Stock Futures Rally on EU Summit Surprise. Stocks to Watch: BUD, AAPL, STZ, FB, F, KBH, JPM, NKE, RIMM
Published on Friday, 29 June 2012 07:55 Written by Christopher Lynn
New York, June 29th (TradersHuddle.com) – Stock futures were higher, as Wall Street seems poised to joined an overseas rally on news that EU leaders agreed to provide financial support to Italy and Spain without additional austerity measures and create a single banking supervisory body, which will allow to use the region’s rescue funds to recapitalize banks directly.
In Asia, stocks jumped after EU leaders surprised market participants, as they agreed that euro zone banks could be recapitalized without adding to the government debt. The news eased concerns over the credit strains in both Italy and Spain, sending shares higher. The Nikkei rallied 1.5% in the session, but still posted a 10.7% decline for the quarter. Meanwhile, the Shanghai Composite gained 1.4%, snapping a seven session losing streak.
In Europe, markets were rallying to close the quarter on an upbeat note following the surprise from the EU summit in which, leaders agreed to take action to bring down Italy’s and Spain’s high borrowing costs. EU leaders agreed that the region’s rescue funds could be used to recapitalize banks and stabilize bond markets without forcing countries that comply with EU budget rules to adopt extra austerity measures or economic reforms. Banks with big exposure to sovereign debt were outperforming on the day.
The euro was jumping against the Dollar, trading below the $1.26 level. Crude oil was rallying 3.55% to $80.45 per barrel. Also in the energy complex, natural gas was jumping 2.06% to $2.778 per MMBtu. Gold was gaining 1.8% to $1578.10 an ounce, and silver was rallying 2.87% to $27.045 an ounce. Meanwhile, copper was jumping 2.71%.
On economic news, at 8:30 am, May personal income and spending data will be available. At 9:45 am, June Chicago PMI will be released and at 9:55 am the final reading of June University of Michigan Consumer Sentiment will be released.
Today’s Stocks to watch: Anheuser-Busch InBev (NYSE: BUD), Apple (NASDAQ: AAPL), Constellation Brands (NYSE: STZ), Facebook (NASDAQ: FB), Ford (NYSE: F), JP Morgan (NYSE: JPM), KB Home (NYSE: KBH), Nike (NYSE: NKE), and Research In Motion (NASDAQ: RIMM).
Anheuser-Busch InBev (NYSE: BUD), the world’s largest brewer, confirmed it would acquire the remaining 50% stake in Grupo Modelo for 278.6 billion pesos, or about $9.15 per share or $20.1 billion. The company will be paying a 30% premium over the closing price of the Corona beer brewer, as it expects to generate $600 million annually from synergies.
Apple (NASDAQ: AAPL), the maker of iPads and iPhones, was gaining 0.93% to $574.32 in pre-market, trading above its 50day moving average at $572.03. The stock has traded in a very tight range around its 50day moving average, as participants wait for the company’s earnings next month to provide a boost to the stock price. Apple announced that Betsy Rafael, Vice President, Corporate Controller and Principal Accounting Officer, will retire effective October 19, 2012 and Bob Mansfield, Apple's senior vice president of Hardware Engineering, will retire and the role will be transitioned to Dan Riccio, Apple's vice president of iPad Hardware Engineering, over several months. Yesterday, CNBC reported that Google’s browser, Google Chrome would be available on Apple devices and Wells Fargo resumed its coverage on Apple with an Outperform rating.
Constellation Brands (NYSE: STZ) was surging 8% to $23.50 after the company beat earnings expectations on revenues that fell short of consensus, while it reaffirmed its fiscal 2013 EPS guidance. The company also announced that it would acquire remaining 50% stake in Crown Imports, which was a 50-50 joint venture with Grupo Modelo, Constellation has agreed to pay $1.85 billion to Anheuser-Busch InBev, as the brewer completes its proposed acquisition of Modelo.
Facebook (NASDAQ: FB), the social media Company, was climbing 1.66% to $31.88 amid increased demand for riskier assets. Increased worries over Facebook’s slowing growth in advertising revenue, coupled with mixed ratings after the IPO quiet period expired earlier this week have pressured the stock in the recent sessions, pulling it back from the $33 per share level. Macquarie initiated coverage with a Neutral. On Wednesday, Wells Fargo and Piper Jaffray initiated coverage with Outperform, while Goldman Sachs with a Buy. Credit Suisse gave it a Neutral rating and BMO Capital an Underperform rating.
Ford (NYSE: F), the Dearborn, MI based automaker, was falling 1.7% to $9.92 in pre-market, after the company provided an operational update. Ford said that for the second quarter, it expects to be profitable, with positive automotive operating-related cash flow, but pre-tax operating profits excluding special items would be substantially lower than the same period a year ago, amid increasing pressure from poor results from its overseas businesses. Ford expects good results from its North American unit and Ford Credit, but operations outside of North America are under increasing pressure. In fact, the combined results for the second quarter for Ford South America, Ford Europe, and Ford Asia Pacific Africa could be a loss of about three times as much as the $190 million pre-tax loss incurred by these operations in the first quarter.
Nike (NYSE: NKE), the athletic apparel and foot ware giant, was tumbling 11.5% to $85.75 in pre-market, hitting an 8-month low, after the company missed earnings expectations on revenues that were inline with consensus. The company reported earnings of $1.17 per share, $0.20 worse than consensus, on revenues that climbed 12.2% from a year ago to $6.2 billion. Also, Nike reported that its Brand futures orders are up 7% in constant currency, while inventories as of May 31 2012 jumped 23% from a year ago. The stock was downgraded to a Hold at Robert W. Baird, with the firm lowering its target price to $85 from $95.
KB Home (NYSE: KBH), the homebuilder, is expected to release its quarterly earnings later this morning.
JP Morgan (NYSE: JPM) was gaining 1.87% to $36.55 along the broad move to the upside following the EU Summit agreements to recapitalize banks and offer support for Italy and Spain. New reports point that losses from the “London Whale” Trade would be somewhere between 4 to $6 billion, less than what it was speculated in the prior session, but still substantially higher than the bank’s initial disclosure of a $2 billion loss. Additionally, others are reporting that regulators are now looking at the lender’s internal controls amid the probe that results from the huge trading loss. Earlier in the week, Goldman Sachs added the stock to its coveted Conviction Buy List, while last week there were reports that JPMorgan has closed 65 to 70% of the position responsible for the trading losses.
Research In Motion (NASDAQ: RIMM), the maker of the Blackberry smartphone, was tumbling 12.9% to $7.95 in pre-market, a new multiyear low, after the company missed earnings and revenue expectations, while announcing a delay in the launch of its new BlackBerry 10 smartphone and warning of financial and operational challenges in the coming quarters. RIM said that it lost $0.37 per share, $0.29 worse than consensus, on revenues that fell 42.7% from a year ago to $2.81 billion. The company said that it shipped 7.8 million smartphones and 260,000 PlayBook tablets. RIM expects to report an operating loss in the second quarter of fiscal 2013, as RIM continues to invest in marketing programs and continues to work through the transition to BlackBerry 10, as well as the Company's fixed costs being allocated over a lower volume of shipments. According to a report, RIM is considering strategic options that include a possible deal with Microsoft or selling its network business. Last month, the company hired JPMorgan and RBC Capital to look at its strategic options. Scotia downgraded the stock to Underperform.
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