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Closing Recap 4:10PM EST

Wednesday, October 8, 14
Index Up/Down % Last
DJ Industrials 273.99 1.64% 16,993
S&P 500 33.74 1.74% 1,968
Nasdaq 83.39 1.90% 4,468
Russell 2000 20.81 1.93% 1,097


Equity Market Recap
Fed to the rescueagain! Equities started the day weaker, adding to one of the worst trading
days in months Tuesday, but markets turned decisively positive after results from the Fed
Minutes of its September FOMC meeting was considered dovish. The Dow Industrials surged
triple digits after the release of the minutes, while bonds cut losses, the dollar sank, and gold
reversed. So once again, the markets in disarray, and the Fed came to the rescue! The Dow
Industrials posted a triple digit move for the 9
th
time in last 13 trading days, while todays gains
wiped out yesterdays losses (note NASDAQ futures had a 90 point bounce off the lows!)
European markets ended near the session lows (the close also appeared to mark the U.S. lows),
as European Stoxx now down 5% in 5-weeks, erasing all 2014 gains, as the German Dax broke
below 9,000 (down 1% overnight) note the last 2 times it broke below 9K, had nice bounce

Economic Data
Fed Minutes from the September FOMC meeting bullish for equities leads to rally
1) several FOMC participants said current guidance suggests longer period before lift-off, more
gradual increase in rates than they expect will likely be needed
2) FOMC participants also saw number of uncertainties, risks around outlook
3) concern was raised that "considerable time" could be misunderstood as commitment rather
than as data dependent
4) only some consider current guidance to be appropriate in light of "risk management"
considerations, which suggest "it would be prudent to err on the side of patience"
5) most participants agreed "significant" underutilization of labor resources remained
Number said that changing guidance might be misinterpreted as signal of fundamental shift in
stance of policy
6) most on FOMC want to clarify that current forward guidance depends on economic data,
progress toward dual mandate regions
7) minutes also showed signs officials are concerned about the impact the strengthening U.S.
dollar could have on the economy


Commodities
Gold prices ended 2 day winning streak, falling -$6.40 to end at $1.206 an ounce, ending at the
lows of the session (high $1,221.20). The move lower in the afternoon came after the dollar
perked up, trading near its highs of the day (gold had risen 2-days on a weaker dollar). Not really
much going on in precious metals of late, under pressure on lack of inflation fears, and a stronger
US economy (gold futures advanced after the close following the FOMC Minute release)
Energy prices remain weak; Brent at 2-year low (now 21% below June peak), slipping into Bear
market territory amid concerns of oversupply. WTI crude fell 1.7% to end at $87.31 per barrel,
while Brent dropped to $91.38 per barrel. Bearish inventory data out both the API and DOE
added to bearish bets

Currencies
It was slow and steady for currencies in the morning, butdramatic changes in the afternoon
after dovish commentary in Fed minutes from its Sept meeting, where the Fed mentioned the
appreciating dollar several times in its press release as a possible cause for concern; following the
minutes, the dollar index (DXY) reversed, moving lower against counterparts, while the euro
traded to a 2-week high and the yen strengthened

Bond Market
Bond markets were flattish early, with yields on benchmark 10-year holding around 2014 lows
early, but sold off throughout the morning, with yields climbing to about 2.37%, helped by a
weaker 10-year auction at 1:00 pm, but the weakness was short lived. Following the FOMC
Minutes release at 2:00, where the Fed expressed caution about pace of rates and wording,
bonds cut losses, sending yields to near lows of the day (2.33%)
Bond auction in the afternoon; the U.S. treasury sold $21B in 10-yr notes at a yield of 2.381%,
with a softer bid to cover; the weak auction allowed bond price to pare gains - auction posted
lowest bid-to-cover ratio since August 2013 (2.52 vs. 2.71 prior auction); US awarded 6.6% of
auction to direct bidders and 44.4% to indirect bidders


Macro Up/Down Last
WTI Crude -1.54 87.31
Brent -0.45 91.38
Gold -6.40 1,206.00
EUR/USD 0.0059 1.2726
JPY/USD 0.13 108.15
10-Year Note -0.036 2.314%


Sector News Breakdown
Consumer
Retailers; COST Q4 results top estimates as comp-store-sales increase; TILE guides Q3 eps and
revenue below views citing customer deferrals and disruptions; JCP held analyst day, said saw
higher traffic levels but trimmed its Q3 sales-forecast (guidance weighed on KSS, M), ; SHLD
vendor said to halt shipments as insurance firms for Sears suppliers are seeking to reduce
coverage; DSW positive analyst comments
Restaurants ; YUM Q3 EPS topped views, but cut its eps growth forecast to 6%-10% YoY assuming
improving (but negative) China Q4 comp sales; GRUB initiated Outperform and $48 target at JMP
Securities; other restaurant names mixed after YUM (MCD, CMG, JACK, WEN)


Auto stocks bounce after early weakness; Ford (F) shares touched fresh 52-week low (falling
sharply since lowered guidance at analyst day last week); GM shares also fell to a 52-week low on
global growth fears; auto suppliers move in sympathy LEA, VC, MGA, AXL
Leisure/Lodging/Casinos; RPM rpts Q1 revenue miss, but reaffirms year view; SFXE negative
mention by Seeking Alpha calling it a house of cards headed towards imminent collapse
(defended by one sell-side firm)

Energy
Energy downward momentum early, as WTI oil and Brent prices plunged more than 1%, with
same factors weighing daily (stronger dollar/Saudi price cuts/too much supply/slowing global
growth fears); stocks prices falling daily into quarterly earnings next week; heavy day of selling
for stock early but bounced well off lows given turnaround in the market
Utility stocks upward momentum early as bond yield prices fall near 52-week lows as bonds rally;
shares of DUK, ED, WEC, PEG, among those names climbing early
E&P sector at Macquarie; upgraded EOG, XEC, PE, and SN to Outperform as believes that these
names offer compelling risk/reward opportunities at these levels
Coal sector; Morgan Stanley said the Met coal recovery to take longer and weaker than previous
forecasts, even w/ evidence pointing to a bottom (downgraded WLT with $4 target)
Story stocks; PXD is pushing forward with a sale of its oil and gas operations in the Eagle Ford
shale which could fetch $4B-$4.5B, Bloomberg reports; LNG fell after FERC concludes approval of
proposed Corpus Christi LNG project would ensure impacts in area would be avoided or
minimized and wouldnt be significant; SCTY to finance rooftop systems in shift from leasing

Financials
After lagging yesterday amid the sharp drop in bond yields, financial outperforming slightly into
earnings next week; shares of C, GS, JPM, MS, BAC all holding up well into earnings next week,
where we get a heavy dose of large cap banks, brokers, and regionals
REIT stocks doing well, again a beneficiary of lower rates, and with yields on the 10-yr hovering
near year lows, seeing a lift in names like SPG, MAC, TCO and IYR ETF
In stock news; HAWK sees year adj. EPS at high end of prior view of $1.19-$1.24; MBI shares fall
after revealing yesterday of breach

Healthcare
Top stories; AGN rises on reports VRX and Pershing may raise bid by $15 to about $191 a share
WSJ http://goo.gl/A43Lln; in Ebola news, Texas Health said Eric Duncan died, succumbing to
Ebola (CMRX shares, which were higher earlier, declined, as it was their drug Duncan was given);
shares of TKMR remains active; UNIS rises a second day after signing supply deal with SNY on
wearable injections; ARWR fell as ARC-520 missed analyst expectations for 2nd cohort in AASLD
abstract data
Biotech movers; ICPT fell after saying data from the Phase II FLINT study will not be presented at
the liver conference (AASLD) Nov. 7-11, contrary to guidance in August; AMGN biosimilar
candidate ABP 501 compared to Humira in patients with moderate-to-severe plaque psoriasis
met its primary endpoint; UK NICE agency does not recommend GWPH MS drug
Pharma movers; LGND raised its Q3 EPS and revenue outlook above prior view and consensus;
generic makers weaker after NYT reported two members of Congress looking to impose new
regulations after the prices of some generic drugs soared more than 1,000% over the last year
(TEVA, MYL, LCI, ACT)


Industrials & Materials
Transports with huge reversal down more than 100 points early, trading positive thanks to the
Fed Minutes; previously, transports were down -1% after dropping -2.5% on Tuesday (broad
pullback despite the continued weakness in energy prices); shares of airlines (data below), rails,
freight all active
Airline monthly statistics: 1) AAL narrows its 3Q Prasm forecast to 0.5%-1.5%, from prior view of
flat to up 2%/reiterates 3Q adj. pretax margin 10%-12% (said Sept traffic down -0.2%/capacity up
1.6%); 2) Air France-KLM warns the recent strike would hit full-year operating profit by as much
as EUR500 million ($631.4 million); 3) LUV Sept capacity up 0.7%, PRASM rose 5%, ASMs rose
0.7% and load factor climbs; 4) SAVE warned 3Q operating margin will be in lower half of
previous range.; 5) ALGT said Sept traffic up 13.2% to 468,240, while load factor fell (-0.4%)
Metals and miners; a group that was trying to get legs in August/September has taken a turn for
the worse in recent weeks, with shares of steel stocks (X, AKS), iron ore (CLF, VALE), industrial
metals (FCX) falling slower global growth concerns prevalent in this group; AA set to report
earnings tonight
Ag sector; MON quarterly results mixed; Q4 eps loss little worse, while revs beat and guides year
eps below consensus; overall ag space has seen profit warnings from fertilizer producers MOS
and AGU as well as equipment maker AGCO yesterday plunging grain prices, oversupply has
crushed this group, with shares of DE, AGCO, TEX trading at 52-week lows
Rail car names still breaking down (TRN, GBX, RAIL, ARII) group has been under pressure after
oil and railroad industry groups asked for more time to retrofit old cars to ship crude by rail the
API and Association of American Railroads urged the Transportation Department for more time
to retrofit rail cars
Other movers; MG fell on a weaker earnings report; CMI initiated buy at Stifel; RUSHA upgraded
by one analyst

Technology, Media & Telecom
Semi/equipment movers; AMAT upgraded to Outperform at CLSA saying Tokyo Electron deal
concerns are overdone; ISSI guides Q4 eps/revs below estimates citing weakness in Asia and
wafer shortages; OIIM issues Q3 revs short of consensus citing product issue in Charger IC line;
overall group surges late day with market
Software/Hardware/Storage sectors; SAP led group lower after Boerse Online reported that the
companys pipeline for the fourth quarter is missing expectations, citing an unidentified source
(Bloomberg); EMC shareholder Elliott proposes spin-off of VMW; AAPL announces Oct 16
th

event; HDD names (STX/WDC) estimates upped at Longbow after price checks
Security/Networking stocks; ATEN lowers Q3 revs to $43M-$43.5M from prior $48M-$50M view;
SYMC said to study split into two companies (Security/Storage); JNPR cut to neutral at MKM
Partners; ADTN upgraded to buy at Goldman after sell-off last week
Internet movers; GLUU upgraded to buy at Benchmark as sees Q3 upside from Kardashian game;
GPRO downgraded to neutral at Piper on valuation; monthly Channel Advisor data showed
AMZN September SSS came in at 37.9% (from 45.1% in Aug), while EBAY September SSS 8.9% up
from August's 5.9%; group lags with market



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