Stocks rebounded on Wednesday following two days of losses as the markets digested a swath of corporate headlines and mixed US economic reports. Investors shrugged off weaker-than-expected durable goods and Q1 GDP as a jump in services data raised sentiment. Healthcare and Discretionary led gains on the S&P 500, while Staples and Telecom topped declines. Gold and Oil are higher amid a weaker dollar.
Real GDP surprised to downside as data showed the US economy contracted 2.9% in the first quarter, a much steeper pace than previously estimated, though activity was impacted by harsh winter weather and there are indications that growth has since rebounded. Durables orders were also much weaker than expected, with durable orders falling 1.0% in May after rising 0.8% in April. Analysts forecast 0.4%. A bright note, Markit flash services PMI came in at 61.2 in June vs 58.1 in May. The reading was ahead of 58.0 consensus and the highest since records began (4 1/2 years ago).
Market Indices/Statistics:
- Dow closed up 49.38 pts. / +0.29% to 16,867.51; 23 of the 30 Dow stocks closed higher.
- S&P closed up 9.55 pts. / +0.49% to 1,959.53; 9 of the 10 S&P 500 sectors closed higher.
- Nasdaq closed up 29.40 pts. / +0.68% to 4,379.76
- Healthcare was the strongest sector (+1.08%) Staples were the weakest sector (-0.07%)
- The VIX is down 0.54 at 11.59
- Gold is up 1.0 to 1321.1
- Oil is up 0.57 to 106.60
- Nat Gas is up 0.010 to 4.542
- Yen vs. Dollar is down 0.13 to 101.84
- Euro vs. Dollar is up 0.0025 to 1.3630
- The US Dollar Index (DXY) is down 0.11 to 80.21
Top Headlines:
Shares of U.S. refiners such as Valero Energy Corp (NYSE:VLO) fell on fears of a rise in crude costs after U.S. officials allowed energy companies to export very light crude oil, or condensate, after it has been minimally processed. The U.S. Department of Commerce's Bureau of Industry and Security told Pioneer Natural Resources Co (NYSE: PXD)that lightly processed condensate would be eligible for export without a license. The news sent VLO down 8.29% to $51.35, while PXD received a boost of 5.15% to $233.07
General Mills Inc (NYSE: GIS) fell 3.61% to $51.76 after fiscal Q4 EPS missed by nearly 7%, largely due to top-line weakness. Sales missed in both US Retail and International, with profit weakness more pronounced in the US. Promotional spending was less effective, while cost inflation was higher. However, Goldman said F15 MSD sales guidance looks optimistic.
Monsanto Co (NYSE: MON), the world's largest seed company, rose 5.06% to $126.73 after posting a Q3 profit of $1.62 per share from continuing operations, which was above the average analyst estimate. The company raised its earnings and free cash flow outlook to the upper end of its previous ranges, citing strong outlook for its seeds and traits business.
Barnes & Noble Inc (NYSE: BKS) popped 5.3% to $21.65 after the book retailer said it would spin off its Nook tablets and college books business. It also reported a quarterly loss that narrowed from the prior year.
Bristol-Myers Squibb Co (NYSE: BMY) rose 2.96% to $49.73 a day after saying said a late-stage trial testing its immunotherapy nivolumab in advanced melanoma patients was halted early after it was determined that the drug was likely to prolong survival.
In other news, the WSJ discussed concerns the REIT space may be overheating. The paper noted that with the MSCI US REIT Index up 15% this year amid a continued reach for yield and the unexpected resilience in the Treasury market. The article pointed out that according to Green Street Advisors, which specializes in REIT research, the group is trading at ~18x adjusted FFO. It said that this compares with an average of 15x over the last 20 years. It also noted that last year, before the Fed started discussing tapering, the space traded as high as 20x. Further, some fund managers are worried about a repeat of the sharp selloff seen on the back of last year's tapering concerns.
Coming Thursday
U.S. Economic Reports:
Initial Jobless Claims (21-Jun) at 8:30am ET – consensus 312K, prior 312K
Continuing Claims (14-Jun) at 8:30am ET – consensus 2594K, prior 2561K
Personal Income (May) at 8:30am ET – consensus +0.4%, prior +0.3%
Personal Spending (May) at 8:30am ET – consensus +0.5%, prior (0.1%)
Bloomberg Consumer Comfort (22-Jun) at 9:45am ET – prior 37.1
Earnings Thursday:
BMO: Accenture (ACN); ConAgra (CAG); Lennar (LEN); Methode Electronics (MEI); McCormick (MKC); Palomar Medical (PMTI); Schnitzer Steel (SCHN); Steelcase (SCS); TMS International (TMS); Winnebago (WGO); Worthington Industries (WOR)
AMC: Assisted Living Concepts (ALC); Iteris Holdings (ITI); Nike Inc (NKE); Progess Software (PRGS); Primus Guaranty (PRSG); Scientific Learning (SCIL)
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