Closing Recap 4:10PM EST

Wednesday, October 22, 14

Index Up/Down % Last
DJ Industrials -153.49 0.92% 16,461
S&P 500 -14.15 0.73% 1,927
Nasdaq -36.63 0.83% 4,382
Russell 2000 -14.67 1.32% 1,098


Equity Market Recap
Stocks close on the lowsEquities were moving along nicely, as it appeared the S&P 500 and
Nasdaq Composite would make it a 5
th
straight day of gains, but reversed late morning on reports
of Canada Parliament locked down as Ottawa police are looking for multiple suspects involved in
shooting incidents in Parliament Hill. (Remember we are coming off the best day for the S&P 500
for 2014 and the Nasdaq best day in about 2-years). Earnings had dominated the headlines prior
to the unusual situation in Ottawa that is still fluid and ongoing. The other standout story,
another sharp downturn in commodity prices, mainly crude oil, falling more than 2% in a late day
slide (bearish inventory data was bearish, but selling was aggressive late)
Regarding the Canada situation, not a lot of detail exactly what is going on in Ottawa, but reports
indicate a separate suspected gunman was shot and killed inside the Canadian Parliament, CBC
reported. Parliament buildings remain on lockdown, after a soldier was shot earlier this morning
at the Ottawa War Memorial. Canadian Prime Minister Stephen Harper is safe and expected to
give a statement later today

Economic Data
U.S. consumer prices (CPI) rose slightly in September (up 0.1% vs. est. 0%) owing to higher costs
for food and housing, but inflationary pressures continue to be held in check by falling energy
expenses. The consumer price index (ex-food and energy) rose a seasonally adjusted 0.1% (in-line
with ests) in September after falling by 0.2% in the prior month. Energy prices dropped 0.7%, led
by gasoline, to mark the third straight decline. Yet the cost of food advanced 0.3%, with most
major categories increasing

Commodities
Energy prices ended at the lows, with a decline of more than 2% for Brent and WTI crude. WTI
crude dropped about $2.00 to $80.51 per barrel (briefly dropped below $80 last week for the first
time since summer of 2012). Inventory data was bearish as the DoE showed a weekly build of
7.1M barrels for the week, more than the expected build of 3.0M; gasoline inventories fell 1.5M
barrels, while distillates rose 1.05M barrels selling accelerated into the Nymex close


Gold prices ended lower by $6.20, to settle at $1,245.50 an ounce, down on a lower CPI inflation
report earlier, while the rising dollar is once again taking its toll on commodity prices (down from
best closing levels yesterday since September). A stronger greenback often hurts dollar-
denominated commodity prices as it makes them more expensive to holders of other currencies.
Silver prices fell 32c, or 1.8% to $17.23 an ounce

Currencies
Currency markets active, with the dollar index up a third day, DXY rises 0.42 to 85.72; the euro
giving back recent gains amid fresh talk of bond buying by ECB yesterday, and stronger data
points in the U.S. (EUR/USD 1.2657 vs. high of 1.2886 just a week ago); the dollar also gains
ground against the yen, rising to 107.18 (but in narrow range throughout the session)

Bond Market
Treasury markets fall, with yield on the 10-year clawing its way higher after last weeks plunge
to 1.86% low; 10-yr now around 2.24%, with bonds lower, the 30-yr yield back at 3%, while
shorter end of curve 5-yr yield at 1.45% (bottomed at 1.1% last week). Lone piece of economic
data today, CPI for Sept, was mostly in-line with estimates


Macro Up/Down Last
WTI Crude -1.97 80.52
Brent -1.64 84.58
Gold -6.20 1,245.50
EUR/USD -0.0072 1.2644
JPY/USD 0.22 107.22
10-Year Note +0.03 2.234%


Sector News Breakdown
Consumer
Staples; food product firm BDBD warned for both Q3 and Q4 eps results; DF upgraded to OW at
Morgan Stanley; BGS Q3 eps/sales miss views; CHUY upgraded at Stifel; SONC Q4 tops estimates;
GMCR traded to fresh 52-week high earlier; MDLZ rises after positive comments from Credit
Suisse calling it an enormous asset value
Home improvement stocks; LL Q3 eps/revs/comps all missed estimates and cut its forecast for
the year (recall AWI recently lowered guidance) firm said operations improving in 4Q despite
uncertain environment (shares of AWI, TTS, MHK movers); tool maker SWK Q3 beat and narrows
year eps )trades back to level prior to drop in market last week)
Retailers; TUP cuts forecast for year (sees neg FX impact) after Q3 eps/sales miss views; retail
apparel names mostly higher, led by GPS, AEO, TJX, LULU
Autos Daimler AG said it has sold its 4% stake in TSLA for $780 million, a position it took with an
investment before Teslas 2010 public offering; shareholder Kyle Bass said on CNBC he would be
buying more shares of GM at current levels (reports tomorrow); Michelin rptd a 1% increase in
volumes for the first nine m 14 (said slowdown observed from Q2 continued); Bloomberg
reported midday that DLPH said to seek about $1B for its Thermal unit
Leisure, Lodging, Gaming; SIX Q3 eps beat and raise dividend, PII raises forecasts; lodging names
exhibiting strength ahead of earnings next week (MAR, H, CHH) and as Ebola headlines have
subsided (same deal with CCL, RCL rising on slowing Ebola stories)




Energy
Oil prices declined late morning after bearish weekly inventory data from the Department of
Energy; seeing bounce in E&P names (APC, DVN, SWN), as well as majors (CVX, HES, MUR), while
refiners rise, led by TSO trading at 52-week high
E&P MLP sector has ~75% downside to fair value on average according to Hedgeye Risk Mgmt.,
reported Bloomberg (says LINE, LNCO worth $0 at current commodity pricescalls MEMP best
long on relative basis)
In earnings news; NBR quarter in-line as all 3 segments improved; FTI with strong beat and
upward revision of 2014; WG preannounced huge miss today morning and restating 2Q2104
results (cut at Johnson Rice)
Analyst changes; GLF downgraded to neutral at Global Hunter; HES upgraded to buy at UBS; SWN
upgraded at Maxim; CHK upgraded to buy at UBS

Financials
Financials slightly lagging overall market as earnings start to wind down for the sector this week
(though buys overnight with several small/mid-cap banks out). In trust banks, NTRS
underperforms as earnings missed; major banks flattish most of the day (JPM, C, BAC); Insurance
got good report from TRV yesterday, ACE better overnight (but helped by favorable reserve
development and higher investment income); credit cards mixed on DFS report
In stock news, OCN remains weak (follows 18% decline Tuesday) on reports they backdated
thousands of letters to struggling borrowers (downgraded by one firm, S&P cut ratings) shares
of ASPS, NSM, WAL, HLSS all lower in sympathy; ABCW IPO opened at $28.66 (priced at $26);
WRLD Q2 eps missed on lower loan growth, but said CFPB has not asked for more documents;
LPLA preannounced Q3 results that included a $23M regulatory charge vs. est. $5M; ETFC up on
earnings

Healthcare
Biotech sector lower, led by weakness in BIIB, after company said that the first patient on
Tecfidera with rare brain infection known as PML died of Pneumonia (quarterly results were
better, as was guidance, but Tecfidera sales light of analyst forecasts; BIIB Q3 eps tops views and
boosts year EPS outlook, but MS drug sales of Tecfidera missed ests ($787M vs. est. $794M)
In other drug news; RGLS reports mean viral load reduction of 4.1 log10 at day 29 in 14 hepatitis
C treated patients from 2mg/kg dose of RG-101; IBIO expands exclusive product collaboration
with Novici Biotech; RPRX said no new safety signals in Androxal long-term study
Instruments; ISRG Q3 EPS/revs beat, procedure sales up 10% YoY, and raised procedure volume
guidance; TMO Q3 eps beat/revs miss/cuts forecast; ABT Q3 eps better
Other movers; NSPH said it started a stock offering; NLNK rises, a 2
nd
day on the WHO's
announcement that its VSV-EBOV vaccine will be tested on 20,000 front-line health workers
treating Ebola patients in Africa
Other earnings; MDCO guides year revs below ests and says sees Q4 pressures; BSX swung to Q3
profit on higher sales

Industrials & Materials
Aerospace & Defense earnings better; NOC Q3 eps/revs beat and raises year eps forecast; GD Q3
EPS/revs handily top views and backlog $74,4B, up 56% YoY (raises year forecast); BA Q3 core eps
and revs top ests and raises core eps view to $8.10-$8.30 from $7.90-$8.10
Industrial; IR Q3 eps/revs better, but guides q4 eps below views; EMR said Sept. trailing 3-mo
orders +5% vs Aug. +5%-10%, July +5%-10% citing mixed trends across markets, heightened
currency volatility; OC eps beats by 13c, but revs in-line (says re-roofing mkt, will be down YoY);
GNRC upgraded to buy at KeyBanc


Machinery/ag chemical names; CAT said Sept. rolling 3-mo. retail machine sales fall 10% vs Aug.
10% fall, July down 9%; DOW rises on quarterly results
Transports; rail co NSC Q3 earnings rose 16% on increased traffic, but top/bottom line results
missed analyst expectations; CVTI up on earnings in truck space
Metals & Mining movers; CDE & HL cut to Underperform at BMO on view that silver will continue
to underperform gold over the next 12 months; steel mixed, with STLD higher (upgraded today),
but X and AKS shares fall; CLF jumps as Credit Suisse said risks to short Trade have increased
Tankers/shippers show strength a second day after Baltic Dry Index rises

Technology, Media & Telecom
Semis; The SOX traded at 603 when MCHP reported (10/9), sold off to as low as 545 (10/15) only
to close at 605 yesterday BRCM Q3 eps/revs/margins top consensus
3D stocks fall as DDD guides Q3 eps and revs below views (revs $164M-$169M vs. $186M est.)
shares of XONE, SSYS, VJET active on guidance)
LED stocks; CREE Q1 eps/revs/margins miss and guides Q2 revs below guidance citing lower LED
demand (VECO, AIXG leveraged to LED)
Internet; HIMX said GOOGL decided not to exercise its previously issued purchase option to
make an additional investment into Himax's subsidiary, Himax Display Inc.; YHOO rises on strong
EPS/rev beats; ANGI falls after lower Q4 guidance
Hardware/software; VMW said profits fell 26% in Q3 due to higher expenses and guidance for Q4
sales below views; EMC profit fell short of estimates; UIS jumps on big earnings beat





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