Closing Recap 4:10PM EST

Friday, October 17, 14

Index Up/Down % Last
DJ Industrials 262.97 1.63% 16,380
S&P 500 23.97 1.29% 1,886
Nasdaq 41.05 0.97% 4,258
Russell 2000 -2.03 0.19 1,084


Equity Market Recap
It was a week of weekswith massive equity market swings, concerns across various spectrums,
plunges in oil prices, surges in treasury prices and oh by the way, earnings season kicked off! In
the end, we ended about a 1% down on the week for major averages but closing around the
highs (though Small Caps and Transports ended positive) what will next week bring?
By midday, the Dow Industrials and S&P 500 were enjoying their best trading day of the year,
until some selling pressure midday pared gains but ramped higher late
Russell 2000 declined (was up 1% earlier), but outperformed this week (up 3% for the week), but
still underperforming for the year (down about 7%)
Dow Industrials break 6-day losing streak (longest since August 2013)
European shares closed higher, its biggest advance in 3 years, ending their longest losing streak
in 11 years (eight days). Still, the Stoxx 600 finished down for a fourth week. Helping markets
higher in Europe (and carry over in the U.S.), were comments from ECB Executive Board member
Benoit Coeure who said the bank will start purchasing assets within days
According to banking executives in the know, the PBOC is set to inject up to 200B ($32.8B) into
roughly 20 large national and regional Chinese banks amid worry the country will miss its GDP
growth target of 7.5% this year. This would follow last month's move which pumped 500B into
the five major state-owned banks Seeking Alpha (Reuters reported earlier)

Economic Data
Federal Reserve Chair Janet Yellen said that the last several decades have seen the most
sustained rise in income inequality in a century. In her Boston speech, Yellen made no comments
on the current state of the economy or on the future course of interest rates
Sept. Housing Starts rose 6.3% MoM to 1.017M annual rate (vs. est. 1.008), up from 957K last
month; Building permits rose 1.5% to 1018k from 1003k in Aug. (vs. est. 1.03K); Single family
starts rose to 646k; multifamily starts rose to 371k in Sept.
University of Michigan Confidence rises to 86.4 (est. 84.0) above the prior high of 85.1 in July
of 2013 (and best levels in seven years)


Commodities
Energy prices end little changed (near lows of $82.44) in what was a roller-coaster ride this week
(Brent and WTI still down 20% from June highs); WTI crude rose 0.05 to $82.75 per barrel (but
traded as high as $84.45 per barrel); WTI bounced from lows of $79.81 yesterday on dramatic
selling pressure. Concerns remain the same for energy prices, with oversupply issues and slowing
demand given a global economic slowdown following recent data (except in the U.S.), and no
intervention from OPEC in regards to production cuts given the glut in oil
Gold prices ended modestly lower, falling $2.20 to settle at $1,239 an ounce, but for the week,
the yellow metal ended higher by 1.4% following Europe weakness, Ebola fears, and Fed rate
timing uncertainty. Silver prices dropped 11c to $17.33 an ounce (up 0.2% for the week)

Currencies
The dollar higher most of the session, trading as high as 85.247 (overnight low was 84.762),
ending a little above 85 level, gaining ground against counterparts on stronger economic data
(Housing Starts rise/Michigan confidence at 7-year highs); the dollar has pulled back from 4-year
highs (DXY topped at 86.746 so far on 10/3), but with Fed on course to raise rates (sometime in
2015 estimated), and ECB expected to be more accommodative likely to hold gains

Bond Market
An extremely volatile week in the bond markets, with % type moves you would not normally see
(10% moves on Wednesday). Treasuries were softer today, with the 10-yr yield edging back to
around the 2.20% level after bottoming at 1.86% on Wednesday in a massive bond surge on
global growth/Ebola market fears; the yield on the 5-year at 1.41% (bottomed at 1.1%
Wednesday), while the 30-yr yield approaching the 3% level. We also saw record low yields in
various bonds in Europe in what was extreme volatility overseas


Macro Up/Down Last
WTI Crude 0.05 82.75
Brent 0.34 86.16
Gold -2.20 1,239.00
EUR/USD -0.0035 1.2774
JPY/USD 0.51 106.80
10-Year Note +0.05 2.195%


Sector News Breakdown
Consumer
Retail movers; URBN negatively pre-announced that Q3 comps and margins tracking below plan
(downgraded by at least three analysts on forecast) really weighed on retailers (ANF, AEO); GII
falls as Piper said wholesale trends within missy space may have softened in past few weeks
Staples rebound; protein stocks (SAFM, TSN, PPC) rebound after decline yesterday after SAFM
investor day (BMO said stocks overreacted to comments that chicken breast prices will fall to
year ago levels); CQB board said the $14 offer from Cutrale-Safra was inadequate
Homebuilders with solid gains Friday, helped by better Housing Starts data earlier (all regions
rose with gains broad-based), and benefitting from the recent downturn in bond yields; shares of
LEN, TOL, PHM, KBH rose
Auto movers; European Automobile Manufacturers Association showed registrations increased
6.1% in September from a year earlier to 1.27 million vehicles; ABG boosts share buyback


Leisure, Lodging, Gaming, news; CCL fell on reports a ship was denied entry by Belize on Ebola
scare/says Texas hospital worker on ship shows no symptoms of Ebola (passenger isolated); CZR
amended debt contract/to begin formal talks with some bank creditors; Hotels stronger, led by
HLT (upgraded at SunTrust), MAR, and HST
Education stocks with a much needed lift, up after ESI said that it was projecting a 40% increase
in institutional scholarships in fiscal year 2014, along with positive cash flow in fiscal year 2015;
shares of DV, APOL, STRA, CECO moved higher

Energy
Energy space up early/down afternoonthe oil services names bounced after weakness
yesterday (was down on BHI quarterly results); overnight, SLB posted Q3 eps and revs above
consensus views and said sees strong earnings growth in 2015 (taking some pressure off the
group HAL up); Cowen on sector, upgraded BAS, CFW.CN, NBR, NR, RES, TESO and TCW.CN
and downgraded HELI, GEOS, PGS.NO, RIG, HERO and VTG
UBS upgraded land drillers HP, NBR and PTEN to buy given view that sell-off in the stocks has
been overdone, even assuming a more cautious N. America environment (believes upside risk of
40%-80% exists if oil prices return to $90 per barrel)offshore drillers with reversal down late
day (RIG, DO)
Sand fracking names with another big bounce (EMES, SLCA, HCLP, FMSA) after decline last 2-
weeks note FMSA received favorable permit ruling giving co. option to expand sand capacity at
Wedron facility
Stock movers; CWEI cut production forecasts/downgraded to accumulate by an analyst on that
production forecast cut

Financials
Financials get much needed bounce, helping lead markets, as earnings rewarded today, and as
yield prices bounce off lows (10-yr yield has now recovered 34 bps off lows on Wednesday!);
shares of MS, leading after earnings, with bounces in JPM, GS, DB, BAC; trust banks rise (BK
reported); credit cards mixed after COF earnings; regionals HBAN, STI, CMA reported
Financial earnings; MS quarterly results top views, led by trading revenue gains; COF declines on
earnings; MTB with a quarterly miss
Fannie Mae (FNMA) and Freddie Mac (FMCC) are close to an agreement with their regulator and
lenders that would expand mortgage credit lending and help lenders protect themselves from
incurring charges on making bad loans WSJ http://goo.gl/rCuGFG

Healthcare
M&A news; MJN shares spiked midday after Reuters reported Danone wants to pursue takeover
of MJN (Reuters says Danone's sale of its medical nutrition division is conditional on Mead
Johnson acquisition) http://goo.gl/33gi6a ; COV shares fell over 4% on no specific news (could be
fear over current deal with MDT after ABBV pulled the plug on its plan to buy Dublin-based Shire
recommending shareholders vote against the proposed $55B takeover following new U.S. tax
rules http://goo.gl/Ej2bQh
Biotech movers; REGN rises after data showed Eylea improves vision better than Roches Lucentis
or Avastin in diabetic macular edema; RPRX said a pending FDA meeting would be re-classified to
Type C instead of Type B amid insufficient clinical data; SRPT says PMOplus drug candidates
(Ebola/Marburg virus) well tolerated, no clinically significant safety effects
Genetics; MYGN guides Q1 eps 25c/$168M, below 41c/$183.3M est. saying more rapid
transition to myRisk test caused increase in costs; CPHD rises on earnings
Other movers; ISRG upgraded at Leerink; ATHN falls after earnings/said leas overall are behind
budget; SYK saw 2014 eps at low end of range; FMI upgraded at William Blair to Outperform
Small Cap; AMBE study performed to show Ampion is safe; CYTR Phase 2b global clinical trial of
aldoxorubicin for the treatment of first-line soft tissue sarcoma has shown longer than expected
survival of patients

Industrials & Materials
Transports added to recent gains (has outperformed major averages lately), with no help from
KSU after earnings, but DAL gets a delayed bounce after better earnings Thursday; rails lead
(UNP, NSC, CSX), but strength across the board (airlines/freight)
Multi-industry; HON boosts low end of 2014 pro forma EPS and revenue forecast, while now sees
2014 segment margin ~17% vs prior view 16.8%-17% (q3 eps topped highest est.); GE operating
EPS topped consensus; TXT Q3 eps topped views, and boosted its year eps and cash flow outlook;
Rolls-Royce cut its sales outlook for the full year; HDSN said the EPAs issuance of final rule on
HCFC allowances for 2015-19 is more aggressive than the agency's original preferred approach
Paper & Packing names rise for a 2
nd
day; CCK shares lead group higher today on earnings and
guidance (shares of BLL, SLGN, OI, SON rise)
Metals & Mining; CLF said it expects to take $6B charge on its iron ore/met coal assets as price
slumped (BMO said charge may wipe out equity holders); AKS lifts steel names after Nomura
upgraded shares to buy
Ag and Chemicals; CF said it has dropped merger talks with Norway's Yara International ASA
after the fertilizer makers were unable to agree on terms of a deal http://goo.gl/2xDdBx; SGGH
entered pact to buy Global Recycling and Specification Alloys (GRSA) unit of Aleris Corp. for
$525M http://goo.gl/WRQ4LC ; CYT earnings/cut guidance

Technology, Media & Telecom
Internet movers; GOOGL missed profit and rev estimates/paid clicks less than est./cost per click
better; NFLX extends yesterday losses after weaker guidance/subscriber growth forecasts (Mark
Cuban came on CNBC saying he bought shares of NFLX yesterday)
Semiconductors with third day of gains after getting crushed late last week; SNDK report one of
few negative points, while XLNX rises on earnings/guidance and AMD up after job cuts (lowered
guidance); shares of INTC, NVDA, TXN, BRCM, ADI all up
Video games U.S. retail sales of video-game players and software rose 2% YoY to $1.1B;
spending on game hardware, including consoles, more than doubled to $432.7M, said NPD Group
Inc. said (spending on consoles more than tripled last month, NPD said); software sales shrank
36% to $481.2 million from a year earlier) - EA, ATVI, TTWO, GME leveraged
Hardware, Storage movers; QLGC reports q2 eps/rev beat and $100M stock buyback plan; DGLY
jumped after receiving order from Cookeville, Tenn police department





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