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Stock Downgrades: Flee PetSmart During Dog Days of Summer

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Wall Street ratings agencies set the tone for today's stock market.

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PetSmart (NASDAQ:PETM) could look like a flea-bitten mutt today after getting downgraded by an equity analyst who says its recent stock-price surge has resulted in a stretched valuation, especially in light of heightened competition and reduced profit margins.
 
As the Fed chairperson settled into her second day in the hot seat, Game of Thrones inspired equities to another standing ovation. With Janet Yellen's concluding congressional testimony largely as expected, it was left to HBO owner Time Warner (NYSE:TWX) to inspire the Dow's (INDEXDJX:.DJI) 15th record close of 2014 with a 17.07% surge that easily topped the entire S&P 500 Index (INDEXSP:.INX). The entertainment empire, subject of an $80 billion bid by Rupert Murdoch, thus enjoyed its single best session since a certain 40% AOL Inc. (NYSE:AOL)-inspired jump on January 10, 2000. That was, of course, the infamous day when an animated, tie-wearing upstart took to the stage with an open-collared elder statesman. One only hopes that Bill Ackman and Carl Icahn, who yesterday reprised the move right down to its wardrobe details, will endure a longer-lasting love fest than that ultimately catastrophic corporate marriage of yesteryear. A broker boost and boffo earnings sent Intel (NASDAQ:INTC) up a Dow-high 9.27%. This, even as the second-best blue chip was Microsoft (NASDAQ:MSFT) with its own 3.84% advance. Clearly, the death of the PC has been greatly exaggerated. (Especially on a day we witnessed the return of the typewriter.) Elsewhere Apple Inc. (NASDAQ:AAPL) attracted analyst hosannas after ending a spat with IBM (NYSE:IBM) that dated to 1984, the year that Moscow on the Hudson made us warm up to Cold War Russians. Those were the days.
 
Today in economics, the Philadelphia Fed Index for July is forecast to fall from the prior month's pace at 10:00 a.m. EDT. On the earnings front, expect announcements out of Google (NASDAQ:GOOG), International Business Machines (NYSE:IBM), Morgan Stanley (NYSE:MS), Novartis (NYSE:NVS), and UnitedHealth (NYSE:UNH).
 
Now let's look at this morning's rating reductions, an eclectic bunch that features both an American cable company and British brewing behemoth, plus headline stock PetSmart.

Charter Communications (NASDAQ:CHTR): Jefferies cuts the company to Hold from Buy with an amended price objective of $175.
 
Diageo (NYSE:DEO): The Guinness owner gets moved to Underweight from Neutral at JPMorgan.
 
GNC Holdings (NYSE:GNC): Shares are taken to Hold from Buy at Jefferies. Its target price, previously $50, falls to $39.
 
International Game Technology (NYSE:IGT): Wells Fargo moves the equity, which surged 9.16% on Wednesday, to Market Perform from Outperform.
 
Javelin Mortgage (NYSE:JMI): Due to what it regards as an excessive valuation, JMP Securities slashes the stock to Perform from Outperform.
 
PetSmart: Today's headline stock gets downgraded to Sector Perform at RBC Capital Mkts. The price objective is $66.
 
Rexam (OTCMKTS:REXMY): Deutsche Bank reduces its rating to Hold from Buy.

Also see:

New Stock Coverage: Own, Don't Break, Pottery Barn Parent Williams-Sonoma

Stock Upgrades: Shrugging Off Sanctions, Even Oligarchs Are Russian Into Time Warner
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No positions in stocks mentioned.
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