Credit Suisse seems to think that International Business Machines Corp. (IBM, +0.19%) is not in good shape. In their report released on Wednesday, ‘32 Contrarian Stock Ideas’, analysts used the word ‘alarming’ when providing their reason to stay away from this stock. According to analysts, as a result of internal dissatisfaction and evidence of underinvestment, IBM is likely ‘set for a painful multiyear transition’. Adding to this, Credit Suisse also rated the stock as a sell or an underperform and the target price provided was $125. To date, of the analysts that cover IBM on Wall Street, five are sells, 22 are holds while five assign it buys. In fact, Morgan Stanley rates IBM as one of its top five ‘megacap’ stocks. It seems that the major concerns regarding the Big Blue include the failure of a restructuring effort, market dilution as a result of IBM’s cloud business, weak orders and dwindling industry wide deals. This analysis came after IBM announced last month that they would spend over $4 billion this year on a variety of projects such as analytics, cloud, mobile and security and social technologies. Despite these efforts, analysts feel that IBM’s success will be hampered by prolonged underperformance as a result of increased investment as well as aggressive mergers & acquisitions which will result in a lower return of cash. In stock trading on Wednesday, IBM shares traded at $159.63, down 2.1 percent. These shares declined 14.5 percent in 2014.
As investors dumped biotech and technology shares, the U.S. markets saw another decline on Wednesday as the Nasdaq suffered its steepest decline since April last year. The declining market marks the 3rd consecutive losing session this week. Adding to this, the Dow industrials and the S&P 500 both recorded the biggest losses in 2 weeks. This came in response to a merger deal that was announced in the morning between H.J Heinz Co. and Kraft Foods Group Inc. By the close of trading, the Nasdaq Composite index (COMP) dropped 2.4%, or 118.21 points, at 4,876.52 with biotechnology stocks declining the most. As a result, the iShares Nasdaq Biotechnology (ETF IBB, -0.06%) declined 4.1 percent. Also on the downside was the Dow Jones Industrial Average (DJIA) which lost 1.6%, or 292.60 points, to 17,718.54. This blue chip index turned negative for the year. Meanwhile, the S&P 500 index (SPX) dropped 1.5%, or 30.45 points, to 2,061.05. Interestingly, energy stocks rallied as oil prices increased in response to the conflict in in Yemen.
Is the U.S. dollar (USD) rally over? On Wednesday, the greenback traded broadly lower against most major currencies. This came after data showed that durable goods orders in the U.S. declined which prompted concerns regarding the strength of the economy. In their report, the Commerce Department said that total durable goods orders, which include transportation items, dropped 1.4 percent in February. This missed analyst expectations for a 0.4% gain. Meanwhile, core durable goods orders also declined in February by 0.4%, missing forecasts for a gain of 0.3 percent. In forex trading, the EUR/USD traded at 1.1002, up 0.70%. The single currency strengthened after data showed that German business confidence improved in March. Against the Japanese yen and the British pound, the USD traded lower with GBP/USD up 0.56% to 1.4931 and with USD/JPY down 0.39 percent and trading at 119.28. Also, the U.S. dollar index was at 97.10, down 0.34%.
On Thursday, crude oil prices got a boost as a result of tensions in Yemen as well as actions by Saudi Arabia as they stepped in to bomb Houthi rebel positions while President Abdrabbuh Mansour Hadi maintains power. WTI crude for delivery in May traded at $49.70 a barrel, up 0.99% on the NYMEX. On Wednesday, Brent crude for delivery in May traded at $56.45 a barrel, up 2.43%, on the Intercontinental Exchange (ICE). As a result of geopolitical tensions linked to the advance of Iran-backed Houthi rebels in Yemen, crude oil prices rebounded and surged on Wednesday. By the afternoon, global oil prices increased by more than a dollar. Meanwhile, in their weekly report, the EIA said that crude inventories for the week ending 20 March increased by 8.2 million barrels from the previous week. Crude inventories in the U.S. now stand at 466.7 million barrels which marks the highest level in 80 years.