S&P Ends Week Little Changed After Fed Signals Rate Hike Possible In June

The major averages ended the week mixed, with the Nasdaq posting a gain, the Dow slipping and the S&P finishing not far from where it started after the minutes of the last Federal Reserve policy meeting showed the many in the central bank consider a rate hike next month as more likely to be the right course of action than many market participants may have anticipated.

MACRO NEWS: On Wednesday, the Federal Reserve released the minutes from its last FOMC meeting, which showed that the members of the Fed's rate setting committee saw "diminished" global economic risks and saw a June rate hike as "likely" if data improved as expected. Officials wanted to keep options open for June, but there were a range of views on whether the economic numbers would be adequate to support a tightening next month. However, the market clearly read the minutes as an indicator that a hike is possible in the short-term, as illustrated by the sharp rise in the market-implied odds of such a scenario...

In the U.S., consumer prices in April rose 0.4% compared to the prior month, versus expectations for the consumer price index to be up 0.3%. If food and energy are removed, the core CPI reading was up 0.2%, matching expectations. Housing starts were up 6.6% to a 1.17M rate in April, versus expectations for a rise of 3.3%. Building permits were up 3.6% to a rate of 1.12M, versus expectations for them to be up 5.5%. Industrial production rebounded 0.7% in April, which was better than the 0.3% month-over-month increase that was expected. The Empire State manufacturing index fell 18.6 points to -9.02 in May, which was much worse than the 6.5 reading that was forecast. The NAHB homebuilder sentiment was flat at 58 in May, holding that level for a fourth consecutive month. Initial jobless claims fell to 278,000 in the week ended May 14, nearly matching expectations for 275,000 first-time claims... In Asia, a raft of Chinese data fell short of expectations, as readings on industrial production, retail sales, investment, money creation and credit growth all missed estimates. Japan's real GDP unexpectedly grew 1.7% quarter-over-quarter in first three months of the year, which was much stronger than expected.

COMPANY NEWS: Shares of Target (TGT) tumbled over 7.5% on Wednesday after the company became the latest in a recent string of major retailers to give a lower than expected outlook and point to challenges in the industry. Target CEO Brian Cornell said during the company's earnings call that the "very challenging" consumer environment became softer and more volatile as the quarter progressed. In contrast, Wal-Mart (WMT), which issued its own quarterly report Thursday morning, climbed over 9.5% that day after the company's first quarter results beat analysts' estimates and the world's largest retailer also gave a better than expected outlook on the current quarter's sales growth and profits. Among other retail names, TJX Companies (TJX) rose after the off-price retailer announced better than expected first quarter results, while off-price peer Ross Stores (ROST) slid following its report on Friday. Home Depot (HD) reported better than expected sales and profits for the first quarter of the year and raised its full-year outlook for sales and earnings growth, and home improvement competitor Lowe's (LOW) also posted better than expected sales and profits... Deere (DE) fell more than 5.5% on Friday after the company reported better-than-expected second quarter results but provided an outlook for equipment sales declines in fiscal 2016 and lowered its net income guidance...

Dow member Cisco (CSCO) reported better than expected results and gave a more favorable outlook than analysts' consensus view, sending its shares up 3% on Thursday on the heels of its report. Among others reporting earnings this week, Applied Materials (AMAT), Dick's Sporting Goods (DKS), Urban Outfitters (URBN) and American Eagle (AEO) gained after reporting quarterly results, while Campbell Soup (CPB), Foot Locker (FL), Hormel (HRL) and L Brands (LB) declined after their own reports...

Tesla (TSLA) rallied about 3% to close near $211 on Wednesday after Goldman Sachs upgraded the stock to Buy. After the closing bell that day, the electric car maker and its CEO, Elon Musk, filed to sell $2B share of common stock in an offering co-led by Goldman... Apple (AAPL) advanced nearly 4% on Monday after a regulatory filing showed that Warren Buffett's Berkshire Hathaway (BRK-A, BRK-B) owned 9.81M shares of Apple as of March 31. The Oracle of Omaha's bet on the iPhone maker was a tailwind throughout the week, as the stock posted about a 5% weekly gain to close Friday at $95.22... Pandora (P) rallied about 6% on Tuesday after Keith Meister's hedge fund, Corvex Management, reported an 8.3% stake in the company and urged the streaming music service operator to immediately explore a sale...

Monsanto (MON) was forced to confirm that it has received an unsolicited, non-binding acquisition proposal from Bayer AG (BAYRY) after Monsanto COO Brett Begemann made comments to a journalist at a conference claiming that reports of a potential takeover by Bayer or BASF (BASFY) were "all wild speculation." In other M&A news, FMC Technologies (FTI) and Technip (TKPPY) announced plans for an all-stock merger deal to create an energy services company, to be called TechnipFMC, which would have an equity value of $13B based on pre-announcement share prices.

Pfizer (PFE) agreed to acquire Anacor Pharmaceuticals (ANAC), whose flagship asset crisaborole is currently under review by the FDA for the treatment of mild-to-moderate eczema, for approximately $5.2B, net of cash and assuming the conversion of Anacor's outstanding convertible notes. Range Resources (RRC) struck a deal to acquire all of the outstanding shares of Memorial Resource (MRD) in an all-stock transaction valued at $4.4B. Memorial closed up 3% at $13.86, while Range shares sunk 10.3% to $37.69 following the deal announcement. inContact (SAAS) jumped more than 50% higher after it agreed to be acquired by NICE (NICE) for $14 per share. Gannett (GCI) announced that it has increased its offer to acquire Tribune Publishing (TPUB) to $15 per share from $12.25 per share.

INDEXES: For the week, the Dow slid about 0.2% to close at 17,500.94; the S&P 500 rose about 0.3% to close at 2,052.32; the Nasdaq advanced about 1.1% to close at 4,769.56.