Market Wrap For January 29: Markets Lower on Fed Taper, Emerging Markets Worries
U.S. stocks were unable to keep yesterday's momentum and ended the day sharply lower. The Dow suffered yet another triple digit decline with the S&P 500 and Nasdaq indices shedding more than one percent.
In Ben Bernanke's final meeting as Fed chief, the FOMC tapered its monthly bond purchasing activity to $65 billion per month. The Fed said that future tapering activity will be data dependent.
- The Dow lost 1.19 percent, closing at 15,738.79.
- The S&P 500 lost 1.02 percent, closing at 1,774.20.
- The Nasdaq lost 1.14 percent, closing at 4,051.43.
- Gold gained 1.46 percent, closing at $1,269.00 an ounce.
- Oil lost 0.22 percent, trading at $97.20 a barrel.
- Silver gained 1.39 percent, trading at $19.77 an ounce.
News of Note
MBA Mortgage Applications declined 0.2 percent compared to a gain of 4.7 percent last week.
In the State of the Union address, President Obama said that he will use his executive power to implement his economic and other policies in an attempt to narrow the gap between rich and poor.
The Turkish Central Bank raised interest rates to 12 percent from 7.75 percent to address the recent decline in the lira. The South African Reserve Bank unexpectedly raised interest rates by 50 bps with the key repurchase rate rising to 5.5 percent and the prime lending rate at nine percent.
Equities-Specific News of Note
Analysts at Wells Fargo said that Macau gaming stocks will see lots of volatility over the coming year as macro-economic factors weigh in. The analysts suggest holding on to stocks that have higher exposure to the less cyclical and high-growth mas market segment. The analysts added “We favor Las Vegas Sands (NYSE: LVS) and Wynn (NASDAQ: WYNN) in 2014, due to LVS's superior mass market positioning; we forecast continued market-share gains and further operational efficiency and WYNN's expected resurgence in the mass market and progress on its Cotai development.” Shares of Las Vegas Sands lost 1.73 percent, closing at $73.96 while Wynn lost 1.69 percent, closing at $193.82.
Analysts at Credit Suisse upgraded Wal-Mart (NYSE: WMT) to Outperform from Neutral with a price target raised to $87 from a previous $80. The analysts noted that Wal-Mart will begin taking steps to “reset” its position in the retail industry under its new CEO Doug McMillon. The analysts noted “We expect McMillon to delineate plans for a small store format and the acceleration of its roll out, to rationalize Wal-Mart's international operations, and to recommit to general merchandise, where business is increasingly up for grabs as some big box retailers continue to close stores.” Shares lost 0.75 percent, closing at $74.11.
Analysts at Raymond James upgraded American Airlines Group (NYSE: AAL) to Outperform from Market Perform with a price target of $38. The analysts noted that the company released a better than expected fourth quarter report. The analysts increased their estimates and see the company earning $4.15 per share, up from an earlier forecast of $2.95 per share. Shares gained 3.13 percent, closing a $32.96.
Analysts at Bank of America upgraded Electronic Arts (NYSE: EA) to Overweight from Equal Weight with a price target raised to $36 from a previous $29. The analysts noted that the company will benefit from the upcoming Titanfall launch in addition to general growth in the video gaming industry in the coming year. Shares gained 1.43 percent, closing at $25.23.
Teva Pharmaceuticals (NASDAQ: TEVA) received FDA approval for a 40 mg dose of its multiple sclerosis drug Copaxone. Shares hit new 52 week highs of $45.98 before closing the day at $44.97, up 1.97 percent.
Bloomberg reported on an internal memo it has received from McDonald's (NYSE: MCD) which detailed the fast food chain has set coffee as a top priority for its 2014-2016 strategy. McDonald's wants to deliver a “gold-standard cup of coffee with every visit” in an effort to become the “envy” of rivals such as Starbucks. (NASDAQ: SBUX) Shares of McDonald's lost 1.09 percent, closing at $93.15 while Starbucks lost 3.16 percent, closing at $71.56.
Shares of Apple (NASDAQ: AAPL) briefly dipped below the closely watched $500 a share level before closing the day at $500.57, down 1.17 percent.
Twitter (NYSE: TWTR) is set to partner with CNN to create a news-gathering platform for journalists. The platform, called Dataminr for News uses pattern recognition and algorithms to filter content from hundreds of millions of tweets to deliver custom alerts to the journalist. Shares lost 1.64 percent, closing at $59.45.
Kinder Morgan Partners (NYSE: KMP) is in talks to ship Texas crude to California through the Panama Canal. The roughly 4,500 mile voyage would cost approximately $10 a barrel, making Texas crude an attractive alternative to imports coming from Saudi Arabia. Shares lost 1.10 percent, closing at $79.30.
TiVo (NYSE: TIVO) acquired Digitalsmiths, a provider of cloud-based video content discovery service for pay-TV providers for $135 million. Seperately, TiVo announced it will add $100 million to its buyback program, bringing the total authorized amount to $186 million. Shares gained 1.15 percent, closing at $12.34.
According to dealReporter, Liberty Media (NASDAQ: LMCA) is still interested in Sirius XM (NASDAQ: SIRI) despite Charter Communications' (NASDAQ: CHTR) recent bid. Shares of Liberty Media lost 1.10 percent, closing at $133.02 while Sirius XM lost 0.83 percent, closing at $3.60. Charter Communications gained 1.19 percent, closing at $138.28.
According to the New York Post, J.C. Penney (NYSE: JCP) is implementing a strategy of raising prices on a wide variety of products with the objective of making discounts down the road seem more attractive. Shares lost 2.02 percent, closing at $6.29, just shy of its 52 week lows of $6.24.
Kroger (NYSE: KR) said that it has completed its merger with Harris Teeter and reaffirmed its $2.00 to $2.20 net debt to EBITDA ratio after allocation free cash flow to debt reduction following the merger. The company said that it expects to see EPS accretion of $0.06 to $0.09 in the first full year. Moody's said that the merger is a credit positive for Kroger. Shares of Kroger lost 0.30 percent, closing at $36.54.
Sotheby's (NYSE: BID) announced a special dividend of $4.34 per share payable on March 17 as well as implementing share buy backs. Shares lost 0.27 percent, closing at $48.75.
Microsoft (NASDAQ: MSFT) can scratch off Hans Vestburg's name from its CEO candidate list. Vestburg, the CEO of Ericsson (NASDAQ: ERIC) told his company's board he has no intention of leaving the company to join Microsoft. Shares of Microsoft gained 1.08 percent, closing at $36.66 while Ericsson lost 0.58 percent, closing at $11.95.
Bloomberg reported that AT&T (NYSE: T) is still interested in making a bid for Vodafone (NYSE: VOD) despite British regulation forbidding the American carrier from making a bid over the next six months. Shares of AT&T lost 1.16 percent, closing at $33.31 while Vodafone gained 0.38 percent, closing at $37.31.
Green Mountain Coffee Roasters (NASDAQ: GMCR) unveiled its new Keurig 2.0 machine which will allow users to brew an entire pot of coffee, or a single cup from the same machine. The new devices will go on sale in the fall. Shares lost 0.96 percent, closing at $76.51.
Qualcomm (NASDAQ: QCOM) is facing penalties over one billion dollars in China as it continues to cooperate with the country's National Development and Reform Commission over an antitrust probe. Shares lost 1.21 percent, closing at $71.12.
Winners of Note
Organovo (NASDAQ: ONVO) has delivered the first ever 3D Liver tissue to an outside laboratory for further experimentation. The company previously guided this would occur later on in the year and hopes to begin generated revenues of 3D Liver tissue products before December. Shares gained 10.22 percent, closing at $9.60.
Yesterday, a court rules in favor of Vringo (NASDAQ: VRNG) to receive a 6.5 percent royalty on a royalty base of 20.9 percent of Google's (NASDAQ: GOOG) AdWords search revenue. Essentially, Google must pay Vringo 1.36 percent of total AdWords revenue. Google has already stated it will appear the verdict. Shares of Vringo hit new 52 week highs of $5.45 before closing the day at $4.79, up 20.65 percent.
Decliners of Note
Analysts at Evercore has lowered its price target on Yahoo! (NASDAQ: YHOO) by a dollar to $39 following Alibaba's weaker-than-expected third quarter revenue growth. The analysts have cut their valuation on Alibaba by five percent to $150 billion. Analysts at Cantor took the other side of the argument and raised its price target to $40 from a previous $38. The analysts noted that the “clock is now ticking” for the company to deliver a full turnaround of the company. Analysts at SunTrust also remained bullish increasing their price target to $42 from a previous $34 and said “We remain optimistic on Yahoo!'s efforts, but wait for more evidence of the core turn around to be more constructive and maintain our Neutral rating." Shares lost 8.71 percent, closing at $34.89.
This morning, Boeing (NYSE: BA) released its fourth quarter results. The company reported an EPS of $1.88, beating the consensus estimate of $1.57. Revenue of $23.8 billion beat the consensus estimate of $22.74 billion. The company issued 2014 guidance and expects its core EPS to come in at $7.00 to $7.20, below the consensus estimate of $7.57. The company expects revenue to total $87.5 billion to $90.5 billion, below the consensus estimate of $92.7 billion. Shares lost 5.33 percent, closing at $129.78.
Earnings of Note
This morning, Novartis (NYSE: NVS) released its fourth quarter results. The company announced an EPS of $1.20, missing the consensus estimate of $1.28. Revenue of $15.08 billion came in slightly short of the $15.09 billion consensus estimate. The company benefited from increased sales in Russia and China where it recently launched new products. The company project that 2014 sales will grow by a low to mid-single digit percentage and that core operating income will rise more than sales. Shares lost 0.36 percent, closing at $79.27.
This morning, Dow Chemical (NYSE: DOW) released its fourth quarter results. The company reported an EPS of $0.65, beating the consensus estimate of $0.42. Revenue of $14.4 billion beat the consensus estimate of $14.13 billion. The company tripled the size of its 2014 buyback authorization to $4.5 billion. Shares gained 3.88 percent, closing at $44.73.
After the market closed, Facebook (NASDAQ: FB) released its fourth quarter results. The company reported an EPS of $0.31, beating the consensus estimate of $0.27. Revenue of $2.58 billion beat the consensus estimate of $2.33 billion. Shares were trading lower by 2.95 percent at $71.75 going in to the company's post earnings conference call.
After the market closed, Las Vegas Sands (NYSE: LVS) released its fourth quarter results. The company reported an EPS of $0.87, beating the consensus estimate of $0.84. Revenue of $3.66 billion missed the consensus estimate of $3.61 billion. Shares were trading higher by 6.37 percent at $56.94 going in to the company's post earnings conference call.
Quote of the Day
"In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction." - Federal Reserve press release following its decision to tape its bond asset purchasing program by $10 billion monthly.
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