Closing Recap 4:10PM EST

Wednesday, October 15, 14

Index Up/Down % Last
DJ Industrials -173.58 1.06% 16,141
S&P 500 -15.21 0.81% 1,862
Nasdaq -11.85 0.28% 4,215
Russell 2000 10.87 1.02% 1,072

Equity Market Recap
Volatility at its fineststocks tanked (off 3%), by midday but staged another wild rally late day
(despite a late day warning from WMT), sending the Russell into positive territory and the
NASDAQ near the flat level (a 3% bounce from lows 110 points). Earnings tonight from AXP,
EBAY, NFLX, LVS, KMI) bonds rose, dollar fell markets whipped around, ending mostly lower,
but pared losses Russell surged, up 1%
The Dow fell for a 5
th
day (was only major index to not close higher yesterday) The Dow
Industrials fell 370 points early, recovering much of it by late morning, only to see selling
accelerate in the afternoon (down 460), and taking major averages down 3% at one point in a
broad sell-off (led by financials). The S&P 500 and NASDAQ both fell around 10% from Sept 19
intraday high (correction area), with VIX surging more than 30% to 30 level at peak (highest level
since 2011). S&P Financials dropped nearly 4% in worst intraday drop since Dec. 2011
S&P 500 cash low 1,820.66 (hi 1874.18), Transports fell almost 3% in what has been a very
choppy week given airline volatility (on Ebola fears), the Dow fell 460 points at session low
Several factors weighed on sentiment today (lately) includes key technical levels breached
1) Ebola fears still prevalent in market (new case in Texas reports the 2
nd
patient had flown
Monday night on Frontier plane)
2) European economy in trouble (awful economic data points), and what can ECB do to help?
3) Energy prices plunging (over supply, slowing demand given global growth slowing fears)
4) Earnings (results just started for recent quarter, but what kind of impact will weaker Europe/FX
concerns have?)
5) geopolitical fears still remain (Russia/Ukraine, protests in Hong Kong, ISIS)
6) newest issue has been the ramifications to investors after Treasury rules regarding inversion
deals (seeing in ABBV/Shire deal today) seeing shares of COV/MDT fall on story
7) What is the bond market telling us, with massive rally over the last week or so, taking yield on
10-year as low as 1.86% earlier?
8) for todays move, weaker economic data (Empire Manufacturing, Retail Sales, while inflation
readings remain benign (PPI lower) pushes out odds of rate hike by Fed
European markets closed near lows, with the Stoxx 600 Index sliding 3.1% (down 11% from June
high); weakness across the board, with Greece closing lower by 6% (was down 10% at one point),
major averages such as Germanys DAX, France's CAC-40 closed down 3.6% at 3939.72

Economic Data
October Empire Manufacturing Index with sharp decline in October, with a reading of 6.17, well
below consensus of 20.25 and well below Sept 27.54 tally; new orders plunged to -1.73 from
16.86 prior, while prices paid dropped to 11.36 from 23.91 prior; employment uptick
Retail sales for September weaker, falling an unexpected (-0.3%) vs. est. (-0.1%) and down from
Aug +0.6%; retail sales ex-autos fell (-0.2%) vs. est. for a 0.2% rise
September Producer Price Index (PPI) falls (-0.1%) vs. est. for an uptick of 0.1%, while core prices
(ex-food and energy) was unchanged vs. est. for 0.1% rise
U.S. business inventories rose 0.2% in August, with sales down 0.4%. July's 0.4% increase in
inventories was not revised, but the 0.8% sales jump was nudged down to 0.7%

Commodities
Another very volatile session for energy prices, ending little changed, but wide ranges for prices;
WTI (hi 82.45 and low 80.01), Brent (hi 85.61 and low 83.40)
Gold prices rose for a third session, up $10.50, or 0.9% to settle at $1,244.80 an ounce, while
silver prices rose 6c to $17.46 an ounce. Lower inflation reading, flight to safety on global stock
pullbacks, weaker US data (raises expectations for rate hikes to get pushed out), just some of the
catalysts for higher precious metal prices. Weakness in platinum (-1%), palladium (-4%), and
copper prices (-2.5%)

Currencies
U.S. dollar sold off following weaker U.S. economic data, a stronger bond market, and overall
concern in U.S. markets; the euro rises to 1.2796 vs. dollar (a 3-week high); the dollar index falls -
0.68 to 85.14; the dollar drops to 105.90 against the yen

Bond Market
Bond markets with some incredible moves todaynear the open, the yield on the 10-yr fell
about 30 bps, dropping under 2.00% for first time since June 2013 (low under 1.9%); bigger
moves in long-end, with 30-yr bond up 3-full points, dropping yield under 2.80% (ended around
2.88%); 2-yr yield drops to 0.28% and 5-year at 1.31% (was 1.10% low) - weaker economic data in
U.S. today on manufacturing (NY), low inflation (PPI), and softer retail sales, (coupled with market
weakness) now pushing out chances of Fed rate hike to end of 2015 now and adding to bond
strength. German 30-yr bond yield drops 16 bps, most since Nov 2011, to 1.60%


Macro Up/Down Last
WTI Crude -0.06 81.78
Brent -1.54 83.50
Gold 10.50 1,244.80
EUR/USD 0.0119 1.2778
JPY/USD -0.95 106.10
10-Year Note -0.116 2.091%





Sector News Breakdown
Consumer
Retail movers; consumer discretionary among worst sectors today despite weaker energy prices
as sentiment in global growth slowing; stories today included WMT CFO said expects net sales
growth to rise 2%-3%, down from prior forecast of 3%-5%; ANN entered into a non-disclosure
agreement with Golden Gate Capital; CENT rejected Harbinger Group Inc.s offer to buy the
company or its pet segment; WTSLA guided eps to low end of view
Staples; Cutrale-Safra raises offer for CQB to $658M, or $14 from $13 per share
http://goo.gl/66v1oX ; SWY Q3 revs miss estimates
Homebuilder stocks leaders; as bond yields plunged, mortgage rates come tumbling down as
well; saw shares of homebuilders LEN, RYL, PHM, KBH, TOL bouncing
Leisure/Lodging related stocks under pressure as Ebola fears renewed, given reports of a 2
nd

Texas health worker diagnosed with the disease; seeing cruise lines, lodging, gaming groups weak

Energy
Energy names holding up better than other sectors (most beaten up), saw some nat gas related
names with relief bounce like RICE, COG, SWN (which got analyst upgrade); overall though, still
nothing fundamentally positive for oil names into earnings, with prices falling daily for WTI and
Brent (over supply and global growth woes) energy tried to bounce off lows
MLP stocks upgraded at Bank America, but notes volatility may persist until oil prices near
bottom, high yield markets show evidence of stability and retail sentiment gets more
negativeupgrades BWP, ENLC, MMP, SUSP, SXL, TOO, WES to buyupgrades NS, NSH to
neutral and downgraded WPT to neutral; DM IPO rises after 17.5M share IPO priced at $21.00

Financials
Financials sharply lower as rates plunging across the board (negative for lending); regional banks
among the hardest hit (RF, KEY, FITB, USB) ugly despite mostly in-line results thus far (no
tremendous reports but no disasters either)
Financial earnings; 1) BAC q3 eps tops views on trading gains; 2) MTG q3 eps beats by 7c as new
insurance written rises, but premiums fall; 3) PNC eps tops views (but includes gain), while NIM
drops to 2.98% from 3.47% YoY; 4) KEY rpts in-line quarterly eps, while NIM drops; 5) SCHW q3
revs above consensus; 6) BLK q3 adjusted eps easily tops views (first of asset managers to report)
Monthly Master Trust credit data; 1) COF Sept. Net Charge-Offs 2.79% from 2.81% MoM, while
Sept. delinquencies rose to 3.21% from 3.08% in Aug; 2) JPM Sept. NCOs 2.24% vs. 2.50% MoM,
while Sept. delinquencies was 1.30% vs. 1.24% MoM ;3) BAC Sept. Credit-Card NCOs 2.93% vs.
3.33%, while Sept. delinquencies 1.92% from 1.86% MoM; 4) AXP Sept NCOs 1.2% vs. prior 1.5%;
while delinquencies at 1% vs. prior 0.9%

Healthcare
AbbVie Inc. (ABBV) said it was having second thoughts about its planned acquisition of Shire PLC,
saying its board would reconsider the $54B deal in light of new Treasury rules that make it less
attractive relocating overseas for tax purposes http://goo.gl/NAl0BT; the comments raise
concern of other inversion type deals, with shares of COV moving lower (note MDT currently
seeking EU review for COV deal)
Biotechs active again; after pulling back yesterday on what appeared to be easing Ebola fears,
shares of stocks leveraged to help fight the disease are rising again after reports of a second
health-care worker in Texas testing positive for Ebola after caring for a patient with the deadly
viral illness shares of CMRX, TKMR, NLNK, BCRX, IBIO, SRPT, as well as protective clothing
makers LAKE, APT, VSR all moving


Hospital stocks were under pressure on the day, with moves by HCA, CYH, THC, UHS, LPNT
Story movers; WST CEO retires and lowers top end of year eps view to $1.82 from $1.87; OREX
earned $60M milestone payment from Takeda Pharmaceutical; PPHM said its Bavituximab binds
to Ebola virus in lab tests; STJ

Industrials & Materials
Transport index falls, led by a very volatile airline sector (group down 6% Monday, up 4%
yesterday); airlines hit session low after reports health worker w/ Ebola flew between Cleveland
and Dallas hours before reporting symptoms (shares of UAL, DAL, AAL, JBLU, LUV fall); truckers
(CNW, R) and rails (CSX falls despite earnings beat) also lower
Chemical makers down as global growth concerns remain in place; shares of DOW, EMN, CE,
LYB, and HUN drop; one deal, as PENX agreed to be bought by INGR for $19 per share in $241M
deal http://goo.gl/iTKCh4

Technology, Media & Telecom
Semi movers; INTC Q3 eps/revs top consensus, guidance better, but falls on market concerns
(downgraded by one analyst); QCOM offered to buy U.K. chip maker CSR PLC (CSRE) in a $2.5B
deal http://goo.gl/l7kDQj ; LLTC q1 eps/revs miss views, CFO to retire, q2 rev guidance below
estimates; ASML with Q3 miss, but sees Q4 revs that exceeded analyst estimates ; MU upgraded
to Overweight at JP Morgan; AMAT upgraded to buy at Bank America calling stock very attractive
after recent sell-off
PC/Hardware; HPQ resumes buyback program/ends merger talks w/EMC http://goo.gl/gktJnV;
ELX guides Q1 revs above consensus and prior views; KTCC cuts Q1 forecast citing larger than
anticipated reduction in production levels for longstanding customers; IGTE falls on earnings
Media movers; TWX standout to upside amid comments at investor day firm said o launch
streaming service in 2015 (weighed on shares of NFLX)





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