Possible Credit Rating Cuts and Stress Tests (ORCL, MU, FINL, UAL, NBS, PTIE)
Stocks slid on the day over more worries about Europe. Greece once again was a center of concern, but it was joined by its Classical neighbor to the west, Italy. Moody’s earlier threatened to cut the credit rating of over a dozen highly rated Italian banks and two government-related financial institutions, and there were fears additional stress test may cause them to have to raise additional capital. Meanwhile, Spain, Portugal, and Ireland remain concerns as well. We continue to expect a choppy summer, and while we think the bulk of the sell-off has occurred, we think the market weakness is likely to continue for awhile longer.
The Stem Cell Stocks Index was the top performing tickerspy Index on the day, led by Neostem (NBS) with a 24% gain. The Pain Management Stocks Index was the day’s worst performing tickerspy Index, with Pain Therapeutics (PTIE) down -43%.
In economic news, the Commerce Department said durable goods orders rose 1.9% in May following a 2.7% drop in April. Excluding transportation equipment, durable goods orders increased 0.6% last month compared to 0.4% in April. The Commerce Department revised its first-quarter GDP estimate slightly upward to 1.9% growth from a previous estimate of 1.8% growth.
In earnings news, shares of Oracle (ORCL), the largest enterprise software maker, fell 4% after the company said its fiscal fourth-quarter profit rose to $3.2 billion, or 62 cents a share, from $2.4 billion, or 46 cents a share, a year earlier as revenue climbed 13% to $10.8 billion. Excluding one-time items, California-based Oracle earned 75 cents a share. Analysts were expecting a profit of 71 cents on revenue of $10.8 billion. Oracle forecast a fiscal first-quarter profit of 45-48 cents a share and non-GAAP revenue of $8.3-$8.5 billion. Nearly 400 pros held Oracle in their portfolios at the end of Q1 and more than 1,400 tickerspy members own the stock in their portfolios.
Shares of memory flash chip producer Micron Technology (MU) plunged 15% after the company said its fiscal third-quarter profit slid to $75 million, or 7 cents per share, from $939 million, or 92 cents per share, a year earlier. Revenue slipped 7% to $2.14 billion. Analysts were expecting a profit of 18 cents on revenue of $2.37 billion. The year-earlier profit number included a $51 million tax benefit and a $437 million gain.
Shares of athletic footwear retailer Finish Line (FINL) dropped 8% after the company said its fiscal first-quarter profit rose to $16.4 million, or 30 cents a share, from $13.6 million, or 25 cents a share, a year earlier. Sales rose 6% to $299.5 million and same-store sales increased 6.5%. Analysts were expecting sales of $301.4 million.
Shares of United Continental Holdings (UAL) plummeted 8% after the company said in a regulatory filing on Thursday that consolidated passenger revenue per available seat mile would increase 8.3%-9.3% in the second quarter. Analysts were expecting a double-digit increase. Analysts expect the company to post a second-quarter profit of $1.54 a share in the quarter, six cents below where the estimate was a month ago. Twenty-four pros held United Continental in their portfolios at the end of Q1 and nearly 300 tickerspy members own the stock in their portfolios.
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