Another day of generally positive economic data was all it took to bring the S&P 500 (SNPINDEX:^GSPC) back from a modest midday loss to once again close at an all-time record high.
Perhaps the biggest factor pushing the broad-based S&P 500 back into positive territory was the release of May's Chicago Purchasing Manager Index report, which showed a reading of 65.5. This was modestly higher than the reading of 63 from April, but notably better than economist's expectations, which had ranged between 60 and 61. A higher reading indicates that the manufacturing sector is expanding faster than most people believe, and would be conducive to the extension of the U.S. economy's rebound.
The final reading for the Thomson Reuters/University of Michigan Consumer Sentiment Index for May also came in fractionally ahead of estimates and the prior reading of 81.8, with a reading of 81.9. Higher consumer-sentiment figures indicate that consumers are feeling better about their short-term and long-term economic outlook, which is a key component to spending. Because consumer spending represents such an inordinately large piece of the U.S. GDP pie, higher consumer confidence would also suggest the possibility of ongoing economic expansion.
However, as I noted above, it was a day of "generally positive" data, and personal spending for April was the one bad apple of the bunch. For April, personal spending fell 0.1% from a gain of 1% in March. While this might appear disappointing, investors may want to consider that March's spending boost was likely bottled up due to the record cold temperatures engulfing much of the country in January and February. A slight retracement from March isn't necessarily endemic of spending concerns, but merely a return to normal levels of personal spending.
By day's end, the S&P 500 managed to utilize this largely positive data, and claw its way higher by 3.54 points (0.18%) to end the week at 1,923.57.
Topping the list of gainers today was biopharmaceutical company NPS Pharmaceuticals (UNKNOWN:NPSP.DL), which surged 13.4% after rumors emerged from FT Alphaville that Shire (NASDAQ:SHPG) could be interested in making a bid of around $40 for the company. Citing familiar sources, the Financial Times blog noted that Shire has met with advisors and explored the possibility of an all-cash offer, although neither company has commented on the rumors thus far.
On one hand, I wouldn't pay much credence to rumors from a blog, as they often turn out to be false, and can leave you chasing a company higher for no valid reason other than emotions. However, I also believe that NPS could represent an intriguing buyout opportunity for a larger pharmaceutical company due to its focus on higher-price orphan drugs that have long periods of patent protection. NPS is already profitable and would likely be an instantly EPS-accretive acquisition. I would monitor NPS closely, but would much prefer to wait for a pullback before digging in.
Not far behind NPS Pharmaceuticals was NQ Mobile (NYSE:NQ), a mobile Internet cloud security services provider, which gained 11.8% after updating its first-quarter revenue guidance, and providing better-than-expected second-quarter sales guidance.
For Q1, NQ Mobile noted that it expects its sales to top its previously forecasted $75 million-$76 million. The current estimate on Wall Street calls for $75 million in sales. Furthermore, in Q2, NQ Mobile anticipates it will report revenue in the $83 million-$84 million range, which is well ahead of the $78.9 million consensus on Wall Street. Both quarters represent more than a doubling in revenue from the prior-year period. While NQ Mobile is growing like wildfire, the gray cloud from Muddy Waters' accusations of fraud are still hanging over the company, and are more than enough reason to keep your distance for the time being.
Finally, semiconductor imaging-sensor chip developer OmniVision Technologies (UNKNOWN:OVTI.DL) flew 11.6% higher after reporting better-than-expected fourth-quarter results and receiving an upgrade from a Wall Street firm.
For the quarter, OmniVision reported a modest 1.5% decline in year-over-year revenue, to $331 million, with EPS of $0.40, a nice improvement over the $0.31 per share it reported in Q4 2013. By comparison, Wall Street was only expecting $292.1 million in revenue and $0.27 in EPS, so OmniVision absolutely crushed estimates. As icing on the cake, it projected first-quarter sales and EPS of $360 million-$400 million and $0.43-$0.63, compared to the current Wall Street consensus of $305.5 million and $0.29. Following this sizable beat, Northland Securities raised OmniVision to outperform from market perform, and boosted its price target 33%, to $28. While investors should keep in mind that OmniVision's business is highly cyclical, an increasing appetite for smartphones and tablets should continue to bode well for the company over the long run.