Market Wrap For May 28: Markets Take A Breather As Treasury Yields Fall
U.S. stocks ended a four day rally which saw the S&P 500 hit historical all-time highs.
However, during Wednesday's trading session the ten-year Treasury yield traded as low as 2.439 percent, the lowest level seen since June 2013.
Volume remained below average during Wednesday's trading session with little market moving data released and earning season winding down.
- The Dow lost 0.25 percent, closing at 16,633.18.
- The S&P 500 lost 0.11 percent, closing at 1,909.78.
- The Nasdaq lost 0.28 percent, closing at 4,225.07.
- Gold lost 0.53 percent, trading at $1,258.80 an ounce.
- Oil lost 1.18 percent, trading at $102.88 a barrel.
- Silver lost 0.25 percent, trading at $19.02 an ounce.
News of Note
MBA Composite Index declined 1.2 percent after gaining 0.9 percent last week.
MBA Purchase Index declined 1.1 percent after declining 3.0 percent last week.
MBA Refinance Index declined 1.4 percent after gaining 4.0 percent last week.
ICSC Retail Store Sales declined 1.2 percent week over week after declining 1.3 percent last week.
Redbook Chain Store Sales rose 3.2 percent year over year after rising 3.9 percent last week.
Presidential elections in Egypt have been extended for a third straight day due to low turnouts despite a fine of around $72 issued to individuals who do not vote.
According to Kelley Blue Book, auto sales in the U.S. rose 6.7 percent in May to 1.54 million units.
Analyst Upgrades and Downgrades of Note
Analysts at Bernstein maintained an Outperform rating on Apple (NASDAQ: AAPL) with a price target raised to $700 from a previous $615. Also, analysts at Barclays maintained an Equal-weight rating on Apple with a price target raised to $655 from a previous $615. Shares hit new 52-week highs of $629.83 before turning negative and closing the day at $624.01, down 0.26 percent.
Analysts at Gabelli & Co upgraded AutoZone (NYSE: AZO) to Buy from Hold. Shares gained 2.52 percent, closing at $533.34.
Analysts at Guggenheim Securities upgraded ConocoPhillips (NYSE: COP) to Buy from Neutral. Shares hit new 52-week highs of $80.54 before closing the day at $79.57, up 0.67 percent.
Analysts at Deutsche Bank downgraded Dollar General (NYSE: DG) to Hold from Buy with a price target lowered to $60 from a previous $65. Shares lost 3.02 percent, closing at $54.60.
Analysts at Stifel Nicolaus initiated coverage of First Solar (NASDAQ: FSLR) with a Buy rating and $75 price target. Shares gained 1.00 percent, closing at $61.87.
Analysts at Stifel Nicolaus initiated coverage of GT Advanced Technologies (NASDAQ: GTAT) with a Buy rating and $20 price target. Shares gained 2.69 percent, closing at $16.39.
Analysts at JPMorgan maintained a Neutral rating on Intuit (NASDAQ: INTU) with a price target raised to $84 from a previous $77. Shares lost 1.32 percent, closing at $79.08.
Analysts at Canaccord Genuity downgraded Lowe's Companies (NYSE: LOW) to Sell from Hold with a price target lowered to $37 from a previous $47. Shares lost 2.24 percent, closing at $46.71.
Analysts at Nomura upgraded Twitter (NYSE: TWTR) to Buy from Neutral with an unchanged price target of $43. Shares gained 10.69 percent, closing at $33.77.
Analysts at Piper Jaffray upgraded Williams-Sonoma (NYSE: WSM) to Overweight from Neutral with a price target raised to $85 from a previous $71. Shares gained 0.86 percent, closing at $68.11.
Analysts at Canaccord Genuity maintained a Buy rating on Workday (NASDAQ: WDAY) with a price target lowered to $105 from a previous $115. Meanwhile, analysts at BMO Capital Markets maintained a Market Perform rating on Workday with a price target raised to $83 from a previous $72. Shares gained 2.33 percent, closing at $84.04.
Equities-Specific News of Note
According to the New York Post, Apple (NASDAQ: AAPL) will announce it has acquired Beats Electronics for $3 billion, $200 million less than previously reported. Shares hit new 52-week highs of $629.83 before turning negative and closing the day at $624.01, down 0.26 percent.
Proxy firm ISS supports the idea of Target (NYSE: TGT) separating its chairman and CEO role. Also, ISS said that it only supports three of the ten board members for re-election on June 11 due to their failure to handle the data breach. Shares lost 0.77 percent, closing at $55.34.
McDonald's (NYSE: MCD) pledged during the Sanford Bernstein conference that it plans to return $18 billion to $20 billion to investors through dividends and share repurchases. Shares lost 1.04 percent, closing at $101.30.
Anadarko Petroleum's (NYSE: APC) $5.15 billion settlement has been approved by a bankruptcy judge who will forward his recommendations to a district court. Shares gained 0.66 percent, closing at $102.00.
SolarCity (NASDAQ: SCTY) has teamed up with Groupon (NASDAQ: GRPN) to sell its services through Groupon's site at a $400 discount. Shares of SolarCity lost 2.27 percent, closing at $51.98 while shares of Groupon lost 2.87 percent, closing at $6.09.
Microsoft's (NASDAQ: MSFT) CEO Satya Nadella said that he has no plans to sell Bing and make any changes to how Microsoft manages Xbox. Also, Nadella declined to comment on Microsoft's acquisition of Nokia's phone unit during a Code conference. Separately, Microsoft announced it has acquired Captain, a developer of analysts and usage monitoring tools for app developers. Shares lost 0.45 percent, closing at $40.01.
Chevron (NYSE: CVX) said that it is on track to grow its production to 3.1 million barrels of energy per day by 2017 from the 2.48 million barrels of energy per day the company produced in 2013. Shares lost 0.26 percent, closing at $122.52.
Analysts at Northalnd speculated that it is unlikely Google will part ways with its glass supplier, Himax Technologies (NASDAQ: HIMX). Shares of Himax gained 4.38 percent, closing at $6.91.
General Electric (NYSE: GE) has pledged it will create 1,000 industrial jobs in France within three years if the company acquires Alstom. Shares gained 0.34 percent, closing at $26.66.
Analysts at Wells Fargo speculated that Stryker (NYSE: SYK) may eventually place a bid to acquire Smith & Nephew (NYSE: SNN). Shares of Stryker gained 2.84 percent, closing at $82.64 while shares of Smith & Nephew hit new 52-week highs of $83.75 before closing the day at $83.05, up 3.37 percent.
Xcel Energy (NYSE: XEL) and SunPower (NASDAQ: SPWR) have agreed to jointly construct a 50 megawatt solar power plant in Colorado. Shares of Xcel gained 0.43 percent, closing at $30.50 while shares of SunPower gained 2.25 percent, closing at $33.13.
Winners of Note
A Koch Industries subsidiary (Flint Hills Resources) has agreed to acquire PetroLogistics (NYSE: PDH) for $2.1 billion, or $14 per share, representing an approximate 8.3 percent premium over Tuesday's closing price. Shares of PetroLogistics hit new 52-week highs of $14.31 before closing the day at $14.30, up 10.60 percent.
Decliners of Note
This morning, DSW (NYSE: DSW) reported its first quarter results. The company announced an EPS of $0.42, missing the consensus estimate of $0.36. Revenue of $598.9 million missed the consensus estimate of $622.4 million. Net income for the quarter rose to $38.64 million from $34.52 million in the same quarter a year ago but comparable-store sales fell 3.7 percent in the quarter due to weather issues and increased promotional activity. DSW revised its guidance and sees its full fiscal year EPS to be $1.45 to $1.60, down from previous guidance of $1.80 to $1.95 and falling noticeably below the consensus estimate of $1.90. Shares plunged to new 52-week lows of $23.45 before closing the day at $23.62, down 27.37 percent.
Valeant Pharmaceuticals (NYSE: VRX) increased its bid for Allergan (NYSE: AGN) to $58.30 in cash, 0.83 Valeant shares, one contingent value right related to DARPin sales and a promise to invest up to $400 million in DARPin. Shares of Valeant lost 2.31 percent, closing at $126.95. However, shares of Allergan lost 5.39 percent, closing at $156.12.
On Tuesday, 3D Systems (NYSE: DDD) announced a 5.95 million share stock offering for a gross proceeds of $327 million. The company plans to use the cash for future acquisitions. However, the stock offering will dilute the company's share count by 5.8 percent after carrying out a 7.5 million share stock offering just last year. Shares lost 10.95 percent, closing at $50.44.
Earnings of Note
This morning, Toll Brothers (NYSE: TOL) reported its second quarter results. The company announced an EPS of $0.35, beating the consensus estimate of $0.26. Revenue of $860.4 million beat the consensus estimate of $830.91 million. Net income for the quarter rose to $65.2 million from $24.7 million in the same quarter a year ago as the company saw its deliveries in terms of units rise 36 percent to 1,218 units and rise 67 percent in dollar terms to $706,000. The company reported it has a backlog of $3.21 billion and 4,324 units which is up 27 percent in dollar terms and up 18 percent in units. Toll Brothers reaffirmed prior guidance of delivering 5,100 to 5,850 homes for the full year fiscal 2014 with an average price ranging from $690,000 to $720,000. Shares gained 2.08 percent, closing at $36.38.
This morning, Michael Kors (NYSE: KORS) reported its fourth quarter results. The company announced an EPS of $0.78, beating the consensus estimate of $0.68. Revenue of $917.5 million beat the consensus estimate of $816.51 million. Net income for the quarter rose to $161 million from $101.1 million in the same quarter a year ago as comparable-store sales rose 26.2 percent. Gross profit margin for the quarter improved 20 bps to 59.9 percent but management guided for a lower gross profit margin in the quarter during the conference call. Michael Kors issued guidance and sees its first quarter EPS being $0.78 to $0.80, versus a consensus estimate of $0.79. Full year fiscal 2015 EPS is guided to be in a range of $3.85 to $3.91, above the consensus estimate of $3.85. Shares gained 1.33 percent, closing at $97.01.
Quote of the Day
“One of the reasons for our continued growth lies with our success in communicating our identity as a leading global luxury brand. We have made Michael Kors synonymous with fashion leadership and jet-set luxury. That philosophy is at the heart of everything we create from our products to our stores and to our digital innovation. By connecting with our customers globally, through consistently exciting products and communications, we have been able to build upon the foundation of Michael Kors jet-set vision. The Michael Kors brand is now sought after by consumers around the world who are aspired to live the luxury jet-set lifestyle, our brand embodies.” – John Idol, Chairman and CEO of Michael Kors speaking during the company's fourth quarter conference call Wednesday morning.
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