Closing Recap 4:10PM EST

Monday, October 20, 14

Index Up/Down % Last
DJ Industrials 19.26 0.12% 16,399
S&P 500 17.23 0.91% 1,903
Nasdaq 57.64 1.35% 4,316
Russell 2000 9.86 0.91% 1,092


Equity Market Recap
After several days/weeks of volatile equity trading, where 3% swings have been the norm,
major averages were steadily higher, with the S&P, NASDAQ and Russell gaining, though the Dow
Industrials lagged given a weaker earnings/guidance report from component IBM (The Dow did
recover from a 120 point loss earlier). All in all quiet news flow (calm before storm most likely
with about 20% of S&P co.s reporting this week) in both equity, currency and bond markets (no
economic data today either) on light volumes. Some key earnings tonight from AAPL, CMG, TXN,
and STLDtomorrow morning from KO, HOG, KMB, MCD, OMC, UTX, LMT, VZ, MAN, ITW, and
RAI. Asia was strong overnight (Nikkei was up 4%, while Europe ended near the lows (DAX -1.5%)
Some data points: S&P and Nasdaq had not posted 3 consecutive days of gains since mid-
September (until today)The Dow Industrials had not posted back to back winning sessions since
9/18-9/19 (until today)The VIX Index fell as much as -14% to under 20 (was above 30 level last
Wednesday)note the S&P futures have traded more than 80 points above the Wednesday low
of 1814). Important technical level being approached for S&P, as now coming close to test of 200
day moving average (this time to the upside after falling and breaching that level a two weeks
ago for first time since 2012).

Commodities
WTI crude prices ended lower, but pared earlier losses of more than 1%, as WTI was flattish at
$82.71 (traded low $81.55 and as high as $83.48), while Brent was weaker, falling 76 to $85.40
per barrel (low was $84.41); no comments from OPEC, supply glut continues, and demand
slowdown concerns on slowing economies
Gold prices ended the session higher (first time in 3-days) by $5.70, settling at $1,244.70 an
ounce. In other metal news, silver inched higher a few pennies to 17.35 an ounce, while copper
dropped below $3.00 per lb. (off -0.5%), while both platinum and palladium prices rose over 0.4%
In grains market, Soybean futures fell to a one-week low on speculation that dry weather will
help accelerate the harvest in the U.S., the worlds top producer. Wheat dropped for the second
straight session, while corn was little changed Bloomberg


Currencies
The euro edged higher in afternoon trade, rising above the 1.28 level vs. the US dollar (no data
today, couple of Fed comments but doesnt change landscape that dollar stronger than other
currencies as we nearing rate hikes in 2015, while other Central Banks still looking at additional
easing measures ie. ECB); the dollar index (DXY) was flat early, fell in afternoon (to 85 level)

Bond Market
With no major economic data today in U.S. or overseas, treasury markets were very quiet, and
not totally surprising after one of the most volatile weeks in many years last week, which saw
sharp gains in bonds, and yields dropping at rapid clips on global growth concerns/flight to safety
trade last week (10-yr yield briefly fell as low as 1.86% last week, with 5-yr falling to 1.1%
lownow at 2.19%/1.4% respectively); 30-yr yield still not back above 3%


Macro Up/Down Last
WTI Crude -0.04 82.71
Brent -0.76 85.40
Gold 5.80 1,287.40
EUR/USD 0.0044 1.2804
JPY/USD -0.06 106.82
10-Year Note -0.0142 2.179%


Sector News Breakdown
Consumer
Retail movers; VFC qtr. Mostly in-line, but raises year eps view (reaffirms revs); in footwear,
Adidas shares rose overseas on reports Jynwel/Partners said to prepare offer for its Reebok unit
http://goo.gl/2OdLGr , while SHOO cut its year eps/rev outlook on retail segment; in other retail
news, SHLD announced that it will be bringing in up to $625M of cash through a rights offering of
senior unsecured notes with warrants/also; HAS beats after MAT miss last week
Staples movers; POST shares may rise more than 50% to $47 said Barron's; PTRY shares no longer
looks cheap according to Barron's; CMG to report earnings after the bell in restaurant sector; VSI
rises after Reuters reported company talking to banks about hiring advisor http://goo.gl/2D4XnC
; WFM said it was aggressively trying to lower prices (Bloomberg); HLF was at highs (Pivotal
Research initiated buy and $110 tgt) note NUS was also higher
Autos; GPC narrowed its year EPS and sales outlook after reporting earnings; rental car HTZ
draws another activist interest, as Jana Partners joins Icahn (Jana raised stake to about 7% from
1.3% prior); big week for earnings GM (10/23), F, LEA (10/24)
Homebuilders leading, led by NVR after q3 eps beat and rise in orders (lifts shares of LEN, TOL,
KBH, PHM); in housing news due this weekreports last Friday that the FHFA is close to a new
framework that will provide lenders with greater clarity on rep and warranty risks
Lodging, Leisure names moving to the upside amid no further negative Ebola stories over the
weekend; shares of cruise lines (CCL, NCLH, RCL), and lodging stocks (HLT, HST, MAR) and online
travel (PCLN, EXPE) bouncing; casino names failed to catch a bid (LVS, WYNN)




Energy
Energy prices were lower to start, with WTI and Brent down more than 1%, but rallied into
afternoon; sharp energy swings of late, likely to continue/coupled with earnings over the next 2-
weeks, group likely to remain volatile (a lot of negative news priced in thus far)
Oil services; HAL rises as Q3 eps and revs top views and raises dividend (so HAL and SLB better,
BHI missed); SLB is inexpensive and has room to rise, Barron's says
M&A news; An investor group led by Macquarie Infrastructure and Real Assets has agreed to buy
electricity supplier CNL in a deal valued at about $4.7B, paying $55.37 per share
http://goo.gl/uBmWeA ; TLLP agreed to buy QEP Resources Inc. (QEPs/QEPM) natural-gas
pipeline and processing business for $2.5B in cash http://goo.gl/2qp60r
Other movers on news; REXX boosts full-year production guidance; PBR mentioned cautiously by
Jim Chanos of Kynikos Associates at Robin Hood Conference
Coal movers; BTU posted a wider loss in its September quarter as revenue fell across all segments
(but loss better than expected lifts ANR, ACI, WLT, CLD early); SCOK said its above-ground
facility for the conversion of carbon dioxide into clean-burning syngas had begun operations
Solar/Alternative energy; TERP upgraded to Overweight at JP Morgan, (was also recommended
by David Einhorn at Robin Hood conference today); JPM lowered tgts on CSIQ, FSLR and SPWR;
SUNE also mentioned positively by Einhorn at Robin Hood conference

Financials
Several analyst rating changes in financial sector today after recent market volatility; Goldman
Sachs upgraded Retail brokers/Trust banks ETFC, AMTD and BK on more than 10% pullback in
interest rate sensitive names; Deutsche Bank upgraded KEY to buy and cut PNC to hold in
regional bank space (also upgraded to AIG on pullback); CMA upgraded at Sandler, Bernstein &
Nomura; PFBC, BANF, PFG, PRI, PBCT cut at Raymond James
At a convention of mortgage bankers, a federal housing regulator revealed a plan that could
loosen tight credit and allow more people to qualify for mortgages, says the New York Times. The
plan would include reassurances to lenders http://goo.gl/hgH23U
REIT movers; AMRE rises on reports several potential buyers are preparing bids for the U.S.
shopping mall owner that could value the company as much as $26 a share http://goo.gl/EUGdTv

Healthcare
M&A related news; VRX Q3 eps tops views, boosts forecasts still pursues hostile bid for AGN
http://goo.gl/2uvzaL ; MJN drops on reports French foods group Danone SA said it was not
conducting a strategic review of assets for Mead Johnson (MJN) and had not decided on any
priority in terms of possible external growth possibilities http://goo.gl/VRks3O
Biotech; NLNK in exclusive worldwide license agreement with Roche for development of NLG919,
NLNKs IDO pathway inhibitor in Phase 1 testing (NLNK to get upfront payment $150M, will be
eligible for $1b in milestone payments and double-digit royalties on sales); REGN/SNY report
start of a phase III study of Dupilumab
Stocks that have been active in reaction to Ebola related headlines moving lower; given no major
developments over the weekend in Texas, seeing shares of protective clothing makers (APT,
LAKE) lose ground (vaccine makers mixed TKMR, BCRX, CMRX, NLNK, IBIO)


Industrials & Materials
Metals and Mining movers; group was active with market rally; earlier Citigroup noted sell-off in
group and says sees opportunity in names: upgrading CNX, NEM and AHGP to Buy and raises FCX
to neutral, while downgrading CLF to Sell saying the covenant breach and asset write-downs
could force the company to cut or eliminate its dividend and stock buyback program; STLD
reports tonight in steel space
Transports higher led by strong gains in airlines (DAL, AAL, UAL), while rail stocks were mixed
(CSX fell on reports CP ended merger talks with CSX); truckers were modestly higher (KNX);
Reuters reported spot crude by rail volumes seen down in Canada; rail car news, TRN loses trial
that it withheld information about its highway guardrail systems that made it more dangerous
(must pay $175M judgment)
Industrial movers; LII Q3 eps beats views and announces $450M stock buyback (lifting HVAC
stocks like WSO)
Ag stocks (MON, POT) got a lift (another one of heavily beaten sectors), after Scotia upgraded
shares of MOS and K+S on valuation, saying group presents opportunity for some investors (does
note overall fertilizer demand will take hit next year)
Chemical sector; PAH to acquire Arysta LifeScience for ~$3.51B http://goo.gl/1BUkj8 ; PPG
upgraded to buy at SunTrust after 10% pullback; CE reports tonight
Tankers/shipping; Baltic Dry Index rises 3.1% to 973 pts (biggest gain since Aug 28), according to
Baltic Exchange data, as Panamaxes gain 3% to $7,970/day; DRYS provided most recent
developments (shares of FRO, TNP, TK active)

Technology, Media & Telecom
Hardware/PC; IBM plunges as rpts Q3 eps $3.68/$22.4B (below $4.32/$23.37B); says no longer
expects to deliver at least $20 in operating EPS in 2015 (saw marked slowdown in client buying
behavior in Sept) has not posted an increase in revs for 10-quarters nowsees Q3 service revs
(3%) YOY and software revs down (2%); AAPL to report earnings after the close (also rolled out
Apple Pay today); separate of earnings, IBM agreed to pay Globalfoundries Inc. $1.5B to take an
unprofitable chip-manufacturing unit http://goo.gl/0BJE2v ; SHOR rejected $540M bid from MTL
($8.10 bid) http://goo.gl/SHUs8s
Software; SAP Q3 operating profit misses views; cuts year operating profit outlook to EU 5.6B-
$5.8B from prior EU5.8B-$6.0B view
NCR cut its year eps view citing a challenging retail environment; says 2014 results to be below
our previous guidance ($6.58B-$6.63B, from $6.75B-$6.85B) stock fell 20%
Chips/HDD movers; HTCH guides Q4 revs above consensus ($70.3M vs. est. $67.7M); MU
upgraded to Outperform at Pacific Crest (follows weakness after SNDK earnings last week); WDC
positive mention in Barrons saying shares look inexpensive as big data play; TXN reports after
the close tonight
Media/Telco; CBS positive mention in Barrons, saying shares may rise 25%; NWSA upgraded at
Macquarie; GCI Q3 eps beats, while operating revs also top views




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