MORNING COFFEE

Warren Buffett Testifies On Rating Agencies. Warren Buffett testifying before the Financial Crisis Inquiry Commission yesterday warned lawmakers not to enact reactionary reforms or single out the ratings agencies for criticism. Buffett who’s company Berkshire Hathaway is a major shareholder of Moody's (MCO) said managers at Moody’s "made a mistake that 300 million other Americans made" in overestimating housing-related assets.

Car Sales Increase. Carmakers once again saw sales gains in May, with several companies posting double-digit growth. Chrysler (FIATY) sales +33%, Ford (F) sales +21.9%. GM sales +16.6%. Toyota (TM) sales +6.7%.

Upgrades

eBay (EBAY): MKM Partners raised their rating from Sell to Neutral.

Charles Schwab (SCHW): FBR Capital raised their rating from Market Perform to Outperform and raised their target price from $29.00 to $33.00.

Coverage Initiated

Procter & Gamble (PG): Stifel Nicolaus initiated coverage with a Buy rating and target price of $72.00.

Colgate-Palmolive (CL): Stifel Nicolaus initiated coverage with a Hold rating.

Earning Reports

Hovnanian (HOV): Reported Q2 EPS of -$0.36 beating estimates by +$0.28 on revenue of $319 million. 

Joy Global (JOYG): Reported FQ2 EPS of $1.15 beating estimates by +$0.38 on revenue of $896 million.

·         Futures: Dow +0.4%. S&P +0.4%. Nasdaq +0.3%. Crude +0.6% to $73.27. Gold -0.4% to $1217.50.

·         Asia: Japan +3.2% to 9914. Hong Kong +1.6% to 19787. China -0.7% to 2553. India +1.7% to 17022.

·         Europe: London +1.7%. Paris +2.2%. Frankfurt +1.7%.

MIDDAY LUNCH

Dow 10133.00  +108.98, Nasdaq 2252.72  +30.39, S&P 1084.85  +14.14 

All three indices are trading higher on some better than expected economic data.

Pending home sales for April increased +6.0% month-over-month, which was stronger than the +5.0% increase economist had expected.  Also, the March number was upwardly revised to a +7.1% monthly increase.   Year-over-year, pending home sales for the month of April are up +24.6%, which is stronger than the +20.2% annual increase that economist had expected.

Additionally, energy stocks are helping push the market higher after getting crushed yesterday.  Halliburton (HAL) 23.45 +2.30, +10.87%, Schlumberger (SLB) 55.30 +3.55, +6.86%.

The Energy sector is currently up +2.48% followed by Basic Materials +2.26% and Transportation +2.09%.

MORNING COFFEE

Civil and Criminal Investigations Begin Over Gulf Oil Spill. The Justice Department announced that they have opened civil and criminal investigations into the Gulf of Mexico oil spill.  Attorney General Eric Holder declined to specify which companies are under investigation.  This comes after complainants about the incompetence of the Obama administration in handling the environmental disaster.  Additionally, there are reports the Obama administration is discussing seizing control of BP’s U.S. operations and finances.  BP (BP) closed -15%, Transocean (RIG) -11.85%, Halliburton (HAL) -14.8%, Schlumberger (SLB) -7.8%, Anadarkko (APC) -19.55%.

Canada Raises Interest Rates. Bank of Canada announced yesterday that it raised their benchmark interest rate +25 basis points, which is now at 0.50%. The rate hike makes Canada the first G-7 country to raise interest rates.

 

Upgrades

Deere (DE): Morgan Joseph raised their rating from Hold to Buy.

 

GlaxoSmithKline (GSK): Jefferies raised their rating from Hold to Buy.

 

TCF Financial (TCB): FBR Capital raised their rating from Underperform to Market Perform and placed a target price of $16.00 on the company.

 

Downgrades

Steelcase (SCS): Longbow lowered their rating from Buy to Neutral.

 

Coverage Initiated

Cypress Semi (CY): Sterne Agee initiated coverage with a Buy rating and target price of $14.00.

RF Micro Device (RFMD): Sterne Agee initiated coverage with a Buy rating and target price of $6.00.

 

Coverage Reiterated/Price Target Changed

Research In Motion (RIMM): Wunderlich reiterated their Buy rating and lowered their target price from $96.00 to $85.00.

Earning Reports  

Collective Brands (PSS): Reported Q1 EPS of $0.84 beating estimates by +$0.09 on revenue of $879 million.

·         Futures: Dow +0.4%. S&P +0.4%. Nasdaq +0.6%. Crude -0.55% to $72.18. Gold -0.3% to $1223.10.

·         Asia: Japan -1.1% to 9603. Hong Kong -0.1% to 19472. China +0.1% to 2571. India +1.0% to 16742.

·         Europe: London -1.1%. Paris -1.1%. Frankfurt -1.0%.

CLOSING BELL

Dow 10024.02  -112.61, Nasdaq 2222.33  -34.71, S&P 1070.71  -18.70 

The selling pressure intensified in the final hours of trading today. 

The market started the day off in the red but was able to post gains after the release of two economic reports that came in better than expected.

The ISM Manufacturing Index for May came in at 59.7, which is slightly above the 59 estimates and construction spending in April showed a +2.7% increase from the prior month. The increase surpassed the +0.1% monthly increase economist had expected. The increase in construction spending was the best monthly Increase since 1998.

But the economic reports were not enough to keep traders from selling.  Traders continue to worry about the state of finances in Europe and news that the European Central Bank (ECB) said that Eurozone banks face further writedowns over the next 18 months added to concern. Additionally, concerns over the Israeli and Palestinian tensions increasing didn’t help.  The euro fell to a new four-year low of $1.211 in response.

Bank of Canada announced today that it raised their benchmark interest rate +25 basis points, which is now at 0.50%. The rate hike makes Canada the first G-7 country to raise interest rates.

Energy stocks were weak as oil prices fell.  Oil finished the day with a -1.8% loss closing at $72.58 per barrel.

BP (BP) 36.52  -6.43, -14.97 shares continue to be punished today after the top kill method to stop the oil leak in the gulf failed.  Additionally, there are reports the U.S. government is seriously talking about the possibility of seizing control of BP’s American operations, finances and firing the CEO.

Advancing Sectors: None
Declining Sectors: Energy -4.3%, Materials -3.1%, Utilities -2.3%, Financials -2.1%, Industrials -2.1%, Consumer Discretionary -1.6%, Health Care -1.0%, Tech -0.9%, Telecom -0.8%, Consumer Staples -0.2%

MIDDAY LUNCH

Dow 10167.09  +30.46, Nasdaq 2255.99  -1.05, S&P 1087.07  -2.40 

Selling pressure has caused stocks to give up some of their gains this afternoon. 

Concerns about the fiscal health of many Eurozone countries and pessimistic comments from the European Central Bank (ECB) caused stock to trading lower in the early morning.  Then some positive economic reports caused buyers to jump in scooping up bargains. 

The ISM Manufacturing Index for May came in at 59.7, which is slightly above the 59 estimates and construction spending in April showed a +2.7% increase from the prior month. The increase surpassed the +0.1% monthly increase economist had expected. The increase in construction spending was the best monthly Increase since 1998.

BP (BP) 37.43 -5.16, -12.84 shares continue to be punished today after the top kill method to stop the oil leak in the gulf failed.  Additionally, there are reports the U.S. government is seriously talking about the possibility of seizing control of BP’s American operations, finances and firing the CEO.

Apple (AAPL) 263.92 +7.04, +2.74% are higher after the company reported that over 2 million iPads have been sold within the last 60 days.

MORNING COFFEE

BP’s Top Kill Fails. After attempting to stop the oil leak in the Gulf of Mexico, BP (BP) said Saturday that its 'top kill' efforts had failed. BP now will attempt to cut the pipe completely in half and cap it.  The procedure will increase the amount of oil spilling into the Gulf until the pipe can be capped.   Additionally, there are reports the U.S. government is seriously talking about the possibility of seizing control of BP’s American operations, finances and firing the CEO. Premarket:BP -14.7% 

French Debt Could Be Downgraded. France said it faces severe challenges in maintaining its triple-A credit rating, and announced some controversial cost-cutting measures in an effort to calm market anxieties. France's actions follow a Friday downgrade of Spain to AA+ from AAA.

Upgrades

Visa (V): Stifel Nicolaus raised their rating from Hold to Buy and placed a target price of $86.00 on the company.

AOL (AOL): The Benchmark Company raised their rating from Hold to Buy and placed a target price of $25.00 on the company.

Priceline.com (PCLN): KeyBanc Capital Markets raised their rating from Hold to Buy and placed a target price of $260.00 on the company.

Downgrades

American Eagle (AEO): Caris & Company lowered their rating from Buy to Above Average and lowered their target price from $23.00 to $20.00.

Coverage Initiated

Finish Line (FINL): Phoenix Partners Group initiated coverage with a Buy rating and target price of $22.00.

Coverage Reiterated/Price Target Changed

Apple (AAPL): Broadpoint AmTech reiterated the Buy rating and raised their target price from $320.00 to $340.00.

AutoZone (AZO): Morgan Joseph the Buy rating and raised their target price from $186.00 to $215.00.

·         Futures: Dow -1.1%. S&P -1.4%. Nasdaq -1.1%. Crude -2.6% to $72.06. Gold +0.8% to $1224.20.

·         Asia: Japan -0.6% to 9712. Hong Kong -1.4% to 19497. China -0.9% to 2568. India -2.2% to 16572.

·         Europe: London -2.1%. Paris -2.3%. Frankfurt -1.7%.

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