The Federal Open Market Committee announced that the federal funds rate will remain at zero to 0.25% at least through late 2014 on significant downside risks from global financial stress. The Dow Jones Industrial Average traded down to 12,580.12 Wednesday morning then rallied above 12,750 into the final half hour of trading. The Dow remains below its May 2nd 2011 high at 12,876.00. The NASDAQ traded between 2788.95 and 2804.17 then rebounded to 2820.40 post-Fed Statement remaining below its May 2nd 2011 high at 2887.75.
Asian stocks were higher on Wednesday with the Nikkei 225 ending their session 8,844 – up 1.12% on the day. The Hang Seng remained closed at 20,110 for the Chinese New Year. European stocks opened higher on Wednesday but slipped into the red by the time US stocks opened then closed mixed. The FTSE 100 ended their session at 5,723 – down 0.50% on the day; the DAX ended their session at 6,422 – up 0.04% on the day; and the CAC 40 ended their session at 3,312 – down 0.31% on the day.
The yield on the 10-Year US Treasury note traded down from 2.076 percent to 2.010 just before the Fed Statement. The yield on the 10-Year note then declined through its 50-day simple moving average at 1.963 to an afternoon low at 1.916. Gold traded down from $1670.4 a Troy ounce to $1649.2 pre-FOMC then popped to $1711.3 as Fed policy licenses commodity speculation. Crude oil traded down from $99.37 per barrel to $97.53 on higher than expected supplies then rebounded to $100.40 as Fed-induced speculation outweighs reduced demand. The euro versus the dollar traded down from 1.3051 to 1.2934 then rallied to 1.3112 following the Fed Statement.
Energy
Inergy Midstream (NRGM) is begun as an Overweight at Barclays and an Outperform at Wells Fargo. Mid-Con Energy Partners (MCEP) is a new Outperform at Oppenheimer with a price target of $24.50. Overseas Shipholding (OSG), Genco Shipping & Trading (GNK), and Eagle Bulk Shipping (EGLE) are all hoisted to Hold from Sell at Deutsche Bank. Baker Hughes (BHI) is now Neutral from Positive at Susquehanna.
Energy Select Sector SPDR (XLE) was trading at $72.69 at 4:00 PM on Wednesday, up 1.23% on the day – up 5.05% year-to-date. The 2011 change was +1.29%.
Materials
Potash (POT) is reduced to Sell from Hold at Dahlman Rose with a $41 price objective.
The Materials Select Sector SPDR (XLB) was trading at $37.14 at 4:00 PM on Wednesday, up 1.64% on the day – up 10.87% year-to-date. The 2011 change was -12.78%.
Industrials
Nordic budget carrier Norwegian Air Shuttle has split a $21.5B booking for 222 narrow-body aircraft between Boeing (BA) and Airbus (EADSF), with the U.S. plane maker receiving an $11.4B order for 122 737 craft and its EU rival tapped to provide 100 A320 neo jets. Leading Japanese tractor maker Kubota (KUB) is negotiating to buy a foreign farm equipment manufacturer in a transaction that could exceed ¥200B ($2.6B) as it looks to boost growth outside of stagnating Japan and exploit the worldwide boom in commodities. CSX Corp (CSX) is raised to Outperform from Neutral at Robert W. Baird with a target of $26. Overseas Shipholding (OSG), Genco Shipping & Trading (GNK), and Eagle Bulk Shipping (EGLE) are all hoisted to Hold from Sell at Deutsche Bank. Air Lease (AL) is lifted to Overweight from Neutral at JPMorgan. Siemens AG (SI) is now Neutral from Overweight at HSBC Securities. Aircastle (AYR) is now Neutral from Overweight at JPMorgan.
The Industrial Select Sector SPDR (XLI) was trading at $36.56 at 4:00 PM on Wednesday, up 1.11% on the day – up 8.33% year-to-date. The 2011 change was -3.21%.
Consumer Discretionary
Michael Kors Holdings (KORS) is a fresh Outperform with Wedbush. Starbucks (SBUX) is raised to Outperform from Perform at Oppenheimer with a $56 objective. Brinker International (EAT) gets a Buy-from-Hold boost at KeyBanc Capital with a $31 target price. McDonald’s (MCD) is downgraded to Perform from Outperform at Oppenheimer and Outperform from Buy at Crédit Agricole.
The Consumer Discretionary Select Sector SPDR (XLY) was trading at $41.55 at 4:00 PM on Wednesday, up 0.73% on the day – up 6.48% year-to-date. The 2011 change was +4.30%.
Consumer Staples
Kimberly-Clark (KMB) is taken to Neutral from Buy at UBS after its earnings announcement. Diageo plc (DEO) gets moved Hold from Buy brokers Collins Stewart. Nestlé (NSRGY) is cut to Hold from Buy at Collins Stewart.
The Consumer Staples Select Sector SPDR (XLP) was trading at $32.56 at 4:00 PM on Wednesday, up 1.15% on the day – up 0.22% year-to-date. The 2011 change was +10.85%.
Health Care
Roche (RHHBY) has made a hostile $5.7B bid for gene-therapy company Illumina (ILMN), with the offer of $44.50 a share representing a 64% premium to the latter’s stock price on December 21. Oncothyreon (ONTY) is begun with a Buy at Cantor Fitzgerald, which has a Hold on Dendreon (DNDN). Watson Pharmaceuticals (WPI) is moved to Overweight from Equal Weight at Morgan Stanley.
The Health Care Select Sector SPDR (XLV) was trading at $35.96 at 4:00 PM on Wednesday, up 0.73% on the day – up 3.66% year-to-date. The 2011 change was +10.32%.
Financials
Citigroup (C) may this year cut more jobs at its securities and banking arm, which includes investment banking, if revenue doesn’t pick up at the division. Citi has already announced cuts of 5,000 across the whole company. HSBC (HBC) is reportedly looking for buyers for its Japanese consumer banking unit but may shut down the auction if offers aren’t sufficiently attractive. Regions Financial (RF) is increased to Outperform from Sector Perform at RBC Capital Markets. Goldman Sachs (GS) and Morgan Stanley (MS) each get downgraded to Neutral from Overweight at JPMorgan. Royal Bank of Scotland (RBS) is reduced to Neutral from Buy at UBS. Regions Financial (RF) is lowered to Neutral from Buy at Bank of America-Merrill Lynch. KeyCorp (KEY) is cut to Underperform from Market Perform by Keefe Bruyette. Equity Lifestyle Properties (ELS) is reduced to Market Perform from Outperform at JMP Securities.
The Financial Select Sector SPDR (XLF) was trading at $14.20 at 4:00 PM on Wednesday, up 0.21% on the day – up 9.23% year-to-date. The 2011 change was -18.50%; the weakest performing sector for the year.
Information Technology
Apple (AAPL) exceeded most analysts’ wildest fantasies in FQ1 as its net income rocketed 118% to $13.06B, or $13.87 a share, making it one of the most profitable quarters ever for any U.S. company. Revenue surged 73% to $46.3B as Apple sold 37M iPhones, 15.4M iPads, and 5.2M Macs. Yahoo (YHOO) continues to flounder, with Q4 EPS slipping 5% to $0.24 and revenue 3% to $1.17B. EPS beat Street forecasts but sales missed expectations as revenue dropped at Yahoo’s display and search advertising businesses, and the company continued to lose market share. Zynga (ZNGA) is initiated at an Overweight by Barclays, Morgan Stanley, and JP Morgan. Goldman Sachs starts coverage at a Buy but Bank of America-Merrill Lynch is less bullish and has a new Neutral. Riverbed Technology (RVBD) is resumed as an Outperform $35 target price at Northland Securities. Alcatel-Lucent (ALU) is upgraded to Hold from Sell at Société Générale. Oracle (ORCL) is moved to Neutral from Outperform at Macquarie. NVIDIA (NVDA) is moved to Underperform from Market Perform at JMP Securities. FactSet (FDS) is downgraded to Hold from Buy at Brigantine.
The Technology Select Sector SPDR (XLK) was trading at $27.08 at 4:00 PM on Wednesday, up 0.78% on the day – up 6.40% year-to-date. The 2011 change was +1.03%.
Telecommunication Services
The NASDAQ Telecommunications Index (IXTC) was trading at $12.92 at 4:00 PM on Wednesday, up 0.33% on the day – up 8.12% year-to-date. The 2011 change was -12.62%.
Utilities
FirstEnergy (FE) is moved to Market Perform from Outperform at FBR Capital with a new target price of $40.50.
The Utilities Select Sector SPDR (XLU) was trading at $35.04 at 4:00 PM on Wednesday, up 1.65% on the day – down 2.61% year-to-date. The 2011 change was +14.81%; the strongest performing sector for the year.
