Stocks Erase Early Losses On FOMC Minutes (FAST, GPN, PFE, KG, NKE, ADDYY, UA, VFC)
After trading lower much of the day, stocks rallied following the release of the Fed minutes. The Fed’s commitment to quantitative easing, including a debt-purchase program, buoyed stocks on an otherwise slow news day. The Fed’s actions, along with what we think will be a pretty solid Q3 earnings season, could set up stocks to finish the year strong.
Stocks rose on the day, with the Dow up 10 points to 11,020. The S&P tacked on 4 points to 1,170, while the Nasdaq rose 16 points to 2,418. Oil slipped -54 cents to $81.67 a barrel, while gold fell -$7.70 to $1,346.70 an ounce.
On the economic front, minutes from the Federal Open Market Committee meeting indicated that many participants think “it would be appropriate to provide additional monetary policy accommodation” if economic growth “remained too slow to make satisfactory progress towards reducing the unemployment rate or if inflation continued to come in below levels consistent with the FOMC’s dual mandate.”
In earnings news, industrial and construction supplies wholesaler Fastenal (FAST) sank by -5.0% after announcing its results for the third quarter. The company earned $75 million, or 51 cents per share, compared to $47.6 million, or 32 cents per share, in the year-ago period. Revenue was up 17% year over year to $603.8 million. Analysts were looking for 50 cents in EPS on $595.5 million in revenue. Nineteen Pros held Fastenal in their top-15 U.S.-listed equity positions at the end of the second quarter, and 189 tickerspy members hold the stock in their portfolios.
Payment solutions firm Global Payments (GPN) fell by -8.1% after the company’s fiscal first-quarter results missed estimates. The company posted net income of $49.4 million, or 61 cents per share, compared to $57.8 million, or 71 cents per share, in the same period last year. Revenue rose by 7% to $440.1 million. The EPS was two cents below Wall Street’s expectations, despite revenue that was in line with the consensus. Global Payments re-affirmed its full-year earnings forecast of between $2.68-$2.77 per share on between $1.74-$1.77 billion in sales. Analysts were looking for full-year results of $2.70 in EPS on $1.76 billion in revenue.
In M&A news, Pfizer (PFE) agreed to buy King Pharmaceuticals for $3.6 billion, or $14.25 per share, in cash. The deal represents a 40% premium to King’s closing value on Monday, and will increase Pfizer’s exposure to the pain treatment segment. King shares rose 39.3%, while Pfizer shares inched up 0.6%. At the end of the second quarter, four asset managers counted King among their top-15 U.S.-listed equity positions, and 103 tickerspy members currently hold the stock in their portfolios.
Nike (NKE) shares slipped -0.1% despite the company winning licensing rights for on-field NFL apparel rights starting in 2012, ousting the incumbent Reebok, a division of Adidas (ADDYY). According to Citigroup analyst Kate McShane, “Reebok’s NFL contract represents about $350 million of its $565 million in U.S. apparel revenues.” According to The Wall Street Journal, Reebok paid $300 million for its 10-year deal. The report notes that the NFL will split its apparel licensing among seven companies upon the expiration of the existing contract. Under Armour (UA) will remain the official sponsor of the NFL Scouting Combine, and VF Corp (VFC) will stay a “key apparel partner” for fan gear.
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