With contributions from Junior Associates
Vetted & Compiled by Raqueem Khan
Edited by Vani Rao
US Stocks Markets Snap Losing Streak; All Eyes on Yellen, Cisco Earnings
Consumer news, testimony from Janet Yellen to determine whether recovery is real
Stocks rose on Friday, 7 February 2014, giving the S&P 500 its first weekly gain over the past four weeks. Over the past few weeks, US stocks had been battered by weak labor market data as well as harsh weather conditions. Last week, traders were expecting economic strengthening following positive consumer news.
The Dow Jones Industrial Average added 165.55 points, or 1.06%, to 15,794.08. The blue-chip index gained 0.6% over the past week, ending a two-week losing streak.
The S&P 500 closed up 23.59 points, or 1.33%, at 1,797.02, and recorded a 0.8% weekly gain after three straight weeks of losses.
The Nasdaq Composite Index ended the day higher at 68.74 points, or 1.69%, at 4,125.86, gaining 0.5% for the week.
Even with last week’s gains, the Dow is down 4.7% since the beginning of the year 2014 , with the S&P 500 off 2.8%, and the Nasdaq down 1.2%.
Cyclical sectors paced the bulk of the advance. All six growth-sensitive groups posted gains between 1.1% and 1.6%, with Industrials ending in the lead with a gain of 1.64%. The sector drew strength from the likes of Boeing (NYSE:BA) and Honeywell (NYSE:HON).
Elsewhere, the discretionary space advanced 1.26%, extending its weekly gain to 1.9%. The Consumer Discretionary sector ended the week ahead of the remaining nine groups after losing nearly 6.0% in January.
On the defensive side, Healthcare (+1.77%) seized the lead during the afternoon while the remaining three counter-cyclical groups, Consumer Staples (+0.91%), Telecom Services (+0.72%), and Utilities (+0.6%) lagged.
Movers & Shakers
Expedia Inc.’s (NASDAQ:EXPE) shares skyrocketed 14.29%. The online travel agency reported fourth-quarter adjusted earnings of 92 cents per share, beating expectations. Its competitor TripAdvisor Inc. (NASDAQ:TRIP) climbed 9.48% and Priceline.com Inc. (NASDAQ:PCLN) added 5.01%.
Netflix Inc. (NASDAQ:NFLX) shares rose 5.41%. The video streaming company said earlier this week that it has renewed the popular series “House of Cards” for a third season.
Noble Energy Inc. (NYSE:NBL) shares advanced 5.73%. The oil and gas explorer said on Thursday that it will sell its offshore Israel natural gas licenses for over $1 billion to Australia-based Woodside Petroleum Ltd.
Cigna Corp. (NYSE:CI) shares slid 9.25% after the health insurer’s disappointing earnings and outlook, issued early Friday added to fears that insurers are being affected by rising medical costs.
Shares of LinkedIn Corp. (NYSE:LNKD) dropped 6.20% after the professional social-networking company announced on Thursday that it expects first quarter revenue of $455 million to $460 million, lesser than forecasts of $470 million from analysts’ estimation.
Flir Systems Inc. (NASDQ:FLIR) shed 4.60%. The maker of imaging and observation sensors said on Friday that its fourth-quarter earnings came in at 20 cents a share, falling short of the average estimates of 23 cents a share.
Verisign Inc. (NASDAQ:VRSN) shares lost 4.94%. The Internet-domain company on Thursday said its fourth-quarter profit rose to $1.94 a share from 65 cents a share a year ago. However, the stock has come under pressure following comments from an analyst that it is losing growth traction.
Treasuries yields fell after employers hired far fewer workers than expected in January, suggesting a loss of momentum in the economy at the same time as the Federal Reserve pares its bond purchase program. The ten-year bonds were last up 6/32 in price to yield 2.68%. Thirty-year bonds rose 3/32 in price to yield 3.67%.
The dollar fluctuated after a weaker-than-expected US jobs report release. However, the fluctuating dollar is unlikely to dissuade the Federal Reserve from diverting from its path of steadily removing monetary stimulus from the US economy. Against the dollar, the euro was up 0.37% to $1.3638. The euro rose 0.52% to 139.47 yen. The dollar advanced against the yen, standing at 0.18% to 102.26 yen. The dollar index fell 0.32% to 80.65.
Oil rose fuelled by a sharp rally in gasoline and heating oil as supplies tightened and refiners started to shut down plants for maintenance. The expectation for tight diesel and heating oil supplies sent oil prices soaring as persistently cold weather across the US continued to eat into heating fuel stocks. Crude rose 2.16% to $99.95 a barrel.
Gold rose after data showed that US job creation slowed sharply over the past two months, fuelling speculation that slowing economic momentum will force the Federal Reserve to keep its current stimulus. Spot gold gained 0.77% to $1,266.96 an ounce. Gold futures for February delivery rose 0.76% to 1,267.10 per ounce.
Bitcoin was in the news for all the wrong reason this week with Russia announcing a ban on Bitcoin. This resulted in the crypto currency crashing by 6.5%. The bad news did not stop there as Bitcoin plunged more than 8% on February 8 after Mt.Gox, the Tokyo-based exchange, halted withdrawals of the digital currency, citing technical malfunction. Bitcoin started the week at the high of $950 per Bitcoin on the Mt. Gox Index, it crashed below $630 on 9 February. The price has recovered slightly, with the price of one Bitcoin standing at $688.89 on 10 February 2014, at the time of reporting.
US hiring struggles to rebound from winter chill
US job creation slowed sharply over the past two months, turning in the weakest performance in three years and raising prospects that the economy may be losing momentum. The unemployment rate hit a new five-year low of 6.6% in January, even as Americans piled back into the labor market to search for work. Non-farm payrolls rose only 113,000 last month after a meagre 75,000 gain in December, the US Labor Department reported. Government payrolls fell 29,000. This was the largest decline since October 2012 and reflected losses on all levels of government services, including the postal services. Manufacturing employment increased 21,000, a sixth consecutive monthly gain. Average hourly earnings rose five cents. The length of the workweek was steady at an average of 34.4 hours.
The Consumer Credit report for December was just released by the Federal Reserve and it showed that consumer credit increased by $18.8 billion. That was higher than the Briefing.com consensus estimate of $11.5 billion. The prior month’s credit growth was revised higher to $12.40 billion from $12.30 billion.
Wyndham beats Q4’13 revenue expectations
|Wyndham Worldwide Corp.’s (NYSE: WYN) fourth quarter FY2013 revenue improved 9.2% year-over-year to $1.2 billion, beating market expectations of $1.18 billion. The company reported net income of $0.73 per share, in line with the analysts’ expectations of $0.73 per share. Wyndham’s Vacation Ownership business unit revenues improved 12% year-over-year to $658 million in the fourth-quarter. Its Lodging business unit reported a 4.7% rise in its domestic Revenue Per Available Room (RevPAR) and a 3.8% growth in its overall RevPAR. The company announced a 21% increase in quarterly dividend to 35 cents and expects an EPS of $4.18-4.28 per share on revenue of $5.25-5.35 billion for FY2014. Analysts at Wall Street anticipate Wyndham’s FY2014 EPS at $4.31on revenue of $5.31 billion.|
Apollo Global Management reports weak Q4 earnings, but tops expectations
|Apollo Global Management LLC (NYSE:APO) reported fourth quarter FY2013 revenue of $795.1 million, down 31.4% from $1.16 billion in the prior-year quarter. The company’s economic net income stood at $421.7 million, or $1.06 per share, compared to $655.8 million, or $1.69 per share, in the year-ago quarter. Analysts estimated the company’s net revenue at $659.97 million and EPS at $0.80 per share. The company has announced dividend of $1.08 per share for Class A shares, payable to shareholders as on February 26, 2014. CEO Leon Black said that the company is well positioned to deliver stronger results in FY2014. The company shares gained 0.38% on Friday 7, 2014, to end the day at $31.90.|
Moody’s profit rises, outperforms market estimates
|Moody’s Corp. (NYSE:MCO) reported a 29% rise in its fourth-quarter income, driven by tax benefits and lower operating expenses. The company earned $206.7 million, or 94 cents per share, compared to $160.1 million, or 70 cents per share, in the year-ago quarter, easily surpassing analysts’ expectations of 76 cents per share. Moody’s revenue increased 3% to $779.2 million, compared to $754.2 billion, bettering Wall Street forecasts of $744 million. Moreover, company’s net income rose 17% to $804.5 million, or $3.60 per share, from $690 million, or $3.05 per share, in the fourth quarter of last year. Moody’s Corp. has offered a positive outlook for FY2014, and expects EPS of $3.90 to $4.00. Following strong Q4 results, the company’s stock hit a new 52-week high of $85.70, before closing the day 4.02% higher at $80.02, on Friday, 7 February 2014.|
Beam’s profits dips on higher costs; net sales rises
|Beam Inc.’s (NYSE: BEAM) Q4 profit declined by 19% as rising operating costs eroded the company’s profitability in the Premium Whisky segment. The company reported income of $90.3 million, or 55 cents a share, compared to $110.09 million, or 69 cents a share, in the year-ago period. Excluding restructuring and acquisition costs, the company’s earnings from continuing operations rose to 77 cents a share, against 67 cents a share in the prior year period. Beam’s net sales also climbed 4.3% to $739.5 million, helped by the strong demand of its premium whisky and tequila brands along with the growth in the Indian market. Analysts at Thomson Reuters were expecting EPS of 72 cents on revenue of $735 million. The demand for the company’s premium brand whiskies, Maker’s Mark and Jim Beam, increased 17% and 3%, respectively, during the quarter under review. Beam is currently reviewing a $13.6-billion in-cash buy offer from Japanese drink maker Suntory Holdings Ltd. Beam’s management didn’t provide targets for FY2014, until the deal is closed.|
LabCorp reports Q4 earnings growth, but misses expectations
|Laboratory Corporation of America Holdings (NYSE: LH) fourth-quarter adjusted EPS rose 4.5% to $1.61, but missed analyst EPS estimates of $1.67. The company reported a net income of $126.3 million, or $1.43 per share, as compared with $120.2 million, or $1.26 per share, in the year-ago quarter. LabCorp’s revenue increased 2.3% to $1,437 million in the fourth quarter, slightly below the analyst consensus of $1,449 million. The company stated its FY2014 outlook, forecasting adjusted EPS of $6.35-6.65, compared to the company’s earlier EPS estimates of $6.50. LabCorp maintained that the government payments and reimbursement policies can affect the company in 2014, and hence offered revenue growth estimates of a mere 2%.|
Cigna’s net income declines, outlook for 2014 disappoints
|Cigna Corp.’s (NYSE:SI) fourth-quarter net income fell by 11% to $361 million, or $1.29 per share, as compared to $406 million, or $1.41 per share, in the prior year comparable quarter. The company’s profitability fell due to higher-than-expected costs in its private Medicare business segment. Excluding one-time charges, EPS fell from $1.57 to $1.39, missing analyst expectations by 9 cents. However, the company’s revenue grew 7% to $8.15 billion from $7.62 million, in the last quarter, bettering Wall Street estimates of $8.06 billion. As a guidance for 2014, Cigna is expecting EPS of $6.80 to $7.20, underperforming the analyst average estimate of $7.29. The company’s FY2014 outlook has disappointed analysts and investors, as a result, the company’ shares fell by 7.90% to close the day at $77.47, Friday, 7 February 2014.|
News to look forward to next week
- US retail sales data next week could offer more evidence that the economy lost some steam at the start of the first quarter. The Commerce Department is expected to report on Thursday, 13 February 2014, that retail sales were flat in January, held down by a drop in receipts at auto dealerships, after rising 0.2% in December. Even after stripping out auto, retail sales are seen barely rising.
- Industrial production data on Friday, 14 February 2014, is expected to show steady gains in industrial and manufacturing output in January after hefty increases in the fourth quarter.
- Also on Friday, 14 February 2014, Consumer Sentiment data is expected to show a dip in consumer sentiment early in February. The Thomson Reuters/UMich consumer sentiment index is forecast slipping to 80.4 from 81.2 at the end of December.
Upcoming Earnings Releases
It will be another big week for earnings, including that of Sprint Corp. (NYSE:S), whose shares have seen ups and downs depending on optimism or pessimism that a merger with smaller rival T-Mobile will actually happen. Cisco (NASDAQ:CSCO), which is under pressure to show signs of a turnaround after its previous quarter, was marred by weakness in emerging markets. Sprint reports on Tuesday, 11 February 2014, and Cisco on Wednesday, 12 February 2014. It will also be a big week for consumer goods companies, with PepsiCo (NYSE:PEP), Kraft Foods Group Inc. (NASDAQ:KRFT) (both on Thursday 13 February 2014), and Campbell Soup Co. (on Friday 14 February 2014) in line to report.
MetLife (NYSE:MET) is expected to top estimates for fourth quarter. The largest life insurer’s results often depend on its derivatives program, which was designed to reduce the risk of being exposed to persistent low interest rates. Rival Prudential Financial (NYSE:PRU) reported a lower-than-expected adjusted operating income due to pretax losses related to the weakening of Japanese yen against the dollar. The company is scheduled to post earnings on Wednesday, 12 February 2014, after the closing bell.
Western Union (NYSE:WU) is expected to report another tough quarter on Tuesday, 11 February 2014, due to higher compliance costs arising from new money laundering and fraud prevention measures in countries such as Spain and Britain. Western Union’s stock has lost 12% of its value in past three months as investors have turned cautious following news that compliance costs will rise in 2014.
Thomson Reuters (NYSE:TRI) is expected to release fourth-quarter results on Wednesday, 12 February 2014. Investors will be looking for full-year financial forecast and details if sales to its financial products are still outpacing subscriber cancellations.
Trip Advisor (NASDAQ:TRIP) is expected to have benefited from increased hotel occupancy, higher rates and growth in business travel. Analysts say the company, which was spun off from Expedia, is set to get a boost from increased travel content on its site and recent investments in mobile and vacation rentals.
Deere & Co (NYSE:DE), the world’s largest maker of tractor, harvesters and other agricultural equipment, is expected to post flat to lower year-on-year sales as farmers throttle back on new vehicle investment following a bumper crop that sent commodity prices lower. The results are expected before the opening bell on Wednesday, 12 February 2014.
Starwood (NYSE:HOT) is the first of the big US hotel chains to report its earnings. Investors will be closely watching for any comment about a possible slowdown in business and group bookings in 2014.
US solar company Sunpower Corp. (NASDAQ:SPWR) will announce fourth quarter results on Wednesday, 12 February 2014. The company has benefited in the last year from stable solar panel prices and strong demand for solar power in the US and Japan.
CNA Financial Corporation (NYSE:CNA), a Chicago-based Property and Casualty insurance company, will report fourth quarter and full-year 2013 results on February 10, 2014, before the market bell on Monday. As per the analyst estimates the company is likely to report EPS of 85 cents.
Hasbro Inc. (NASDAQ:HAS) will release its fourth-quarter results before the market bell on Monday, 10 February 2014. The toys and game maker had reported EPS of $1.31 in Q3, in line with the industry expectations. The toymaker has a quarterly dividend payout of $1.60 a year, which equals to annualized yield of about 3.1%, above the S&P 500’s 2.05%.
Loews Corporation (NYSE:L) reports its fourth-quarter results before the opening bell on 10 February 2014. Market experts are expecting EPS of 70 cents from the New York-based Property and Casualty company. Loews had strong Q3 2013, where profit surged 59% to $282 million, or 73 cents per share, from $177 million, or 45 cents per share, in Q3 2012.
Markel Corporation (NYSE:MKL) will release its fourth-quarter earnings on Monday, 10 February 2014. The Virginia-based financial holding company had reported diluted EPS of $4.67 for the third quarter of 2013. Markel Corporation directors had authorized a new share repurchase program covering purchases up to $300 million on 21 November 2013.
Masco Corporation (NYSE:MAS) will announce its fourth quarter and year-end earnings data on Monday, 10 February 2014, after the market closes. The company in third-quarter reported EPS of 27 cents and revenue of $2.15 billion, which topped the analyst estimates. Industry experts are expecting another strong quarter from Michigan based home improvement company, which is a leading supplier to Home Depot (NSYE:HD) and Lowe’s (NYSE:LOW).
New Fed Chair Janet Yellen is in the spotlight with her first report to Congress on the state of the economy and monetary policy. Most expect her to signal a steady-as-she-goes approach to winding down the Fed’s bond-buying program, despite a second disappointing month of jobs data that raised doubts about US growth. She’ll also be quizzed on the market impact of the Fed’s decisions, both at home and abroad, and could face contentious questions from lawmakers who may want to revise the Fed’s mandates and beef up oversight of central bank. She will testify before the House panel on Tuesday, 11 February 2014, and before a Senate committee on Thursday, 13 February 2014.