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Fly Intel - End of Day Brief - Wednesday Feb 5, 2020

Stocks end higher following Disney, Merck earnings

Stocks rose for a third straight session to further recover from last week's coronavirus-fueled selloff. While the reported number of cases of the deadly disease continues to rise, the outbreak is still mainly contained to China and there were reports of some success in treating it with existing drugs. Meanwhile, a report on payroll additions in the U.S. was strong, adding to the optimistic tone that has returned to the domestic market.

ECONOMIC EVENTS: In the U.S., payroll company ADP reported private payrolls surged 291,000 in January, sharply beating estimates. The trade deficit widened 11.9% to $48.9B in December, in line with expectations. Markit's services PMI was revised up to 53.4 in the final January print from the 53.2 preliminary, which was already up from the 52.8 reading in December. ISM's services index rose 0.6 points to 55.5 in January, slightly topping expectations. 

TOP NEWS: Following Disney's (DIS) fiscal first quarter report and associated call last night, shares of the media giant fell 2.4%. Disney reported 26.5M paid subscribers for Disney+ as of the end of last year and said that number has grown to 28.6M by February, with Chairman and CEO Bob Iger stating that the launch of Disney+ "exceeded even our greatest expectations."

Merck (MRK) shares were 2.9% lower following the company's fourth quarter results and fiscal year guidance. The drugmaking giant also announced plans to spin-off products from its Women's Health, trusted Legacy Brands, and Biosimilars businesses into a new, yet-to-be-named, independent, publicly traded company. After the break with "NewCo," Merck will retain its current growth pillars of Oncology, Vaccines, Hospital and Animal Health.

Shares of Tesla (TSLA) dropped 17.2% to halt an incredible six-day rally that had seen the stock advance 60%. Reports say the carmaker is delaying Model 3 deliveries in China due to the outbreak of the new coronavirus and Canaccord Genuity analyst Jed Dorsheimer cut the stock's rating to Hold as he sees a "balanced" risk/reward for investors to lock in profits following the recent run-up in the shares.

In other automakers' news, Ford (F) shares dropped 9.5% after the company last night delivered softer than expected Q4 earnings. General Motors (GM), which hosted a capital markets day and also reported Q4 earnings and provided 2020 guidance, closed 1.9% higher.

Following yesterday's Wall Street Journal report that Intercontinental Exchange (ICE) had made a takeover offer for eBay (EBAY), Intercontinental Exchange confirmed that it had approached eBay "to explore a range of potential opportunities that might create value for the shareholders of both companies." However, it added that "eBay has not engaged in a meaningful way" and that the two companies "are not in negotiations regarding the sale of all or part of eBay."

Meanwhile, Biogen (BIIB) shares surged 17.5% higher after it won a challenge by Mylan (MYL) regarding the validity of a patent on its multiple sclerosis drug Tecfidera. Mylan failed to prove that the Tecfidera patent shouldn't have been issued, the U.S. Patent Trial and Appeal Board said in a ruling. The Biogen patent expires in 2028.

Additionally, shares of Intelsat (I) dropped about 6% after Bloomberg reported that the company is weighing a possible Chapter 11 bankruptcy filing if U.S. regulators don't increase the amount of compensation the company would receive for giving up some of its C-band spectrum.

MAJOR MOVERS: Among the noteworthy gainers was Macy's (M), which rose 5.9% after the company announced its new three-year Polaris cost reduction strategy, which involves about 125 store closures and 2,000 job cuts and is expected to generate $1.5B in annual savings. Also higher were Peabody Energy (BTU) and Coty (COTY), which gained a respective 25.6% and 14.5% after reporting quarterly results.

Among the notable losers was Spotify (SPOT), which slid 4.8% after reporting quarterly results and announcing the acquisition of Bill Simmons' The Ringer for an undisclosed amount. Also lower after reporting quarterly results were Snap (SNAP) and Chipotle (CMG), which fell 14.7% and 3.4%, respectively.

INDEXES: The Dow rose 483.22, or 1.68%, to 29,290.85, the Nasdaq gained 40.71, or 0.43%, to 9,508.68, and the S&P 500 advanced 37.10, or 1.13%, to 3,334.69.


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Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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