Factory Orders fell 0.6% in April well below the up 0.2% Wall Street estimates. The Dow Jones Industrial Average traded up to 12,143.69 then down to 12,035.09 staying well below its 200-day simple moving average at 12,258. The NASDAQ traded up to 2769.93 then down to 2726.68 before consolidating and was below its 200-day simple moving average at 2759 going into the final half hour of trading.
Asian stocks were lower again on Monday. The Nikkei 225 ended the day at 8,296 – down 1.71%. The Hang Seng ended the day at 18,186 – down 2.01%. European exchanges were mixed on Monday. The FTSE 100 was closed at 5,260 – down 1.14% on Friday. The DAX ended Monday at 5,978 – down 1.19%. The CAC 40 ended Monday at 2.954 – up 0.14%. The yield on the 10-Year US Treasury set a record low of 1.439% on Friday and rose to 1.532% on Monday. The yield on the Japanese 10-Year JGB traded below 0.8% for the first time since July 2003.
Gold traded down from $1629.7 the Troy ounce to $1610.0 on Monday after jumping to $1632.0 on Friday for a test of the base of the “Death Cross” 50-day and 200-day simple moving averages at $1624.2 and $1687.7. Crude oil traded down from $83.38 per barrel to another new year to date low at $81.21 then rebounded to $84.25. The euro versus the dollar traded to a new year to date low at 1.2291 on Friday and rebounded from 1.2389 to 1.2507 on Monday.
Energy
According to a Reuter’s source, BP (BP) is free to sell its TNK-BP stake. This is in response to the speculation that the Russian co-owners of the joint venture would veto any deal. Chesapeake Energy (CHK) by its of its hedges against low gas prices last October exacerbated the company’s cash crunch and left it largely unprotected against low gas prices this year. The Wall Street Journal has calculated the losses to be $750 – $900 million. Pioneer Natural Resources (PXD) have been upgraded to Hold from Sell at Société Général. Dow components – Chevron (CVX) down 0.20%, Exxon Mobil (XOM) down 0.49%.
Energy Select Sector SPDR (XLE) was trading at $61.90 at 3:30 PM on Monday, down 0.23% on the day – down 10.46% year-to-date.
Materials
Buckeye Technologies (BKI) has been upgraded to Buy from Neutral at UBS. Dow components – Alcoa (AA) down 0.42%, DuPont (DD) down 1.00%.
The Materials Select Sector SPDR (XLB) was trading at $33.00 at 3:30 PM on Monday, down 0.30% on the day – down 1.49% year-to-date.
Industrials
AMR (AAMRQ.PK) will renew talks with pilot representatives today on cost cuts after failing to reach a agreement on Friday with the APFA flight attendants’ union. If the sides cannot agreement, a court will rule, possibly on June 22, whether the airline can void the contracts with the unions, which have been backing a merger with US Airways (LCC). Boeing (BA) has been upgraded to Buy from Hold at Stifel Nicolaus due to valuation and expected strength in the aerospace cycle with an $80 price target. Cummins (CMI) has been downgraded to Market Perform from Outperform at Wells Fargo. Dow components – Boeing Co (BA) up 0.21%, Caterpillar (CAT) down 2.07%, General Electric (GE) down 1.94%, 3M Company (MMM) down 0.66%, United Technologies (UTX) down 1.29%.
The Industrial Select Sector SPDR (XLI) was trading at $33.34 at 3:30 PM on Monday, down 1.10% on the day – down 1.21% year-to-date.
Consumer Discretionary
Conn’s (CONN) beat FQ1 estimates by two cents on higher average selling prices in major product categories. The company raised its full year EPS guidance. KAR Auction Services (KAR) has been upgraded to Outperform from Perform with a $21 target price at Robert W. Baird citing the company’s deep network of buyers and sellers, property zoned for salvage, and valuable internet assets. YUM Brands (YUM) the parent of Pizza Hut and KFC has been downgraded to Market Perform from Outperform at Raymond James. Dow Components – Disney (DIS) up 0.18%, Home Depot up 1.31%, McDonalds (MCD) down 0.21%.
The Consumer Discretionary Select Sector SPDR (XLY) was trading at $41.85 at 3:30 PM on Monday, up 0.26% on the day – up 7.25% year-to-date.
Consumer Staples
Smart Balance (SMBL) has been upgraded to Buy from Hold at Canaccord Genuity. Cheesecake Factory (CAKE) has been downgraded to Market Perform from Outperform by William Blair citing potential earnings estimate risk from choppy casual dining trends. Macy’s (M) has been removed from the Top Picks Live List at Citigroup. Dow components – Kraft (KFT) down 0.05%, Coca Cola (KO) up 0.45%, Procter & Gamble (PG) down 0.53%, Wal-Mart (WMT) flat.
The Consumer Staples Select Sector SPDR (XLP) was trading at $33.21 at 3:30 PM on Monday, up 0.15% on the day – up 2.22% year-to-date.
Health Care
Pharmaceutical companies are presenting trial data at the American Society of Clinical Oncology meeting in Chicago. Late stage studies of Glaxo Smith Kline (GSK) trametinib and dabrafenib treatments for skin cancer showed good results, as did Johnson & Johnson’s (JNJ) Zytiga for prostate tumors, Roche’s (RHHBY.PK) T-DM1 for breast cancer and Avastin for cancer, and Bristol Myers’ (BMY) BMS-936558 for lung, kidney and skin tumors. WellPoint (WLP) will acquire contact-lens and eyewear retailer 1-800 Contacts for an undisclosed sum. This is a sign that health insurers will be diversifying and deepening their ties with consumers. Galena Biopharma (GALE) has been initiated with a Buy rating at Cantor Fitzgerald with a $4 price target, on high hopes for a Phase III trial with NeuVax for the prevention of breast cancer. Healthsouth (HLS) has been upgraded to Outperform from Market Perform at Wells Fargo. Synta Pharmaceuticals (SNTA) has been upgraded to Outperform from Market Perform at BMO Capital. Dow Components – Johnson & Johnson (JNJ) up 0.49%, Merck (MRK) up 0.46%, Pfizer (PFE) down 0.44%.
The Health Care Select Sector SPDR (XLV) was trading at $35.57 at 3:30 PM on Monday, up 0.17% on the day – up 2.54% year-to-date.
Financial
Over a year ago a small group of investors warned JP Morgan’s (JPM) management that the bank needed to upgrade its risk management controls. Two of the group’s proposals: giving the chief risk officer more power to oversee CIO trades and strengthening the board’s risk management committee were ignored, but are now being fast-tracked at the bank. Days before Bank of America (BAC) shareholders approved the bank’s $50 billion purchase of Merrill Lynch purchase, BofA executives were told that the losses at Merrill would hit the combined companies’ earnings for years, but this information was not shared with shareholders. Bank of America (BAC) has been upgraded to Overweight from Equal Weight at Evercore Partners. SunTrust Banks (STI) has been upgraded to Overweight from Equal Weight at Evercore. Charles Schwab (SCHW) and TD Ameritrade (AMTD) have been downgraded to Neutral from Buy at Citigroup. Concerns include a weaker global economy and the flattening US Treasury yield curve. Regions Financial (RF) has been downgraded to Hold from Buy at Deutsche Bank. Dow Components – American Express (AXP) up 0.69%, Bank of America (BAC) down 1.24%, JP Morgan Chase (JPM) down 2.16%, Travelers (TRV) down 0.21%.
The Financial Select Sector SPDR (XLF) was trading at $13.38 at 3:30 PM on Monday, down 0.82% on the day – up 2.92% year-to-date.
Information Technology
Facebook (FB) has developed technology that would let under-13 year olds use the site with parental supervision, according to the Wall Street Journal. The social network currently bans children below that age from opening accounts, but 7.5 million are estimated to be using the site – having lied about their ages. Facebook (FB) has been initiated with an Underperform rating at Sanford Bernstein. Inphi (IPHI) has been upgraded to Overweight from Neutral at Piper Jaffray. Solera (SLH) has been initiated with an Equal Weight rating by Barclays. Dow Components – Cisco Systems (CSCO) up 0.22%, Hewlett-Packard (HPQ) down 1.04%, IBM (IBM) down 0.51%, Intel Corp (INTC) down 0.42%, Microsoft (MSFT) down 0.16%.
The Technology Select Sector SPDR (XLK) was trading at $27.29 at 3:30 PM on Monday, up 0.33% on the day – up 7.23% year-to-date.
Telecommunication Services
Dow components – AT&T (T) up 1.00%, Verizon (VZ) up 0.60%.
The NASDAQ Telecommunications Index (IXTC) was trading at $175.98 at 3:30 PM on Monday, down 0.16% on the day – down 11.15% year-to-date.
Utilities
PG&E Corp (PCG) has been initiated with an Equal Weight rating at Morgan Stanley. Dominion Resources (D) up 0.15%, Edison International (EIX) up 1.13%, First Energy (FE) up 0.65%, PG&E Corp (PCG) up 0.37%, Southern Company (SO) up 0.35%.
The Utilities Select Sector SPDR (XLU) was trading at $35.80 at 3:30 PM on Monday, up 0.25% on the day – down 0.50% year-to-date.
STOCKS: CVX, XOM, BP, CHK, PXD, AA, DD, BKI, BA, CAT, GE, MMM, UTX, AAMRQ.PK, LCC, CMI, DIS, HD, MCD, CONN, KAR, YUM, KFT, KO, PG, WMT, SMBL, CAKE, M, JNJ, MRK, PFE, GSK, RHHBY.PK, BMY, WLP, GALE, HLS, SN, TA, AXP, BAC, JPM, TRV, STL, SCHW, AMTD, RF, CSCO, HPQ, IBM, INTC, MSFT, FB, SLH, IPHI, T, VZ, D, EIX, FE, PCG, SO
