U.S. markets followed European equities and sold off after Portugal's second largest bank Banco Espirito Santo missed a debt payment, renewing concerns over the health of the Portuguese and European economy.
Despite a comeback from hefty losses, major indices still finished the day in negative territory despite jobless claims data approaching post-recession lows.
Wholesale inventories also painted a positive picture, perhaps forecasting a rebound in second-quarter GDP.
- The Dow lost 0.42 percent, closing at 16,915.07.
- The S&P 500 lost 0.41 percent, closing at 1,964.68.
- The Nasdaq lost 0.52 percent, closing at 4,396.20.
- Gold gained 0.94 percent, trading at $1,366.70 an ounce.
- Oil gained 0.65 percent, trading at $102.96 a barrel.
- Silver gained 1.79 percent, trading at $21.44 an ounce.
News of Note
Initial Jobless Claims declined 11,000 to 304,000, below the consensus of 315,000. Continuing claims rose 10,000 to 2.58 million.
May Wholesale Trade Inventories rose 0.5 percent to $532.7 billion, below the consensus of a gain of 0.6 percent. Sales rose 0.7 percent to $453.2 billion while Inventory to Sales ratio read 1.18.
EIA Natural Gas Inventory rose 93 bcf, above the consensus calling for a gain of 92 bcf.
The Bank of England maintained its QE program of 375 billion pounds and made no changes to its 0.5 percent benchmark lending rate.
Greece cut the size of its three-year note sale nearly in half to 1.5 billion euros.
India's newly elected government pledged to return to seven to eight percent economic growth within the next three years.
Analyst Upgrades and Downgrades of Note
Analysts at Morgan Stanley upgraded Alcoa (NYSE: AA) to Overweight from Equal-weight. Shares hit new 52-week highs of $15.97 before turning negative and closing the day at $15.62, down 0.45 percent.
Analysts at ISI Group upgraded Allscripts Healthcare (NASDAQ: MDRX) to Strong Buy from Buy. Shares gained 4.66 percent, closing at $16.17.
Analysts at CRT Capital maintained a Buy rating on American Airlines (NASDAQ: AAL) with a price target raised to $51 from a previous $45. Shares gained 1.99 percent, closing at $42.82.
Analysts at Macquarie initiated coverage of American Express (NYSE: AXP) with an Underperform rating and $92 price target. Meanwhile, analyst sat Barclays maintained an Equal-weight rating on American Express with a price target raised to $100 from a previous $93. Shares lost 0.30 percent, closing at $94.46.
Analysts at JPMorgan maintained a Neutral rating on Bank of New York Mellon (NYSE: BK) with a price target raised to $35 from a previous $32.50. Shares gained 0.24 percent, closing at $37.72.
Analysts at JPMorgan maintained a Neutral rating on Caterpillar (NYSE: CAT) with a price target raised to $110 from a previous $102. Shares lost 0.78 percent, closing at $109.36.
Analysts at HSBC initiated coverage of Freeport-McMoRan (NYSE: FCX) with a n Overweight rating and $44 price target. Shares hit new 52-week highs of $39.32 before turning negative and closing the day at $38.86, down 0.46 percent.
Analysts at Citigroup maintained a Buy rating on Garmin (NASDAQ: GRMN) with a price target raised to $70 from a previous $65. Shares lost 0.88 percent, closing at $57.35.
Analysts at Jefferies downgraded Lumber Liquidators (NYSE: LL) to Hold from Buy with a price target lowered to $57 from a previous $115. Also, analysts at Credit Suisse downgraded Lumber Liquidators to Neutral from Outperform. Meanwhile, analysts at Canaccord Genuity maintained a Buy rating on Lumber Liquidators with a price target lowered to $100 from a previous $122. Shares sank to new 52-week lows of $54.31 before closing the day at $55.25, down 21.54 percent.
Analysts at CRT Capital maintained a Buy rating on Southwest Airline (NYSE: LUV) with a price target raised to $34 from a previous $27. Shares gained 0.22 percent, closing at $27.27.
Analysts at JPMorgan maintained a Neutral rating on The NASDAQ OMX Group (NASDAQ: NDAQ) with a price target lowered to $42 from a previous $43. Shares lost 1.33 percent, closing at $38.60.
Analysts at Citigroup downgraded Waddell & Reed (NYSE: WDR) to Neutral from Buy. Shares lost 2.40 percent, closing at $59.38.
Equities-Specific News of Note
Costco (NASDAQ: COST) reported its June same-store-sales grew 6.0 percent while net sales grew ten percent year over year to $10.89 billion. Shares gained 0.14 percent, closing at $118.08.
L Brands (NYSE: LB) reported its June same-store sales rose two percent while total sales rose seven percent year over year to $1.18 billion. Shares lost 2.67 percent, closing at $60.21.
According to Italian media and reported by Bloomberg, International Game Technology (NYSE: IGT) has put itself up for sale and will receive a $4 billion acquisition offer from GTech. Shares of International Game Technology gained 2.05 percent, closing at $15.42.
Eni (NYSE: E) is close to selling half of its stake in its German gas operations to Energie Baden-Wuerttemberg for approximately 150 million euros. Shares lost 2.58 percent, closing at $52.80.
Bank of America (NYSE: BAC) is seeking permission from the Fed to raise its quarterly dividend to $0.05 from $0.01. Shares lost 0.06 percent, closing at $15.43.
Skechers (NYSE: SKX) filed a trademark suit against Fila U.S.A. alleging that Fila's footwear products infringe its intellectual property. Shares lost 2.12 percent, closing at $45.30.
Amazon.com (NASDAQ: AMZN) announced a new Web Service called Zocalo which provides 200GB of cloud storage for $5 a month. Shares lost 0.62 percent, closing at $327.92.
Boeing (NYSE: BA) predicted the global plane market will rise exponentially over the next two decades as the world will need more than 37,000 new jets worth a total of $5.2 trillion. Shares finished the day unchanged at $126.79.
Google (NASDAQ: GOOG) announced it will establish a $100 million European venture capital fund. Shares lost 0.86 percnet, closing at $571.10.
Winners of Note
Regency Centers (NYSE: REG) offered to acquire AmREIT (NYSE: AMRE) for $22 a share. Regency already owns 4.2 percent of AmREIT. The acquisition offer was presented in a public note following failed efforts of Regency executives to finalize a deal with AmREIT in private. Regency Centers wrote: “We are making this letter public because we feel that the potential benefits of a combination are just too great to ignore.” Shares of Regency Centers gained 0.43 percent, closing at $55.63 while shares of AmREIT hit new 52-week highs of $22.49 before closing the day at $22.45, up 16.93 percent.
TRW Automotive (NYSE: TRW) received an acquisition offer from ZF Friedrichshafen. The company confirmed the reports and said it will conduct an analysis of the offer with the help of bankers from Goldman Sachs. Shares of TRW Automotive hit new 52-week highs of $101.98 before closing the day at $98.91, up 8.22 percent.
CRAY (NASDAQ: CRAY) received a $174 million deal from the U.S. National Nuclear Safety Administer (NNSA) to provide an XC30 supercomputer and storage system named Trinity. CRAY's technology gives NNSA the tools to simulate nuclear tests. Shares gained 15.69 percent, closing at $31.49.
Decliners of Note
In a conference call with investors last night, Lumber Liquidators (NYSE: LL) issued downside guidance. The company reported its second quarter sales totaled $263.1 million and expects to announce an EPS of $0.59 to $0.61. The company previously guided its revenue to be $303.2 million and EPS of $0.90. The company also guided its full year sales to be $1.05 billion to $1.1 billion, below the consensus estimate of $1.16 billion. EPS is guided to be $2.65 to $3.00, below the consensus estimate of $3.34. The company noted that traffic to its stores has been weak and macroeconomic trends related to residential remodeling has been poor. Shares sank to new 52-week lows of $54.31 before closing the day at $55.25, down 21.54 percent.
Sarepta Therapeutics (NASDAQ: SRPT) reported a clinical update on its eteplirsen therapy involving patients with Duchenne muscular dystrophy. The company disclosed that at week 144 in its study, the decline in walking ability was greater than what was seen during week 74, possibly suggesting the therapy has a declining effectiveness. Shares lost 12.94 percent, closing at $22.54.
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As part of a sell-off in Portuguese equities, Portugal Telecom (NYSE: PT) continued its slide as Portugal Telecom's purchase of debt issued by a Grupo Espirito Santo subsidiary may prove negative for its merger partner, Brazilian based Oi SA (NYSE: OIBR). Shares of Portugal Telecom hit new 52-week lows of $2.52 before closing the day at $2.60, down 6.81 percent while shares of Oi also hit new 52-week lows of $0.63 before closing the day at $0.6448, down 11.55 percent.
Earnings of Note
This morning, Family Dollar Stores (NYSE: FDO) reported its third quarter results. The company announced an EPS of $0.85, missing the consensus estimate of $0.81. Revenue of $2.66 billion beat the consensus estimate of $2.61 billion. Net income for the quarter fell to $81.1 million from $120.9 million in the same quarter a year ago while the gross profit rate fell 40 bps to 34.3 percent. Family Dollar noted that its stores saw strong demand in refrigerated and frozen food in addition to tobacco sales. The company confirmed that it will close 370 under-performing stores by the end of the fiscal year while introducing a multi-year roll-out of beer and wine products. Family Dollar issued guidance and sees its fourth quarter EPS being $0.75 to $0.85 versus a consensus estimate of $0.78. Shares lost 0.19 percent, closing at $64.12.
This morning, Progressive (NYSE: PGR) reported its second quarter results. The company announced an EPS of $0.49, beating the consensus estimate of $0.48. Revenue of $4.63 billion missed the consensus estimate of $4.64 billion. Net income for the quarter fell to $293.4 million from $324.6 million in the same quarter a year ago as net premiums written rose five percent after rising 6.2 percent a year ago. The company noted that consumers aren't responding as well as originally hoped from a move to allow clients to do business from mobile devices. The company did see an improvement in its ratio to 92.6 percent from 93.3 percent a year ago. Shares lost 2.66 percent, closing at $24.52.
Quote of the Day
"This is not Greece, this is not Detroit, this is basically Venezuela with (a higher) debt to GDP ratio. We realize now we have been analyzing Puerto Rico incorrectly over the last 30 years ... With the new law, (PR) is more of a sovereign nation, and creditors do not have the protection of the federal laws to exercise their remedies. This is chaos." -@AProgresista, quoting a conference call regarding Costa Rica.
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