Market Wrap For June 9: Markets Higher On St. Louis Fed Comments, Low Volume
U.S. markets rose for the fourth straight session as investors positively digested comments coming from the St. Louis Fed.
Jim Bullard, the St. Louis Fed chief said that inflation is low but moving back toward the two percent target. As such, Bullard argued that the Federal Reserve Open Committee is much closer to its goals today than at any time in the past five years.
“With inflation still below target, albeit rising, and unemployment still high, but falling, the Committee faces a classic monetary policy challenge,” Bullard wrote in a presentation given to the Tennessee Bankers Association. “The challenge is this: How quickly should the Committee move to return monetary policy to normal given improving macroeconomic conditions?”
As to be expected following the conclusion of earnings season and the beginning of the summer months, trading volume is lower than usual. The SPDR S&P 500 ETF (NYSE: SPY) traded hands 56.86 million times. The index has a three-month average daily volume of 101.75 million.
- The Dow gained 0.11 percent, closing at 16,943.10.
- The S&P 500 gained 0.09 percent, closing at 1,951.27.
- The Nasdaq gained 0.34 percent, closing at 4,336.24.
- Gold gained 0.07 percent, trading at $1,253.40 an ounce.
- Oil gained 1.70 percent, trading at $104.41 a barrel.
- Silver gained 0.44 percent, trading at $19.08 an ounce.
News of Note
Speaking in Las Vegas, Warren Buffett said that he plans to invest billions of additional dollars in energy investments.
On June 16, The People's Bank of China will cut its reserve ratio by 50 basis points for some banks that lend to rural areas and smaller companies.
Analyst Upgrades and Downgrades of Note
Analysts at Stifel Nicolaus maintained a Buy rating on Apple (NASDAQ: AAPL) with a price target raised to $110 from a previous $93. Shares hit new 52-week highs of $93.88 before closing the day at $93.70, up 1.60 percent.
Analysts at Nomura upgraded Capital One Financial (NYSE: COF) to Buy from Neutral with a price target raised to $94 from a previous $75. Shares hit new 52-week highs of $82.31 before closing the day at $82.00, up 1.49 percent.
Analysts at Jefferies upgraded Dollar General (NYSE: DG) to Buy from Hold with a price target raised to $75 from a previous $56. Shares hit new 52-week highs of $65.98 before closing the day at $62.25, up 7.35 percent.
Analysts at Jefferies upgraded Family Dollar Stores (NYSE: FDO) to Buy from Hold with a price target raised to $79 from a previous $55. Shares gained 13.35 percent, closing at $68.61.
Analysts at Wells Fargo removed Hertz Global (NYSE: HTZ) from its “Priority Stock List” with a price target lowered to a range of $30 to $33 from a previous $32 to $36 range. Shares lost 2.88 percent, closing at $26.93.
Analysts at Deutsche Bank maintained a Hold rating on Lululemon Athletica (NASDAQ: LULU) with a price target lowered to $50 from a previous $55. Also, analysts at DA Davidson maintained a Buy rating on Lululemon with a price target lowered to $56 from a previous $64. Shares gained 1.28 percent, closing at $44.99.
Analysts at Wells Fargo upgraded J.M. Smucker Company (NYSE: SJM) to Market Perform from Underperform. Shares lost 0.05 percent, closing at $105.64.
Analysts at KeyBanc maintained a Buy rating on Joy Global (NYSE: JOY) with a price target raised to $75 from a previous $65. Shares hit new 52-week highs of $64.83 before closing the day at $64.51, up 0.62 percent.
Analysts at Morgan Stanley initiated coverage of Weibo (NYSE: WB) with an Equal-weight rating and $21.40 price target. Shares gained 0.59 percent, closing at $18.65.
Equities-Specific News of Note
Shares of Apple (NASDAQ: AAPL) began trading this morning post 7:1 split. Shares opened at $92.69 and hit new 52-week highs (split adjusted) of $93.88 before closing the day at $93.70, up 1.60 percent.
According to analysts at Pacific Crest, Maxim Integrated Products, (NASDAQ: MXIM) and not Cirrus Logic (NASDAQ: CRUS) will supply audio amplifier slots for future Apple products. Shares of Maxim hit new 52-week highs of $35.76 before closing the day at $35.41, up 1.37 percent while shares of Cirrus lost 3.67 percent, closing at $22.58.
American Airlines (NYSE: AAL) reported that its total revenue passenger miles rose 2.1 percent year over year in May to 19.2 billion with an 84 percent load factor which was 30 bps lower than a year ago. Shares hit new 52-week highs of $44.43 before turning negative and closing the day at $43.59, down 0.66 percent.
Southwest Airlines (NYSE: LUV) reported that its total revenue passenger miles rose 0.6 percent year over year in May to 9.4 billion with an 83.7 percent load factor which was 180 bps higher than a year ago. Shares hit new 52-week highs of $27.70 before turning negative and closing the day at $27.45, down 0.51 percent.
Chesapeake Energy's (NYSE: CHK) board of directors approved plans to spinoff its oilfield services operations into a separate company to be named Seventy Seven Energy and trade under the ticker SSE. Shares of Chesapeake Energy lost 0.47 percent, closing at $29.58.
Tesla Motors (NASDAQ: TSLA) announced it will “open-source” its Supercharger system with the hopes of encouraging a standard system for the industry. Shares lost 1.37 percent, closing at $205.31.
Morgan Stanley is diversifying away from its physical commodities business and has sold its 19.7 percent stake of TransMontaigne Partners (NYSE: TLP), a storage, marketing and transportation company to NGL Energy Partners (NYSE: NGL) for $200 million. Shares of NGL Energy hit new 52-week highs of $43.43 before closing the day at $42.86 while shares of TransMontaigne lost 3.98 percent, closing at $47.29.
China Mobile (NYSE: CHL) has purchased an 18 percent stake in True, a mobile carrier based in Thailand for $880 million. Shares gained 0.33 percent, closing at $49.09.
Tyson Foods' (NYSE: TSN) bid to acquire Hillshire Brands (NYSE: HSH) for $63 a share is closer to becoming a done deal. The company confirmed its $8.55 billion takeover offer and will use cash on hand in addition to a bridge loan to finance the acquisition. Shares of Tyson Foods lost 6.53 percent, closing at $37.50 while shares of Hillshire Brands hit new 52-week highs of $62.16 before closing the day at $62.06.
McDonald's (NYSE: MCD) reported its global comparable-store sales rose 0.9 percent in May. However, comparable-store sales declined one percent in the U.S. Shares lost 0.57 percent, closing at $101.38.
Amazon.com (NASDAQ: AMZN) will launch a service of managing subscription payments. Users will pay for services based on credit card details always stored on Amazon.com. Shares lost 0.66 percent, closing at $327.50.
Winners of Note
On Friday, Carl Icahn disclosed a 10.7 million share, good for a 9.39 percent stake in Family Dollar (NYSE: FDO). Icahn hinted he may push for a merger with Dollar General (NYSE: DG). On Monday Family Dollar adopted a one-year shareholder rights ("poison pill") plan with a ten percent ownership threshold. Shares of Family Dollar gained 13.37 percent, closing at $68.62 while Dollar General hit new 52-week highs of $65.99 before closing the day at $62.25.
Merck (NYSE: MRK) has agreed to purchase Idenix Pharmaceuticals (NASDAQ: IDIX) for $24.50 per share, nearly three times Friday's closing price of $7.23. Merck said that it was attracted to Idenix's promising portfolio of hepatitis C candidates based on its expertise in nucleoside/nucleotide chemistry and pro-drug technologies. Shares of Idenix skyrocketed to new 52-week highs of $24.21 before closing the day at $23.79, up 229.05 percent. Shares of Merck were little changed, closing the day at $57.94, up 0.16 percent.
Analog Devices (NYSE: ADI) has agreed to purchase Hittite Microwave (NASDAQ: HITT) for $2 billion or $78 per share. The purchase price represents an approximate 28 percent premium to Friday's closing price. According to Analog Devices, the acquisition will be accretive to non-GAAP earnings per share. At the same time, Analog Devices reaffirmed previous guidance for its third quarter results in which the company expects revenue to grow one percent to five percent and earn $0.60 to $0.64 per share. Shares of Hittite Microwave surged to new 52-week highs of $78.39 before closing the day at $77.90, up 28.63 percent. Shares of Analog Devices also hit new 52-week highs of 456.17 before closing the day at $55.31, up 4.97 percent.
Decliners of Note
Pilgrim's Pride (NYSE: PPC) withdrew its $55 per share bid to acquire Hillshire Brands after Tyson Foods' proposed a $63 per share offer. Pilgrim Pride confirmed that it will not engage in any future bidding wars. Shares of Pilgrim's Pride lost 6.70 percent, closing at $24.51.
A leaked e-mail from the North American Numbering Council said that Ericsson will win the next U.S. local number porting management contract, and not NeuStar (NYSE: NSR) who handled the number-switching duties since 1997. NeuStar called the leak “troubling” given the fact that the document should not have been made public. Additionally, NeuStar claims that Ericsson submitted its bid to win the contract after the deadline to do so had passed. Shares of NeuStar hit new 52-week lows of $24.00 before closing the day at $24.43, down 8.40 percent.
Earnings of Note
After the market closed, Casey's General Stores (NASDAQ: CASY) reported its fourth quarter results. The company announced an EPS of $0.59, beating the consensus estimate of $0.53. Revenue of $1.91 billion missed the consensus estimate of $1.92 billion. Shares were trading slightly higher by 0.01 percent at $74.78 following the earnings release.
Quote of the Day
“Some large US ISPs are erecting toll booths, providing sufficient capacity for services requested by their subscribers to flow through only when those services pay the toll. In this way, ISPs are double-dipping by getting both their subscribers and Internet content providers to pay for access to each other. We believe these ISP tolls are wrong because they raise costs, stifle innovation and harm consumers. ISPs should provide sufficient capacity into their network to provide consumers the broadband experience for which they pay.” – Comments from Netflix's ISP Speed Index update.
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