Wall Street Recap: Thursday, June 7th

Includes: BBY, BNNY, LULU, MS
by: The Value Investor

After yesterday's big rally major markets ended roughly flat on Thursday. The S&P 500 closed the day unchanged trading 0.01% lower at 1,314.99 points. The Dow Jones Industrial Average managed to gain 0.37% while the Nasdaq lost 0.48%.


Markets in Europe traded in positive territory. The EuroStoxx 50 ended the day 0.25% higher and the major averages across the continent all managed to stay in the green. Stocks rallied for the second day in a row after China surprised markets by announcing an interest rate cut, the first time it has lowered rates since 2008. The one-year lending rate has been cut by 0.25% by the People's Bank of China to 6.31%. Weaker economic growth and lower inflation within China gave room for the rate cut in an effort to boost global economic growth.

Furthermore investors were relieved as Spain successfully managed to sell 10 year bonds in an offering which was sold 3.29 times. At the same time France managed to sell 7.84 billion euro at lower than expected yields.

Wall Street Opening

Equity markets opened with gains of roughly 1% on the back of the Chinese rate cut. Gains slowly evaporated throughout the trading day after the Federal Reserve's Chairman Ben Bernanke did not signal new stimulus measures in a testimony before Congress.

Furthermore financial stocks came under pressure as the FED proposed to let US banks comply with Basel III, the international agreement which subjects banks to higher capital standards. By 2019 all banks should hold top-quality capital of at least 7% of risk-weighted assets.

Corporate News

On the back of the statements of Ben Bernanke and the proposal to subject US banks to Basel III capital requirements, major banks fell after yesterday's rally. Morgan Stanley (MS) fell 3.8%, while Citigroup (C), JP Morgan (JPM) and Goldman Sachs (GS) showed losses around 1%.

Lululemon Ahtletica (LULU) the retailer of athletic apparel fell 8.8% in regular trading after issuing a second quarter outlook below analysts consensus. Lululemon reported first quarter earnings per share of $0.32 on revenues of $286 million. The company guides for second quarter earnings per share of $0.28-$0.30 on revenues of $273 million to $278 million. Investors are disappointed with the second quarter outlook which suggests a decline in quarter-on-quarter revenues and profits.

Best Buy (BBY) the retailer of consumer electronics has seen a volatile trading session. Shares lost almost 8% in the early morning but recovered in the afternoon to end with losses of 1%. Best Buy's Chairman Schulze said he resigned from his post and the company. He also explores options to sell his 20.1% stake in the company. Investors were worried about possible pressure on the share price in the morning, but worries faded in the afternoon.

Annies (BNNY) the natural and organic food company which went public in March of this year saw its shares fall some 3% today as it reported its fourth quarter results for its fiscal year of 2012. The company reported a 17.5% increase in net revenues to $43 million. Adjusted net income rose 18% to $3.9 million, or $0.24 per diluted share for the final quarter of its fiscal year.

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