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Deals, Industrial-Sector Earnings, IPO Buzz Rally Stocks

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October 21, 2015

Stock indicators point higher Wednesday with Wall Street energized by deal news and the buzz around Ferrari’s market debut. A mixed bag of earnings news leaves Boeing (BA) and General Motors (GM) early gainers after their results, but Chipotle (CMG) and Coca-Cola (KO) are among those stocks trading lower following their latest earnings report card.

Ferrari N.V. shares (RACE) will start trading Wednesday on the New York Stock Exchange after the car maker’s initial public offering priced at the top of Street expectations.

Deal news also injected a tone of business-as-usual in the market, lifting broad-market sentiment. KLA-Tencor (KLAC) surged in early action after Lam Research (LRCX) said it plans to acquire the semiconductor equipment maker in a $10.6 billion deal that values KLA-Tencor’s stock at 24% above where it closed Tuesday. Elsewhere, SanDisk (SNDK) gained after Western Digital (WDC) agreed to buy the flash-storage company in a $19 billion deal.

SPX-stock-chart

FIGURE 1: MIXED EARNINGS TEST SPX.

The S&P 500 (SPX), charted on the new-look thinkorswim® platform, chops near 2030 amid mixed earnings news. Major resistance comes into play at 2060 but it’s difficult to determine when a test of that line could emerge as SPX has logged much narrower intra-day moves in recent sessions. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

GM Roars After Earnings Beat. General Motors (GM) gains after early Wednesday reporting Q3 earnings excluding non-recurring items were $1.50, well ahead of a Street forecast for $1.12. Revenue declined to $38.8 billion from $39.3 billion, but was above the Street consensus of $37 billion. The company said unfavorable currency moves reduced revenue by $2.3 billion. "These results reflect our work to capitalize on our strengths in the U.S. and China, while taking decisive, proactive steps to mitigate challenges elsewhere," said CEO Mary Barra. GM is studied for a quick snapshot on the China impact, as slowing demand there risks stinging many multinationals; GM in particular has stressed its sensitivity to Chinese revenue. The stock has surged 10% over the past three months, but was still down 4.1% year to date.

Yahoo Warns. Yahoo (YHOO) was an early decliner after it warned about the holiday quarter and several analyst firms cut their price target on the search and content firm’s shares. Analyst notes raised collective doubt for the strength of near-term operations even if YHOO can secure a tax-efficient divestiture of its Alibaba Group (BABA). Most of the analysts, however, were optimistic on Yahoo's new search partnership with Google (GOOGL). YHOO stock is down 17% over the last three months, underperforming the S&P 500's 4% decline.

Chipotle: Burrito Wars Heat Up. Chipotle (CMG) shares fell post-earnings. Attention was on sales figures as industry analysts note this “fast food alternative” is seeing increased competition after once being about the only chain burrito house in the biz. CMG said sales at restaurants open more than 12 months grew 2.6% in Q3, a sliver above the 2.4% increase analysts had expected, according to FactSet data. But growth in this closely followed metric slowed from the 19.8% posted in the same period a year ago and the 4.3% rise in Q2.

Good Trading,

JJ

@TDAJJKinahan

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