Closing Recap 4:10PM EST

Wednesday, December 3, 14

Index

Up/Down

Last

DJ Industrials

32.94

0.18%

17,912

S&P 500

7.77

0.38%

2,074

Nasdaq

18.66

0.39%

4,774

Russell 2000

10.85

0.93%

1,179

Equity Market Recap

Record territory again for the Dow Industrials, S&P 500 a few points from record highs, NASDAQ
reverses earlier losses to finish higher, and Small Cap Russell 2000 Index outperforms in what was
another low volume, but steady and strong equity market showing. Commodity markets were
mixed, while the dollar was stronger ahead of European Central Bank Meeting tomorrow
morning (more easing on its way to lift markets? Euro fell ahead of meeting)
A very strange day for U.S. markets as major averages held higher most of the trading day (in
narrow trading range), but there were various individual stock moves that were very volatile (to
the upside and down), on no specific news that was very out of character shares of JOY, BBY,
CVC, SNI, PBI, PNW, CPB, CBG, HRS, MNST, IRM, TSCO made huge intraday moves on no
apparent news. Some were spikes (up and down), some were gradual moves all day on no news
CNBC noted the unusual moves midday, but no clear cut explanations. In addition to the
individual names, several sectors with broad moves, as 2014 losers (Energy, Metals, Ag names,
MLPs) outperformed the market, while winners (Tech, Biotech, Staples) were standout losers

Economic Data
November ADP Private payroll report added 208K jobs, below est. of 222k, and prior months
upwardly revised 233k (from 230K); data comes ahead of Non-farm payroll data Friday
ISM Non-Manufacturing (services) for Nov rises to 59.3, above est. of 57.5 (and 57.1 prior
month); as Business activity rose to 64.4 from 60.0 prior month, new orders rose to 61.4 from
59.1, and Employment fell to 56.7 from 59.6
The Federal Reserve said in its Beige Book release that employment gains were widespread
across districts as the worlds largest economy continued to expand amid advances in consumer
spending and lower gasoline prices. A number of districts also noted that contacts remained
optimistic about the outlook for future economic activity, the Fed said

Commodities
Energy futures were mixed, with WTI crude rising 50c to close at $67.38 per barrel, while Brent
priced declined 62c (0.88%) to close $69.92. Both were higher overnight, but Brent dipped midmorning after WSJ reported OPEC's biggest oil producer Saudi Arabia now believes oil prices
could stabilize at around $60 a barrel, a level both it and other Gulf producers believe they could
withstand, according to people familiar with the situation. Brent reversed after hose headline. Oil
was up early after bullish inventory reports from DOE and API overnight; but overall landscape
still bearish with OPEC keeping production unchanged prices remain down more than 35% from
summer highs
Gold prices ended higher, rising $9.30, or 0.8% to settle at %1,208.70 an ounce in what has been
a volatile week so far for the yellow metal. Gold jumped over 3.5% on Monday (after overnight
losses of 2%), fell more than 1% yesterday, but recovers some of those losses today. The move
higher came despite a stronger dollar, as commodities were back on the rise in general today

Currencies
Dollar rises; the euro made fresh lows vs. the US dollar (weaker services data overnight in
Europe/low inflation may increase aggressive monetary easing from the ECB, putting further
pressure the currency); the dollar rises further against the yen, (new 7-yr highs), approaching the
120 level; the dollar index (DXY) nears 89 level (touched briefly). The U.S. dollar continues to
push higher as increasing factory activity, and rising interest rate expectations, alongside
optimistic forecasts for a strengthening economy

Bond Market
Bond markets were little changed, with yields essentially around the same level when the day
started, after mixed economic data today (ADP little weaker/ISM services little better); also
ahead of Nonfarm Payroll data this Friday; the yield on the 10-yr held around 2.28% (tested
2.3%), while 30-yr around 3% and 5-yr at 1.6%

Macro

Up/Down

Last

WTI Crude

0.50

67.38

Brent

-0.62

69.92

Gold

9.30

1,208.70

EUR/USD

-0.0077

1.2306

JPY/USD

0.56

119.78

10-Year Note

0.002

2.287%

Sector News Breakdown

Consumer
Retailers mixed; ANF Q3 in-line but lowers year eps outlook; GIII jumps as Q3 eps easily tops
estimates/raises year outlook; ASNA Q1 beats/reaffirms year; Goldman Sachs cuts Broadline to
neutral from attractive amid disappointing 3Q results despite solid macro backdrop firm
upgrades TJX to conviction buy, but removes ROST from CL, cut JCP to sell saying more
challenging backdrop is likely to weigh on turnaround and cuts BURL to neutral on valuation;
WMT CEO said on CNBC that 2%-3% growth feels perpetual
Staples; BF/B Q2 eps missed and cuts its year profit outlook on dollar concerns (STZ weak);
overall, saw several consumer staples getting sold off today, with PG, CLX, KMB, CL, EL, falling in
products; food names TSN, MDLZ, CPB, SFD also lower (though PPC rallied); nothing specific on
consumer staples/just broad weakness; beverages lag (STZ, TAP), soda too KO, PEP, DPS all down

 Restaurants; LOCO upgraded at Morgan Stanley; TXRH downgraded at RBC; BOBE falls after
cutting year revenue outlook (one downgrade)/hires adviser; YUM lower
Retail drug stores get positive Nov comps from WAG (overall comps 4.5% vs. 4.3% est.), while
pharmacy comps beat, but front end sales lagged
Autos; TSLA fell early as WSJ said co may have trouble meeting analyst expectations
http://goo.gl/1h434m; MBLY up early on two positive analyst comments (Barclays/William Blair)
after investors meetings (after falling more than 10% last 2-days); AN
Gaming, Lodging, & Leisure; in Gaming, LVS lost the lead in Macau market share to Hong Kongbased SJM Holdings; WYNN shares fell for a 2nd day (note Macquarie early yesterday cut its Wynn
Macau rating to Underperform)
Energy
Commodity plays getting a lift today as beaten up oil services/E&Ps/drillers/MLPS getting a
bounce, with gainers OKE, NFX, PXD, RIG, XEC, HAL, DO leaders in the S&P today; metals also
seeing signs of life, with steel stocks (X, STLD) higher)
Some energy names pared gains/turned lower after the WSJ reported Saudi Arabia now believes
oil prices could stabilize at around $60 a barrel, a level both it and other Gulf producers believe
they could withstand (sent shares of Dow components XOM, CVX lower)
MLP stocks; UBS upgraded SEP to buy saying steep drop has created an opportunity to own a Nat
Gas sensitive name with growth potential; upgrades BWP as has pivoted toward growth and now
benefits from its Nat Gas exposure; and ups CEQP to Buy from Neutral in part due to the steep
decline and the recent asset sale moving it closer to being a pure play GP; overall, MLP Index
(AMZ) rising solidly for a second day, led by MEMP, BBEP, TLLP and LINE
European Oils at Barclays: BP upgraded to Overweight from Equal Weight at Barclays;
downgraded E to Underweight and cuts STO to equal-weight
Financials
Noticeable weakness in credit card names today, with AXP, COF, DFS all lower
REIT rating changes; Stifel upgraded FR to hold from sell, but downgraded CUZ and PKY to hold
from buy, cuts EGP to sell from hold; Bank America also on Office REITs, downgrading CUZ and
PKY from Buy to Neutral; upgrading BDN from Neutral to Buy both noting downside risk to oil
prices and Houston economy too large for either to handicap (also cut EGP to neutral)
Exchanges; CBOE downgraded to sell at Citi saying risk/reward is now tipped to the downside
following the 25% run since early July (recommends buying CME); CME boosts its offer for GFIG
to $5.25 per share http://goo.gl/gweNq1
Healthcare
Biotech movers (group falls); PBYI shares plunge after delaying filing for U.S. regulatory approval
of its experimental breast cancer treatment (neratinib) by as much as a year; ICPT falls as FBR
Capital cuts tgt $99 and reiterates Underperform saying changes to NASH study endpoints, adds
to risk; BIIB jumps a 2nd day after positive data from early-stage Alzheimer drug trial yesterday
Small cap biotech; ADMA said its phase 3 study RI-002 achieves primary endpoint; PRTA says
starting NEOD001 global Phase 3 study based on positive results in ongoing Phase 1/2 study;
SQNM and ILMN end outstanding patent disputes
Managed care rises; CMS preliminary 2016 Medicare Advantage trend assumption came in better
than expected, according to Leerink saying early review ests. for non-ESRD beneficiaries are
projected to be 2.45% for 2016 vs 3.55% in the preliminary rate announcement; managed care
names HUM (which reaffirmed guidance), UNH (gave upbeat guidance Tuesday), AET, CI rise
Other movers; JAZZ enrolled first patients in a Phase 3 clinical trial to assess the safety and
efficacy of Xyrem in children and adolescents aged 7 to 17 who have narcolepsy with cataplexy;
IDRA said preclinical data shows cancer immunotherapy demonstrated potent and systemic antitumor activity in multiple preclinical cancer models

Industrials & Materials

Heavy duty truckers advanced; November Class 8 truck orders were 41,000, up 93% YoY (Wells
Fargo est. was 30k-33k) ; class 5-7 orders of 17,500, down 4% YoY (stocks leveraged to data
include CMI, PCAR, and NAV)
Metals & Mining; STLD positive mention at Morgan Stanley (reit OW and $28 tgt noting margins
expand); Bernstein also positive today, saying developing a more positive view on X, assuming
Carnegie results can be sustained; gold miners back on the rise with gold increase; CLF rises with
group and on report of coal asset sale
Agricultural/machinery; AGU said early winter weather hurts Q4 fertilizer sales (MOS/IPI); POT
said it is conducting a strategic review of equity investments that have a combined market value
of about $4.5B (also said inventories low at industry conference); machinery stocks also jump
mid-day with JOY and CAT surging on no news
Transports; in rails, UNP CEO said at a conference railroad running at suboptimal level as PRB
coal stockpiles 17 days below average; in airlines, ALK said Nov traffic rose 9.4%, load factor up
0.6 to 82.3%; transport index was up on the day, on 2nd day of gains from rails (NSC/UNP); CP
CEO at industry conference said we made it clear the deal with CSX is off, reported Bloomberg
Industrials; POWL posts Q2 profit vs, expected loss on better revs (FY15 guidance light); UTIW
spiked late afternoon on reports it is in advanced talks to sell company to DSV (Bloomberg)
http://goo.gl/MGo2Bj
Technology, Media & Telecom
Semiconductors were higher (SOX +1%); MCHP boosted the low end of prior eps/rev guidance
saying correction experienced in Q2 behind them (lifts NXPI, ADI, FSL); OVTI Q3 revenue outlook
misses (one analyst downgrade); SNDK initiated buy and $125 target at Citi calling the only pureplay in the $25B NAND market; QCOM said its profits are under attack from a group led by INTC
that wants to change how money is made on wireless standards such as Wi-Fi
Internet stocks under pressure today; group as a whole underperformed major averages, with
large caps such as AMZN, FB, leading the move lower (no specific news, but notable that
apparent 2014 winners, such as Tech lagged today, while yearly losers like Energy, rallied)
Software/hardware; GWRE boosts 2015 eps/revenue outlooks; MXWL positive mention at Piper;
GLW announced $1.5B share buyback and boosted dividend
Body camera movers; TASR downgraded at JP Morgan on recent rally; DGLY pares recent gains
(up 45% Tuesday) the AP reported some Indianapolis police officers will begin wearing body
cameras as a test (could have a total cost from $2M-$3M if they use) http://goo.gl/5RlJuR
Telco/Media; BV Q2 loss narrowed as revs top consensus; DISH cut to sell at Wunderlich who
sees 30% probability that all DISHs spectrum is monetized in 2015 at $38.6B pre-tax; FCC restarts
clock on TWC/CMCSA and T/DTV deals http://goo.gl/v4LSj1 ; VOD denied he is planning a
colossal takeover of Liberty Global, said the Telegraph http://goo.gl/ayI0AG ; standout moves to
the upside in CVC and SNI midday; Telco VZ and T underperform
Chinese movers; JD secondary offering priced 26M shares at $23.80; JCOM submits $15 per share
proposal for CARB http://goo.gl/etqfHs

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