The Federal Reserve’s statement shows an economic theme that expansion is proceeding at a moderate pace with the labor market improving gradually. The Fed recognizes that commodities prices have spiked since last summer and that the rise in the price of crude oil has contributed to an inflation pick-up in recent months, but they believe that inflation expectations remain stable and that underlying inflation remains subdued.
The FOMC will continue to expand its holdings of U.S. debt as announced in November, and that this $600 billion program known as QE2 will end on June 30th. In addition the Federal Reserve will maintain the federal funds rate at zero to 0.25 percent for an extended period. U.S. stocks stayed firm during and after Fed Chief Ben Bernanke’s press conference with the Dow Jones Industrial Average trading to another year to date high above 12,700, with the NASDAQ above 2870.
U.S. stocks posted solid gains on Tuesday with the Dow Jones Industrial Average up 115 points to 12,595, so the Dow is up 8.8% year to date. The NASDAQ gained 22 points to 2848 up 7.4% year to date. Asian stocks were mixed overnight with the Nikkei 225 up 1.4% to 9692. The yield on the 10-Year US Treasury declined 5.6 basis points on Tuesday to 3.307 percent, but is higher at 3.360 while the bond market awaits the Fed Statement at 12:30 PM, and Fed Chief Bernanke’s news conference at 2:15 PM. Yields were little changed after the Fed events. Gold is trading above $1500 the Troy ounce, but below Monday’s all time high at $1519.2 pre-Fed, then set a new all time high above $1530 post-Fed. Crude oil is below Monday’s high at $113.48 per barrel trading down to $110.71 Wednesday morning on a supply build, but recovered above $113.00 post-Fed events. The euro set a new year to date high above 1.4775 following the Fed events. This morning we learned that Durable Goods Orders rose by 2.5% in March, but up 1.3% excluding transportation.
Energy
BP’s (BP) Q1 net profit climbed 16% to $7.2B as gains from the sale of major assets to pay for the Gulf of Mexico oil spill and higher oil prices outweighed the continuing costs of the disaster. Baker Hughes (BHI) beat estimates by 9 cents and revenue by $240M. National-Oilwell (NOV) reported Q1 EPS of $1 (in-line), while beating estimates by $20M. Nexen (NXY) reported Q1 EPS of $0.38 (vs consensus of $0.61), while beating estimates by $120M. Nabors Industries (NBR) missed estimates by 5 cents, but beat revenue by $1B. Gulfmark Offshore (GLF) is upgraded to Neutral from Sell at Global Hunter. Encore Energy (ENP) is now Neutral from Outperform at Robert W. Baird with a $25 target.
The Energy Select Sector SPDR (XLE) was trading at $79.31 at 4:00 PM on Wednesday, down slightly on the day – up 16.21% year-to-date.
Materials
Nalco Company (NLC) missed estimates by 5 cents, but beat revenue by $30M. U.S. Steel (X) is now Neutral from Buy at Goldman. In afternoon trading: Shares of Rockwood Holdings (ROC) are up about 9.8%. Shares of Endeavour Silver (EXK) are up about 7.9%. Shares of Silver Wheaton (SLW) are up about 5.8%. Shares of China Shen Zhou Mining (SHZ) are up about 5.3%. Shares of ADA-ES (ADES) are down about 7.4%.
The Materials Select Sector SPDR (XLB) traded at $40.72 at 4:00 PM on Wednesday, up 0.32% on the day – up 6.01% year-to-date.
Industrials
C.H. Robinson Worldwide (CHRW) missed estimates by a penny, but beat revenue by $40M. Hertz Global (HTZ) beat estimates by 2 cents with revenue in-line with estimates. Boeing (BA) reported EPS of $0.78 and reaffirmed 2010 guidance. Jacobs Engineering (JEC) is upgraded to Outperform from Market Perform at BMO Capital. Federal Signal (FSS) is moved to Market Perform from Outperform at BMO Capital. Masco (MAS) is downgraded to Underperform from Sector Perform at RBC Capital. In afternoon trading: Shares of SFN Group (SFN) are down about 22%. Shares of Rockwell Automation (ROK) are down about 9% despite beating estimates by 2 cents and revenue by $60M. Shares of Old Dominion Freight Lines (ODFL) are up about 9%.
The Industrial Select Sector SPDR (XLI) traded at $38.41 at 4:00 PM on Wednesday, up 0.44% on the day – up 10.15% year-to-date.
Consumer Discretionary
Intruders who last week hacked into Sony’s (SNE) PlayStation Network, which generates roughly $500M/year in revenue, have stolen the names, addresses and possibly credit card data belonging to 77M user accounts. Taking the long view and ignoring Wall Street’s obsession with quarterly figures, Amazon (AMZN) spent ferociously in Q1 on building more data centers to power its growth, leading to a 33% drop in EPS to $0.44, well short of the $0.61 consensus. Revenue jumped 38% to $9.86B, beating forecasts of $9.52B. Analysts expect Starbucks (SBUX) to report FQ2 EPS of $0.34 on revenue of $2.73B this afternoon, compared with $0.28 and $2.53B last year. Investors will be looking for any updates on rising expenses, with Starbucks warning last quarter that these could hit its performance. Whirlpool (WHR) beat estimates by 47 cents and revenue by $140M. Wyndham (WYN) beat estimates by 4 cents, but missed revenue by $10M. Perry Ellis (PERY) is initiated with Buy at Deutsche Bank. Sirius XM Radio (SIRI) is now Neutral from Buy at Lazard. In afternoon trading: Shares of ReachLocal (RLOC) are up about 37% after the online marketing company reported a partnership with Google Inc. and boosted its full-year financial outlook. Shares of Town Sports International (CLUB) are up about 19% after being upgraded to Buy from Hold at ThinkEquity.
The Consumer Discretionary Select Sector SPDR (XLY) traded at $40.42 at 4:00 PM on Wednesday, up 1.20% on the day – up 8.05% year-to-date.
Consumer Staples
Lorillard (LO) is upgraded to Buy from Hold at Citigroup. Safeway (SWY) is downgraded to Hold from Buy at Jefferies. In afternoon trading: Actives: Shares of Rite Aid (RAD) are up about 4.6%. Shares of Altria Group (MO) are up about 1.3%. Shares of Procter & Gamble (PG) are up about a quarter of a percent. Shares of Coca Cola (KO) are down slightly. Shares of Wal-Mart (WMT) are up about 1%. Shares of Kroger (KR) are up slightly.
The Consumer Staples Select Sector SPDR (XLP) traded at $31.23 at 4:00 PM on Wednesday, up 0.64% on the day – up 6.55% year-to-date.
Healthcare
Johnson & Johnson (JNJ) has agreed to buy Swiss-U.S. medical devices maker Synthes for $21.3B in cash and stock, in which Synthes holders will receive 159 Swiss francs ($181.68) a share – an 8.5% premium. WellPoint Health Networks (WLP) beat estimates by 48 cents and revenue by $90M. Regeneron Pharmceuticals (REGN) is resumed with an Outperform rating and $58 price objective at Boenning & Scattergood. Endo Pharmaceuticals (ENDP) is added to Citigroup’s Top Picks Live list. In afternoon trading: Shares of Regeneron are up about 28% after a Phase III study showed Zaltrap, in combination with a leading chemotherapy regimen, helped extend the lives of patients with advanced colorectal cancer. Shares of Pacira Pharmaceuticals (PCRX) are up about 13.25%. Shares of Cardiome Pharma (CRME) are up about 11.5%. Shares of Universal Health Services (UHS) are up about 10.5%.
The Health Care Select Sector SPDR (XLV) traded at $35.08 at 4:00 PM on Wednesday, up 1.12% on the day – up 11.37% year-to-date.
Financials
In afternoon trading: Shares in Barclays (BCS) are down about 3.6% after the U.K. bank reported Q1 net profit fell 5% to £1.01B ($1.66B), led by a 15% fall in revenue at its investment-banking unit. Shares of Jones Lang LaSalle (JLL) are down about 6.1%. Shares of Centerstate Banks (CSFL) are down about 6.1%. Shares of CB Richard Ellis Group (CBG) are down about 6%. Shares of Moody’s (MCO) are up about 6.5%.
The Financial Select Sector SPDR (XLF) traded at $16.28 at 4:00 PM on Wednesday, up 0.62% on the day – up 2.07% year-to-date.
Information Technology
Nokia (NOK) intends to cut R&D spending by €1B ($1.46B) by outsourcing its Symbian software activities to Accenture (ACN), and as a result will lay off 4,000 people by the end of 2012, and outsource another 3,000 to Accenture. Nokia’s plans come after it inked a deal with Microsoft (MSFT) earlier this year to incorporate Windows on its phones. AU Optronics (AUO) missed estimates by 32 cents and revenue by $190M. Broadcom (BRCM) beat estimates by 5 cents with revenue in-line with estimates. STMicroelectronics (STM) missed estimates by a penny and revenue by $1M. Western Union (WU) beat estimates by a penny with revenue in-line with estimates. MicroStrategy (MSTR) is initiated with an Outperform and $180 price target, while Qlik Tech (QLIK) is initiated with a Market Perform and $29 price target at BMO Capital Markets. Riverbed Technology (RVBD) is an Outperform at Morgan Keegan with a $45 target price. InterActiveCorp (IACI) is upgraded to Buy from Hold at Citigroup. First Solar (FSLR) gets a Buy-from-Hold boost at Kaufman Brothers with a target of $165. Taiwan Semiconductor (TSM) gets added to Goldman Sachs’ Conviction Buy list. Lexmark (LXK) is lowered to Hold from Buy at Brean Murray. Youku.com (YOKU) is cut to Neutral from Buy at Goldman. Broadcom (BRCM) gets removed from Goldman’s list of Conviction Buys. In afternoon trading: Shares of ShoreTel (SHOR) are up about 15.5%. Shares of LM Ericsson (ERIC) are up about 13%. Shares of Silicon Image (SIMG) are up about 12.75%. Shares of Broadcom are down about 12%. Shares of Mercury Computer Systems (MRCY) are down about 11.5%. Shares of SuccessFactors (SFSF) are down about 10.25%.
The Technology Select Sector SPDR (XLK) traded at $26.75 at 4:00 PM on Wednesday, up 0.60% on the day – up 6.19% year-to-date.
Telecommunications Services
In afternoon trading: Shares of Cincinnati Bell (CBB) are up about 6%. Shares of Cogent Communications (CCOI) are up about 3.3%. Shares of General Communications (GNCMA) are up about 3.1%. Shares of Clearwire (CLWR) are down about 4.3%. Shares of VocalTec Communications (CALL) are down about 3.6%. Shares of Leap Wireless (LEAP) are down about 3.5%. Shares of Alaska Communications Systems (ALSK) are down about 3.3%.
The NASDAQ Telecommunications Index (IXTC) traded at $230.84 at 4:00 PM on Wednesday, up 0.72% on the day – up 2.43% year-to-date.
Utilities
In afternoon trading: Actives: Shares of AES (AES) are up about 1%. Shares of Duke Energy (DUK) are relatively unchanged. Shares of PG&E (PCG) are relatively unchanged. Shares of PPL (PPL) are up about 0.75%. Shares of Southern (SO) are up about 0.75%. Shares of Exelon (EXC) are down slightly.
The Utilities Select Sector SPDR (XLU) traded at $32.80 at 4:00 PM on Wednesday, up 0.80% on the day – up 4.66% year-to-date.
STOCKS: BP, BHI, NOV, NXY, NBR, GLF, ENP, NLC, X, ROC, EXK, SLW, SHZ, ADES, CHRW, HTZ, BA, JEC, FSS, MAS, SFN, ROK, ODFL, SNE, AMZN, SBUX, WHR, WYN, PERY, SIRI, RLOC, CLUB, LO, SWY, RAD, MO, PG, KO, WMT, KR, JNJ, WLP, REGN, ENDP, PCRX, CRME, UHS, BCS, JLL, CSFL, CBG, MCO, NOK, CAN, MSFT, AUO, BRCM, STM, WU, MSTR, QLIK, RVBD, IACI, FSLR, TSM, LXK, YOKU, SHOT, ERIC, SIMG, MRCY, SFSF, CBB, CCOI, GNCMA, CLWR, CALL, LEAP, ALSK, AES, DUK, PCG, PPL, SO, EXC
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