Closing Recap 4:10PM EST

Monday, November 17, 14

Index

Up/Down

Last

DJ Industrials

13.07

0.07%

17,647

S&P 500

1.46

0.07%

2,041

Nasdaq

-17.54

0.37%

4,671

Russell 2000

-8.62

0.73%

1,168

Equity Market Recap

It was another choppy session on Wall Street, remaining directionless for a 6th consecutive
trading day, as major averages hold near record highs, this despite a weaker outlook out of Japan
overnight (GDP showed surprise contraction), as M&A activity, and positive investors sentiment
in the U.S. remains firmly in place. Small Caps and Tech stocks led weakness (Russell 2000 -0.7%,
while S&P another closing high). One more week of meaningful earnings reports, as retailers
round out the quarter, with TGT, HD, LOW among those reporting this week. It was another low
volume, light news session this Monday, outside of two large M&A deals (HAL/BHIACT/AGN),
with Asia ending lower, Europe closing higher (Draghi comments) and commodities mostly lower
Asian stocks tumbled overnight after Japans real gross domestic product (GDP) shrank (-1.6%) in
the third quarter, a major surprise to economists that had on average been looking for the
economy to expand by 2.25%. Japanese stocks sank nearly 3% after the report. Europe shares
ended higher after ECB President Mario Draghi said in Brussels that expanded purchase program
could include Govt bonds

Economic Data
New York Fed Empire Manufacturing for November rises to 10.16, below ests. of 12.0, but above
prior month of 6.17; Prices paid fell to 10.64 from 11.36, while New orders rose to 9.14 from 1.73 prior; Number of employees fell to 8.51 from 10.23 reading
Industrial production in the U.S. unexpectedly dropped in October, weighed down by declines at
utilities, mines and automakers, falling (-0.1%) after a 0.8% increase in September that was
smaller than previously estimated (and below est. for 0.2% increase)

Commodities
Oil prices end lower, but off worst levels, with WTI down -0.18 to $75.64 (lows of day $74.71),
while Brent dropped as low as $77.95 per barrel, also before paring losses (closed around $79 per
barrel). All eyes on OPEC meeting next week, where with prices at four-year lows, OPEC may be
forced to curb supply at its November meeting. Leading members of OPEC have previously
resisted calls to cut production as oil has fallen into a bear market

 Gold prices ended a quiet session modestly lower after rallying sharply Friday (but still finished
the week lower), declining $2.10 to settle at $1,183.50 an ounce on a bounce in the dollar. Silver
prices posted biggest drop in more than a week
Nat gas prices rise, up more than 7% amid colder weather temperatures, rises 0.29 to 4.31 mln
Btu (near highs off lows of $4.113 mln btu)

Currencies/Treasuries
Today, the dollar index (DXY) approached a five-year high (back near the 88 level) as ECB
President Mario Draghi cited an urgent need to agree on concrete short-term commitments for
the euro area. The dollar rose and Treasuries fell on speculation the U.S. economy is robust
enough to withstand higher interest rates and a recession in Japan. The dollar traded up above
the 117 level against the yen before paring gains, while the euro declined
The yield on 10-year Treasuries added two bps to 2.34% in quiet trade. Federal Reserve
Governor Jerome Powell said he expects the U.S. central bank to raise interest rates next year,
adding the exact timing would depend on the pace of economic recovery

Macro

Up/Down

Last

WTI Crude

-0.18

75.64

Brent

-0.10

79.31

Gold

-2.10

1,183.50

EUR/USD

-0.0071

1.2455

JPY/USD

0.15

116.44

+0.014

2.336%

10-Year Note

Sector News Breakdown

Consumer
Retailers; quiet in sector after recent outperformance, despite mixed earnings last week; tonight
URBN reports quarterly results, with HD, DKS, TJX tomorrow, LOW, TGT, SPLS, LB Wednesday
Staples; poultry producers rise as TSN Q4 eps beat/revs light; midpoint of year eps above
consensus (SAFM, HRL rise in reaction); PG downgraded to hold on valuation at Canaccord;
restaurants mostly lower (JACK, BKW, CMG) - note LOCO falls as files to sell 6M shares of stock;
JD fell as online direct sales company in China posted Q3 loss vs. year ago net income
Housing/Building products; homebuilders mixed after rallying last week on some earnings (shares
of DHI, KBH, LEN active); MTZ upgraded by one analyst
Lodging, Leisure, & Gaming; UBS downgraded shares of MAR and HOT to neutral saying that
signposts point that we are late enough in the cycle that we should avoid paying higher than
historic multiples for the lodging names
Energy
Oil services in focus after HAL agreed to acquire BHI for about $78.62 per share, in deal valued at
$34.6B; HAL subject to $3.5B break-up fee; http://goo.gl/81bCH1
Energy stock prices lower, led by DNR after cutting 15 cap-ex by 50% to $550M on oil price
uncertainty/targets flat 15 production; shares of E&P stocks in general weaker (NFX, DVN, PXD,
APC), while drillers reversed from earlier lows (RIG, NE, DO)
Story movers; EXH plans to separate into two publically traded companies; CLH upgraded to
Outperform at Wedbush; PBR shares fell as it cut its 2014 output growth target because of delays
in securing platforms and licenses; TLM said in talks to sell Marcellus Pipelines to Regency,
Bloomberg reported (said deal valuing assets at over $1B could be announced within 3-weeks)

 Solar stocks weakness continued (group fell last week after softer revenue outlook from SPWR);
group also fell after better CSIQ earnings last week (group falling despite reports last week the
United States and China just agreed to a climate treaty, where U.S. agreed to reduce its carbon
emissions by 26% to 28% by 2025 (from 2005 levels) and China agreed to reach peak emissions
by 2030 shares of YGE, TSL, JASO have been falling) not SPWR spiked late day
Utility index bouncing (UTY), among best performers on the day, led by shares of CNP, SRE, EXC,
PCG, ED and NU to name a few winners
Financials
Master Trust data: Monthly Master Trust Credit Card data generally weaker: COF Oct Net Charge
offs (NCO) jumped to 3.16% from 2.79% in Sept as delinquencies rose to 3.31% ; JPM Oct NCOs
rise to 2.26% from 2.24% Mom (Oct. delinquencies also rise to 1.34%); ADS Oct NCOs jump 4.4%
from 3.6% (delinquencies dip); BAC NCOs 2.81% vs. 2.93% MoM; DFS Oct NCOs 2.1% vs. 2.2% in
Sept (but delinquencies rise to 1.8%); AXP NCOs rise to 1.3% from 1.2% in Sept
Stock movers; AON announces stock buyback; ALL downgraded at Keefe Bruyette; REIT sector
one of few outperformers early in financial sector (IYR)
Healthcare
M&A news in Healthcare/Pharma sector; AGN agreed to be acquired by ACT for $66B, getting
$219 per share http://goo.gl/FgDRUs (to repel hostile advance from VRX which said was willing
to pay up to $200 per share); PFE cut its year eps views after news it is teaming up w/ Germanys
Merck KGaA to develop new cancer license product (Merck KGaA to get $850M upfront
payment) http://goo.gl/nbzAt9
Hospital stocks rally; Bank America defended group saying threats to health-care reform
relatively low, with Obama likely to veto major changes to ACA, states likely to see work
around if Supreme court were to overturn subsidies (CYH, LPNT, HCA, UHS rise)
In stock news; FOLD reports positive phase III data on Cardiac/Composite endpoints from Fabry
study; INO ends 2013 prostate cancer agreement with Roche; KND files to sell 5M shares of
common stock; CLDX jumps as positive interim data from is Phase 2 clinical trial assessing the
safety and efficacy of rindopepimut in patients; ABBV says Phase 1 data show 33% response sate
in brain cancer; MRKs Vytorin reduced cholesterol ~20% more than statin alone and reduced
heart complications by 6.4% in long-awaited Improve-It study; REGN/SNY PCSK9 tops MRKs
Zetia in helping reduce LDL cholesterol; SNSS jumps after announcing late-breaking presentation
of phase III ALOR trial at ASH annual meeting
Industrials & Materials
Metals & Mining stocks; no specific news in metals, but seeing pullback in steel stocks (X), as well
as other industrial metals (AA, FCX, CLF); gold miners advanced throughout the day
Chemical stocks have been active plays given the recent pullback in oil prices, with shares of LYB,
WLK, DOW among names pulling back with price of oil
Transports little changed, but DJ Index still holding near all-time highs heading into holiday
season (more travel for airlines/more package delivery for UPS/FDX) lower energy prices
remain a tailwind for the sector

Technology, Media & Telecom

Internet movers; LNKD fell after reports FB is developing product which will allow users to chat
w/ colleagues, connect w/ professional contacts; in general, high beta Internet stocks were under
pressure, led by weakness in GOOGL, YHOO, BABA, AMZN, NFLX
Media/Telco; DWA shares fall/HAS bounces, after the WSJ reported acquisition talks have
cooled, as per WSJ http://goo.gl/wAVCSM ; MITL said it has withdrawn its proposal to acquire all
outstanding shares of SHOR common stock
Software/Hardware movers; IMPV downgraded to neutral at JPM on valuation saying stock
trading at premium to median sales multiple, as co. has recovered from missteps in March
(shares of other Internet security players dipped as well SPLK reports this week); TUBE falls a
2nd day after earnings (downgraded by Citi today); RVBD signs confidentiality agreement with
shareholder Elliott
Top stories; Samsung Electronics agreed with AAPL to produce application processors (APs) from
next year for iPhones and iPads, the Korean Times reported/deal means Samsung will become a
primary supplier of APs to Apple, pushing TSM back to second place. http://goo.gl/hmCUiH
Semis; KLAC cut to underperform from outperform at CLSA citing limited upside; MU and SNDK
fell early as Bank America said current memory chip prices are weaker-than-expected, though
still better than seasonal; FCS President, COO Vijay Ullal leaves
3D stocks active; DDD rises on Chairman stock purchases; VJET shares fell after Cowen cut rating
citing the company's larger than expected Q3 loss and reduced 2014 outlook; SSYS announced
that its MakerBot unit had made a deal with Martha Stewart Living to distribute 3D printing
materials and jointly develop 3D printable designs

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