It was a cautious day on Wall Street ahead of the two-day Federal Open Market Committee meeting and Federal Reserve Chairman Janet Yellen’s next pronouncement regarding interest rates. After yesterday’s solid gains, markets pulled back 180 points in the morning before drifting higher the rest of the day.
The National Association of Home Builders reported that housing starts fell 17% in February to a seasonally adjusted annual rate of 897,000 units. Each region of the U.S. suffered a decline, and starts for both single-family and multi-family units alike were lower.
Poor weather may have been a factor, particularly in northern states.
The Dow Jones Industrial Average pulled back 0.7%, while the S&P 500 was off by 0.3%. The Nasdaq Composite bucked the trend and was up nearly 0.2%
A few sectors, such as utilities and energy, were still strong despite another lower close for crude oil. Among individual issues, MGM Resorts International (NYSE:MGM), DSW Inc. (NYSE:DSW) and American Airlines Group Inc (NASDAQ:AAL) had strong days and were three of today’s best stocks.
MGM Resorts International (MGM)
It was a big day on Wall Street for MGM stockholders after activist investor Jonathan Litt strongly urged MGM to spin off the company’s real estate assets into a real estate investment trust (REIT). MGM stock roared up 10.6% on heavy volume of 62.4 million shares.
Litt said such a move could potentially more than double MGM’s stock price, perhaps bringing MGM stock as high as $55 per share. Litt feels that MGM’s real estate assets are worth more than the entire MGM share price, and that MGM could repay half its debt by creating the REIT.
A number of other similar companies, such as Pinnacle Entertainment, Inc (NYSE:PNK) and Caesars Entertainment Corp (NASDAQ:CZR) have also recently come under pressure from activist investors to sell off real estate or form a REIT.
DSW Inc. (DSW)
The Columbus, Ohio-based shoe retailer had investors dancing today after reporting fourth-quarter adjusted earnings of $30.8 million, or 35 cents a share, well ahead of analysts’ expectations for 27 cents a share.
Fourth-quarter revenue of $640.2 million was also above Street estimates for $608 million. DSW stock has lagged the market this year, but today’s earnings report and subsequent 4% rally may be just the thing to get DSW stock going again.
American Airlines Group Inc (AAL)
AAL stock flew 6.9% higher after it was announced that it will be added to the S&P 500 after the closing bell on March 20. AAL will replace Allergan, Inc. (NYSE:AGN), a company that has recently been bought out by fellow S&P company Actavis plc (NYSE:ACT).
AAL stock has traded sideways year-to-date, but the inclusion into the S&P 500 will undoubtedly have it trading higher over the next few weeks as various ETFs and index funds add AAL stock to their portfolios.
As of this writing, Ethan Roberts does not hold a position in any of the aforementioned securities.
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