Wall Street Recap: Tuesday, June 5

by: The Value Investor

Wall Street finally managed to end in the green Tuesday. The major averages opened flat but in the afternoon managed to gain some ground. The S&P 500 closed the day 0.57% higher to close at 1,285.50 points while the Dow Jones Industrial Average and the Nasdaq gained 0.22% and 0.66%, respectively.


Markets in Europe were relatively stable Tuesday as the Euro Stoxx 50 ended the day 0.3% higher. Spanish and Italian equity markets outperformed for the second day in a row while the German Dax ended with a small minus of roughly a quarter of a percent point.

Spain publicly called out for help Tuesday saying that European institutions should help to recapitalize its banks. As Spain has almost entirely been cut off from capital markets, investors have been speculating who will pick up the bill in order to recapitalise the Spanish banks. German finance minister Schaeuble said that Germany is willing to seek European coordination by providing a recapitalization through the Spanish government. Schaeuble remains opposed to a direct bailout of the banks.

Wall Street Opening

Investors were relieved Tuesday after the service industry continued to grow during the month of May. Last week a string of disappointed macro-economic data left many investors scared of a renewed recession, or at least a significant slowdown in growth. The Institute for Supply Management index rose 0.2 points to 53.7 in May, beating economists consensus of 53.4 points.

Bargain hunters betting on a soft landing in China and a quick resolution in Europe picked up some of the hardest hit stocks in recent weeks. Homebuilders, airliners and banks were among the largest winners on the street today as some traders argue the market is "extremely cheap" as long as the economy holds.

Corporate News

Facebook (FB) was again among the biggest losers, as shares fell yet another 3.8%, ending the day at $25.87. A Reuters poll revealed that four out of five users said they never made a purchase on the back of an advertisement on the social network platform. Investors have been extremely worried about the company's ability to monetize its 900 million user base, a concern which once more got highlighted in the report.

Fastenal (FAST), the provider of industrial and construction supplies, fell 9.8% Tuesday after the company reported weak sales for the month of May. Despite a 18.4% sales growth, investors were hoping for more. Besides a weaker economy the company is also suffers from stiff competition from Amazon.com (NASDAQ:AMZN). Shares of other industrial suppliers like W.W. Grainger (NYSE:GWW) and MSC Industrial Direct (NYSE:MSM) fell significantly as well.

RF Micro Devices (RFMD) the manufacturer of radio frequency components and semiconductor technologies ended the day 13.2% higher after industry reports show the RF market is expected to grow from $3.8 billion at the moment to $5 billion in 2016. Furthermore Avian Securities established a $4.50 price target for the firm as it discovered "positive nuggets," including a doubling amount of RF Micro's content in the new iPhone 5.

Green Mountain Coffee Roasters (GMCR) fell 5.0% to $22.30 as investors where hoping on some sort of collaboration with Starbucks (NASDAQ:SBUX), when the latter yesterday announced it would announce a new strategic initiate for the retail market. Instead of a collaboration with Green Mountain, on which investors have been betting, CEO Howard Schultz announced the $100 million acquisition of privately held "La Boulange" bakery in an attempt to expand the firm's food menu. Shares of Starbucks lost 3.5% after a good performance yesterday. Analysts as Wells Fargo are wondering if the firm is "overextending its capabilities" with the deal.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.