The major averages were mixed throughout the morning, with the S&P and Dow lower and the Nasdaq higher, ahead of the Federal Reserve's rate announcement. The decision to make no change to rates came as universally expected. However, at the margin, the statement and the projections were bullish. The Fed stated it will keep rates low until it's "confident" that the economy is back on track and underscored that view with its "dot plot," where the median indicates rates fractionally above 0% through 2022. The averages popped briefly in reaction to the Fed's commitment to low rates, but eased as the afternoon wore on, although the Nasdaq was able to notch a third straight record close.
ECONOMIC EVENTS: In U.S. data, the Consumer Prices Index fell 0.1% in May, with the core rate down 0.1% as well, which undershot estimates.
The Federal Reserve decided to maintain the target range for the federal funds rate at 0 to 0.25%, as widely expected. The Committee "expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals," the central bank added. The Fed also said it will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities "at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions."
TOP NEWS: Shares of Grubhub (GRUB) finished almost 2% higher at $59.05 following news that the company and European food delivery service operator Just Eat Takeaway.com (TKAYY) are in advanced discussions regarding an all-share combination. Just Eat Takeaway.com confirmed the talks following press speculation, including reports from both CNBC and The Wall Street Journal that Grubhub's previous deal talks with Uber (UBER) had hit an impasse. Later in the day, Alex Sherman and Lauren Feiner of CNBC reported, citing people familiar with the matter, that Just Eat's offer is at a small premium to where Grubhub had been trading, or around $58 per share. Just before the close, however, the Wall Street Journal reported that Just Eat deal values GrubHub at close to $70 per share.
In other M&A news, Simon Property Group (SPG) announced that it has exercised its contractual rights to terminate its merger agreement with Taubman Centers (TCO). Simon argues that Taubman's business has been disproportionately hurt due to the COVID-19 pandemic when compared to the rest of the retail real estate industry, while also alleging that Taubman "has breached its obligation to operate its business in the ordinary course." Taubman responded that it believes that Simon's purported termination of the agreement is "invalid and without merit," and that Taubman "intends to hold Simon to its obligations under the merger agreement and the agreed transaction, and to vigorously contest Simon's purported termination and legal claims."
Starbucks (SBUX) shares fell over 4% after the coffee giant issued an update on its current operating trends and financial expectations for the quarter and the year. While sales are recovering, the company noted there will continue to be disruption for the rest of the year and its below-consensus adjusted EPS guidance accounts for a higher flow-through of lost revenues due to partner support and additional pandemic-related costs. Starbucks also previewed plans to "reposition" its Americas store base, which will include the closure of up to 400 company-operated stores over the next 18 months in conjunction with the opening, over time, of a greater number of new stores in different locations and with "innovative store formats."
Shares of Tesla (TSLA) topped $1,000 for the first time today as CEO Elon Musk is reported to have told his team that it is time to bring the company's Semi truck to volume production. Nikola Motors (NKLA), which is also working on producing electric and hydrogen fuel cell powered trucks, dropped 18.5% after the report following a furious run-up in recent days.
MAJOR MOVERS: Among the noteworthy gainers was Five Below (FIVE), which rose 9.4% and was upgraded to Buy from Hold by Gordon Haskett analyst Chuck Grom after the retailer reported Q1 results and gave an updated on the performance of reopened stores in Q2. Also higher AMC Entertainment (AMC), which gained 5.5% after reporting quarterly results and stating that it currently expects to have it theaters fully open globally in July.
Among the notable losers was Hertz (HTZ), which fell 39.6% after the company confirmed that the staff of NYSE Regulation had determined the company is "no longer suitable for listing" and the exchange will commence proceedings to delist the common stock of the company from the New York Stock Exchange. Also lower was Guess (GES), which declined almost 20% after reporting quarterly results and providing its own COVID-19 business update.
INDEXES: The Dow lost 282.31, or 1.04%, to 26,989.99, the Nasdaq gained 66.59, or 0.67%, to 10,020.35, and the S&P 500 fell 17.04, or 0.53%, to 3,190.14.
