent, closing at $59.06.
Best Buy (NYSE: BBY) reported that its holiday season comparable store sales declined by 0.8 percent due what the company's CEO Hubert Joly cited as “aggressive promotional activity in the retail industry during the holiday period, which we believe did not result in higher industry demand and had a deflationary impact on our revenue.” Shares lost 28.59 percent, closing at $26.83.
Analysts at Sterne Agee foretasted Zynga (NASDAQ: ZNGA) to miss its fourth quarter results and the company is “likely to disappoint” and that “the Street is expecting fourth quarter to represent the ‘bottom' and bookings to begin growing in the first quarter. Based on current traffic patterns, this seems unrealistic.” Shares lost 12.16 percent, closing at $3.54.
Earnings of Note
Goldman Sachs (NYSE: GS) released its fourth quarter results this morning. The company reported an EPS of $4.60, beating the consensus estimate of $4.17. Revenue of $8.78 billion beat the consensus estimate of $7.62 billion. The company's CFO Harvey Schwartz said that “when you boil it all down, the 2013 environment is just one where the world took two steps forward followed by one step back.” Schwartz also said that the company has been preparing for the Volcker rules since 2010. Shares lost 2.00 percent, closing at $175.17.
Citigroup (NYSE: C) released its fourth quarter results this morning. The company reported an EPS of $0.82, lower than the consensus estimate of $0.99. Revenue of $17.9 billion came in lower than the consensus estimate of $18.75 billion. The company's CEO Michael Corbat said “we didn't finish the year as strongly as we would have liked, [but] made substantial progress toward our key priorities in 2013.” Shares lost 4.35 percent, closing at $52.60.
Quote of the Day
“If China authorities ever go after Nu Skin, the "guilt by association" isn't likely to bode well for other multi-level marketers operating there -- no matter how much within the lines they believe they operate. Trouble is, even if they genuinely have the rules and regs in place, the multi-level marketers can't control ethics and compliance of tens of thousands of distributors in far-flung places. Nature of the, uh, beast.” - Herb Greenberg comments made yesterday regarding Nu Skin.
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