Closing Recap 4:10PM EST

Friday, October 3, 14
Index Up/Down % Last
DJ Industrials 208.00 1.24% 17,009
S&P 500 21.70 1.12% 1,967
Nasdaq 45.43 1.03% 4,475
Russell 2000 8.36 0.80% 1,104


Equity Market Recap
Strong JOBS = Strong MARKETSEquities move sharply higher as job growth rose more than
expected in September (revised high for August as well), while the unemployment rate drops
below 6% (lowest level since 2008). The jobs report strengthens the view of those who favor a
rise in rates sooner than mid-year, as the drop in the unemployment below 6% is ahead of Fed
projections (though no wage increases and participation rate at new record lows!). Equities
resume upward momentum, as once again it appears between 4-7% decline is max for markets
gains across the board (except for commodities)
A HUGE move in currency markets after the dollar spikes on stronger jobs report; dollar weighing
on commodity prices (gold plunges/oil falls); macro trade took hold today, with commodity prices
plunging, but just about all else moving higher with jobs. Europe higher, Asia higher, stocks
higher, bonds lower, Transports much higher (+2%)
A close above 1959 for the S&P 500 marks a close above the 100 day moving average, a level it
breached 2 days ago which marked the 5
th
time we broke the 100 day in the last 52-weeks, with
the prior four occurrences turning out to be a great entry point for stocks. For the Dow
Industrials, last time traded up over 200 points, seven months ago (March 4
th
)
Good bounce for major averages over the last 2-days, but S&P 500 still posts its first back to back
weekly losses since May. Transports and retailers with significant moves to the upside today, as
well as Financials, Small Caps (back to back 1% gains for IWM) and Tech

Economic Data
Strong jobs report as Labor Department said the U.S. economy added 248K jobs in September,
well above estimates for 215K jobs, while the unemployment rate dropped to a six-year low of
5.9% (ests were for 6.1% figure) Professional job increased by 81,000 while retailers, health-care
providers and construction companies also posted strong job growth. Hours worked rose a tick to
34.6 hours (post-recession high), while average hourly wages fell a penny to $24.53, reducing the
12-month increase to 2% from 2.1% (prior month figures revised to 180K from 142K while
private payroll data also showed strength/improvement)the participation rate in September fell
a tenth to 62.7%, marking the lowest level since February 1978


The U.S. trade deficit shrank for the 4
th
straight month in August, down (-0.5%) to $40.1B, its
lowest level since January, while exports hit an all-time high, rising 0.2% to $198.5B
Sept. ISM Non-Manufacturing (service sector) falls to 58.6 from 59.6 prior month and mostly in-
line with estimates; said business activity fell to 62.9 vs 65.0 prior month, while new orders fell to
61.0 from 63.8, while Employment rose to 59 from 57.1
Markit's final reading of its services sector PMI for September was bumped up to 58.9 from its
flash reading of 58.5

Commodities
Precious metals fall; another awful day and week for gold, as the precious metal turned negative
for the year, falling below the $1,200 level for the first time in 2014 (lowest settlement since Feb
2010), as a stronger jobs report increased confidence in the economy; Gold for December fell
$22.20 to $1,192.90 an ounce (hi $1,215.70 and low $1,190.30); gold down -1.9% for the week
and now down 1% for the year
Crude oil prices fall, much like much of the commodity complex, with more than 1% declines in
both WTI crude and Brent, led lower today on the massive spike in the U.S. dollar; Natural gas
prices buck the trend, rising over 2% to $4.03 mln Btu; WTI crude closed below $90 per barrel,
first close below since April (down 4% for week), while Brent was down about 5% this week and
down about 20% from June high of $115.06; gasoline futures dropped 1.3% to $2.3785 (lowest
since January) dollar strength, Libya added supply, Saudis cutting prices all hurting energy

Currencies
Currency markets volatile, U.S. dollar surges on stronger jobs data, sending other currencies
reeling; the British Pound fell below the $1.60 level against the U.S. dollar, lowest since
November of last year; the euro plunges to 1.25 level (more than 1c move) after trading above
1.27 early yesterday; DXY up over a point to 86.62 (hi was 86.746) a new 2014 high and making
fresh 4-year highs (peaked at 88.405 on June 2010); dollar surges against the yen to 109.72 (up
1.31) big move in dollar!

Bond Market
Treasury markets started lower initially after better jobs data, weakness in bonds were more
pronounced on short end of the curve, but slowly reversed throughout the afternoon; in the end,
shorter end of the curve bonds fell (lifting yields slightly), while the long end (30-yr) rising, and
yields fell ; 10-yr yield ending around the 2.44% level


Macro Up/Down Last
WTI Crude -1.27 89.74
Brent -1.11 92.31
Gold -22.20 1,192.90
EUR/USD -0.0158 1.2510
JPY/USD 1.38 109.79
10-Year Note +0.11 2.447%





Sector News Breakdown
Consumer
Retail movers; RSH reached deal w group led by Standard General LP to refinance about $590M
of loans; in drug retail news, WAG Sept comp sales rose 7.9% vs. est. 5.3%, while pharmacy
comps 11.3% (vs. est. 7.7%) and front end comps (1.7% vs. 1.1% est.) also better follows better
comp data from RAD Thursday; SHLD rises as Bruce Berkowitz reports purchase of 49,200 shares;
LULU holder Thornburg reported stake of 2.3% (down from 8.5% prior); ANF analyst upgrade
Restaurants/Staples; CBRL announced stock buyback; protein stocks upward momentum
continues (two analyst upgrades on TSN this week) also strength in PPC and SAFM (lower grain
prices helping these names)
Casinos/Gaming stocks get negative news (but group unphased in broad market rally) as starting
Monday, all casinos in Macau are set to implement strict new government curbs on smoking, as
laid out in a recent statement by Macaus government information bureau (WYNN, MPEL, LVS,
MGM); Wells Fargo said smoking ban may hurt mass rev growth ~5%

Energy
Energy names remain laggards, despite a 1% move across the board for major averages, as the
winners get bought and losers keep falling; oil drillers resume selling pressure (RIG, NE, DO) after
relief rally yesterday; refiners falling (WTI/Brent spread narrows negative for refiner margins),
as VLO, WNR, HFC decline (HFC also gets analyst downgrade); E&P names (EXXI, NFX, UPL) also
remain under pressure
Stock movers; APAGF agreed to be bought by Pluspetrol for $14.50 per share in cash; LINE/LNCO
to sell entire position in Granite Wash, Cleveland plays located in Texas Panhandle, western
Oklahoma to privately held institutional affiliates of EnerVest for contract price of $1.95B
In solar space; SPWR was upgraded to Overweight at JPM saying risk/reward trade-off looks
attractive now
Oil services; HAL upgraded to Equal Weight at Morgan Stanley citing a more compelling
risk/reward following the recent pullback in shares; BHI reports that the U.S. Rig Count is down 9
rigs from last week to 1922, with oil rigs down 1 to 1591, gas rigs down 8 to 330; FMSA IPO
opened today and declined with commodity space (sold 25M shares at $16)

Financials
Large cap financials one of todays leaders, as big banks and brokers GS, JPM, BAC, C, and MS
surge; a stronger jobs report lifts sentiment on economy, also increases chances of rates rising
perhaps in early part of 2015 (a positive for banks regarding lending)
Small Cap bank changes at Barclays - downgraded PBCT to UW from EW, cutting EVER to EW
from OW and upgrading shares of CFR to EW from UW saying as interest rates begin to rise,
expect banks with high quality deposit bases & strong liquidity to be rewarded
Bond insurers/Monolines (AGO, MBI, AMBK) gained after BTIG called a U.S. Bankruptcy judge's
ruling on Stockton, CA "momentous" due to its "direct assault" on the sanctity of pension funds
in municipal bankruptcies
One IPO in financial space with YDLE jumping nearly 4 points after pricing 6.25M shares at $12
per share


Healthcare
Biotech movers; drug makers working on Ebola vaccines rising again after reports of an American
working as a freelance cameraman for NBC News has tested positive for Ebola and plans to
return to the U.S. for treatment; shares of TKMR, SRPT, BCRX, HEB, among others rise (note
biotech in general (CELG, ALXN, GILD) seeing bounce after sell-off in shares the past few days
Pharma/Generics; SLXP rises, after Bloomberg reported was in talks to sell to ACT as AGN fades
http://goo.gl/7x4PLM (also overnight SLXP ended a $2.7B merger deal with Cosmo Pharma citing
tougher U.S. tax rules http://goo.gl/9EK8mW ; MYL rises after guiding Q3 eps $1.12-$1.16 from
90c-95c citing operational performance/approvals; ACT rises after Cowen said mgmt. is doing
well executing after Forest acquisition, will likely have an aggressive approach to buying
development & on-market assets (and on SLXP story)
In other movers; MDT said to use $16B external financing to complete COV deal; DRTX received
SPA for phase 3 study of its Dalvance in pneumonia; HALO received orphan drug designation for
PEGPH20 for treatment of pancreatic cancer; RMTI rises after saying BAX will sell its
Hemodialysis products/buy $15M of its stock; PAH is in advanced talks to buy privately held rival
Arysta for about $3.5B WSJ reports http://goo.gl/MgrBf3
Managed Care; WLP authorized a $5 billion increase in authorized share buybacks; AET upgraded
to buy at Argus

Industrials & Materials
Containerboard/Paper stocks rise; Jefferies said while IP, RKT, and PKG have been largely range
bound due to soft box demand and new supply, believes there is a high likelihood one of the
containerboard producers create an MLP structure over the next 6-12 months, possibly unlocking
30-50% value in the stocks and accelerate stock buybacks and M&A in the industry
Heavy duty truckers (CMI, NAV, PCAR) rise after ACT Research reported August Class 8 orders
grew 32% YoY, but fell 2% MoM to 24,900 (was at low end of Wells Fargo's expectations of
24,500-27,500 units, but several analysts positive on data point
Transports with a strong bounce-back day Friday, with Dow Transports rising 2% midday (erasing
most losses over the past week), as slumping energy prices lifting sentiment on group, with all 20
components higher, led by rails (KSU, UNP, CSX), and airlines (UAL, DAL, JBLU)
Metals & Mining movers; gold stocks in focus as precious metal falls below $1,200 an ounce
earlier; ratings changes at RBC as upgraded NEM, AUQ, EGO and cut KGC; Deutsche Bank said
gold miners have the greatest exposure to Ebola outbreak (RGLD, AU); CLF downgraded to
reduce at Nomura w $5 target/also WSJ reports on Casablancas profit-sharing pact
w/consultant; IAG sold its Niobec mine to a group of companies for $500M after tax upon
closing; awful week for steels still, no bounce with X, AKS, NUE falling more than 4% for week

Technology, Media & Telecom
Internet security stocks in focus after JPM said contact information for about 76M households
and about 7M small businesses was compromised in a cybersecurity attack detected this
summer; shares of PANW, PFPT, IMPV, CUDA, FTNT, FEYE active (FEYE received analyst
downgrade today, while PANW positive comments at Piper)
Internet movers; all the news activity came late afternoon, and all related to YHOO; Yahoo Said
to Acquire Mobile Messaging App MessageMe: TechCrunch rpts http://goo.gl/k2YAJD ; also, WSJ
reported that YHOO is near a deal to invest in Snapchat
Hardware/software; GPRO launches major retail expansion at BBY for HERO cameras/accessories
(bounce after decline yesterday on early lock-up announcement); EPIQ retains Credit Suisse to
assist in review of strategic alternatives; high growth software names with a good move today to
upside, led by shares of DWRE, N, and TRAK; AAPL downgraded to hold at Deutsche Bank; also
Re-Code also announced Apple will hold its iPad event on October 16




Semiconductor movers; ADI, TER, KLAC were downgraded to neutral at ISI Group and says
consensus ests. for ADI, FSL, LLTC and TXN may be at risk due to softness in Europe/China;
overall though, a bounce in semis after days of selling pressure
Media movers; DIS reiterated OW and top pick in media at JPM and raised numbers, while
cutting ests on CBS saying several factors continue to weigh on earnings; Macquarie also lowered
Q3 domestic TV ad growth estimates for CBS, DIS, and FOXA on the back of weak ratings and
uncertain scatter market signals
Networking/Telco; ADTN guides Q3 revs below views to $162M-$163M (est. $177.5M) citing a
softer spending environment




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