Closing Recap 4:05PM EST

Friday, December 5, 14

Index

Up/Down

Last

DJ Industrials

58.69

0.33%

17,958

S&P 500

3.43

0.17%

2,075

Nasdaq

11.32

0.24%

4,780

Russell 2000

8.22

0.62%

1,180

Equity Market Recap

A surprisingly stronger than expected monthly payroll report, which showed job growth of over
300K jobs (a 10th straight month over 200K+ jobs growth), lifted equity markets across the board.
The Dow Industrials came with a few points of 18,000, while the S&P broke out to a new intraday
high and the tech heavy NASDAQ also stayed the course. The 321K job increase topped estimates
for a 230K increase, while unemployment rate held at 5.8%. The report sent the dollar surging
(which weighed on commodity prices), and Treasury yields higher. It was yet another strong
week for global equities (Asia surged), as we continue to trend higher into the New Year.
Financials paced market gains, while Defensive names lagged (Telecom, Utility), as well as Energy
European markets surged, with Germanys DAX closing higher by 2.4% to around 10,090 level,
while Cac 40 jumped 2.3%, and Italys MIB rising 3.2%. Global risk on trade remains in place as US
economy strong, and Central Banks around the world getting more and more accommodative
Asia ended the week very strong, as Nikkei Index gained 33 points to settle at 17,920 (6-day
winning streak ends index at 7-year high), the Shanghai Index advanced another 1.3% to settle at
2,937, the Hang Seng Index jumped another 170 points to end at 24,002

Economic Data
November Jobs data very strong; U.S. employers added the largest number of workers in nearly
three years in October and wages increased, which could bring the Federal Reserve closer to
raising interest rates. Nonfarm payrolls surged by 321K last month, the most since January of
2012 (and above ests 230K), while the prior month was revised up to 243k from 214k.
Change in Private Payrolls jumped 314K above est. for 225k (prior month also revised to 236K
from 209K). The unemployment rate held steady at a six-year low of 5.8%, average hourly
earnings jump 0.4% (est. 0.2%) and Labor Participation rate held at 62.8%
Oct. Factory Goods Orders fall (-0.7%) vs. est. 0% (Sept revised up to -0.5%); New orders extrans. for Oct. decline (-1.4%), while new orders ex-defense for Oct. fall (-1.2%)
Oct. Consumer Credit rose $13.2B (vs. est. $16.5B); consumer credit in Oct. rose 4.9% at an
annual rate to $3.279T, while revolving credit rose $0.922b to $882.6B

Commodities
Energy prices end the week lower, as both WTI crude and Brent both closed at lowest levels in
over 5-years, weighed by comments out of Saudi Arabia which offered its oil customers in Asia
the biggest discount on record, $2 per barrel (Bloomberg said lowest in at least 14-yrs). The move
comes after agreeing to not cut production at its OPEC meeting the week prior. WTI fell 97c to
$65.84 per barrel, while Brent closed at $69.07, down 57c (down 1.5% for the week)
Gasoline prices at the pump have fallen 71 consecutive days, according to CNBC
Gold prices slid $17.30 or 1.4% to settle at $1,190.40 an ounce, weighed early on stronger jobs
data, but still managed to end the week higher by 1.3%. The stronger data lifted the U.S. dollar,
which weighed again on commodity prices. March silver fell 32c, or 1.9%, to $16.26 an ounce. A
day earlier, gold ended lower, but held near the $1,200-an-ounce level after the ECB decided to
hold off on additional stimulus

Currencies
The dollar index (DXY) rises, hitting fresh high of 89.467 (now best level since March 2009)
before pulling back to 89.31 (up 0.61 on day). The dollar surged further against the yen, touching
new 7-year highs of 121.69 (up about 1.60 on the day). The euro dropped to the lowest level vs.
the dollar since Aug 2012, falling to $1.2271 (high 1.2393 and low 1.2271), on combo of stronger
U.S. economy (leaning to likely raise rates sooner) and ECB leaning to more QE (possibly January
according to ECB Council yesterday)

Bond Market
Treasury markets fall; finally some volatility, as yields bounce back and forth following the
overwhelmingly positive jobs report. Bonds ended lower, lifting yields across the boards, with the
2-yr yield up 10.3 bps to 0.643% (biggest 1-day jump in 4-yrs), the 3-yr spiked 12.3 bps to 1.073%
(biggest jump since March), and the 5-yr yield jumped 9.5 bps to 1.682%. The benchmark 10-yr
was up about 5 bps to 2.32%

Macro

Up/Down

Last

WTI Crude

-0.97

65.84

Brent

-0.57

69.07

Gold

-17.30

1,190.40

EUR/USD

-0.0090

1.2289

JPY/USD

1.62

121.41

10-Year Note

0.05

2.305%

Sector News Breakdown

Consumer
Retailers dominated earnings this morning (mixed, but better than prior day round of numbers)
Better retail: GPS posts +6% comp, well ahead of the Street's down (-1-2% est.), driven by a huge
jump in Old Navy comps, rising 18%; ULTA reported its second straight 9%+ comp and solid EPS
beat/raise guidance; FRAN misses Q3, but names new CEO (formerly of SIG);
Worse retail: GCO lowers year eps outlook/CFO retires; FIVE guides Q4 eps/rev below consensus;
ZUMZ Q4 eps/revs guidance misses, though Q3 eps/revs/Nov comps better; AEO guides Q4 eps
below views (30c-33c vs. 35c) after in-line Q3; BIG Q3 misses consensus, but reaffirmed year
comps and sales forecasts
Staples were mostly flat after bout of weakness this week in beverages (KO, PEP), and consumer
product makers (PG, CLX, CL); SBUX pushes to new highs after providing 5-year plan Thursday
(restaurant names DNKN, MCD, YUM higher); protein stocks PPC was cut at BB&T, while TSN was
upgraded at Goldman Sachs

Energy
Energy stocks lag again, as E&P, drillers and equipment names down the most
MLP space relatively quiet, with AMZ Index down a few points in what has been a volatile week
given the sharp moves in oil prices; shares of NRP, BBEP, LGCY and SDLP lagged, while TCP, EQM
and EXLP paced to the upside
Sand fracking stocks upgraded to Outperform at RW Baird, raising ratings on EMES, FMSA, and
HCLP to Outperform saying group oversold relative to expected 20% capex reduction in oilfield,
massive retrenchment overdone
Analyst calls; APA downgraded to Underperform at Bank America; Oilfield service stocks DRQ
and FI both cut to Market Perform at FBR Capital and lower estimates and tgt saying macro
outlook threatens to significantly impact the deepwater equip/service names; Williston Basin
E&Ps (NOG, OAS, EOX, TPLM) downgraded at Iberia
Recently beaten solar stocks bouncing; Chinese solar names, which have fallen with plunging oil
prices and a broad selloff in anything energy-related, are higher JKS, JASO, TSL, YGE up
Financials
Financials outperform following the jump in yields earlier this morning following the much
improved monthly jobs report. Among those counting on higher interest rates to boost profits
are banks, insurers, and online brokers, and all are outliers to the upside as a strong November
jobs report has rate hike expectations on the rise (C, JPM, BAC, WFC), as well as regionals (RF,
KEY, ZION, PNC, SNV, HBAN), and Trust banks (STT, NTRS), online brokers SCHW, AMTD and
ETFC all advanced on the jump in rates and insurers
Industrial REITS at KeyBanc - maintains Market Weight weighting on the Industrial REIT vertical,
though reduce their rating on EGP from Hold to UW
Healthcare
Not too much in way of news in healthcare today, no major earnings outside of COO which
posted a Q4 eps miss and cuts outlook for FY15 (to $7.30-$7.70 from $8.20-$8.60); major pharma
mostly higher, led by strength in BMY, while biotech was firmly higher (IBB), with GILD leading;
Managed care stocks also rise (HUM, AET, CI)
Hospitals were higher; Susquehanna noted that business coalition proposes Florida Medicaid
expansion alternative that would extend health coverage to roughly 1m uninsured Floridians
(firm said Medicaid expansion in any form in Florida would be "meaningfully beneficial" to
publicly traded hospital group (THC, CYH, UHS, LPNT rise)
Industrials & Materials
Metals & Miners; gold miners downward pressure continues as gold prices fell on the stronger US
jobs report NEM, ABX, GG fall, but off worst levels); steel up slightly early on follow through from
yesterday (reports of better iron ore pricing)
Aerospace & Defense: Bernstein upgraded NOC to Outperform, but downgraded LMT to Market
perform; stock buybacks were announced for NOC ($3B worth) and LLL ($1.5B);
Industrial movers; ROK cut to neutral at Bank America saying slow macro environment should
present a challenge to growth; DOV downgraded at Bank America as sees greater downside risk
to upstream names vs. downstream; AIMC and ATU cut to hold at KeyBanc as sees lower oil &
gas CapEx levels going forward/slower related activity for industrials
Ag sector/chemicals; POT raised to overweight vs neutral, and up tgt to $40 from $34 saying the
industry fundamental has become more favorable; ag machinery names little changed
Chemical movers; EMN downgraded at JP Morgan as hedges will offset lower material price
impact; VAL was upgraded to Overweight at JP Morgan, but removed from Goldman Sachs
conviction buy list
Paper/Packaging; SON said its base Q4 eps might be slightly higher than prior period, citing an
encouraging start to 4Q, particularly in consumer-related businesses; LPX analyst downgrade

Technology, Media & Telecom

Internet; GOOGL was downgraded to neutral at Bank America on estimate risk and
regulatory/competitive concerns and upgraded YHOO to buy on Alibaba optimism and the
potential for a positive tax structure in early 2015; Z said it had 74.30M monthly unique users in
Nov, down from 82.33M in Oct/82.81mMin Sept; CTRP remains weak (possible rotation out of
ADRs into the actual china shares that firms can buy now)
Media; STRZA upgraded to Outperform at Macquarie based on the owners being motivated to
make smart moves to improve value and believe the consensus is not pricing growth (also
positive mention at Sterne Agee with $36 tgt); CBS said its broadcast network remains on the air
for DISH subscribers as the two companies negotiate a new programming accord
Telco; Defensive telecom giants VZ and T remain weak (have been so since spectrum auction 2weeks ago); ALSK sells its wireless customer base to General Communication for $300M
Software/Hardware; BIRT to be acquired by OTEX for $6.60 per share (http://goo.gl/0U6n9r );
SYNA raises Q2 revs view to $440m-$460m, from prior $415m-$450m view; RALY fell despite
smaller than expected quarterly loss
Body camera stocks with continued upward momentum (TASR and DGLY) much attention to
police mounted cameras after situation in Ferguson and death of Eric Garner in NY)
Networking/optical; FNSR Q3 eps and gross margins missed, but stock hung in (few sell-side firms
defended); CSCO slapped upstart rival, ANET with a patent and copyright infringement lawsuit
Semi movers; Semi Index (SOX) index at 700 level (highest since 2001); FSL leading today on
Evercore upgrade; sector with good news this week from AVGO earnings and MCHP raising
guidance; AMBA falls despite better quarterly results
Digital advertising company FUEL fell after Maxim initiated with sell and $10 target as believes
margins come under increased pressure

Want a free trial to The Hammerstone Report 4x Daily ? Sign-up for a trial today at www.
thehammerstonereport.com

***DISCLAIMER/LIMITATION OF LIABILITY: Hammerstone Inc. (the Report) provides information and data and does NOT provide any individual investment advice or money management
assistance and does NOT attempt to influence the sale or purchase of securities. The Report is intended for informational purposes only and does not claim to be actionable for investment
decisions. The information contained in the Report has been obtained from sources deemed to be reliable but is not represented to be complete, and it should not be relied upon as such. The
Report does not purport to be a complete analysis of any security, issuer, or industry and is not an offer or a solicitation of an offer to buy or sell any securities. The Report is prepared for
general information purposes only and does not consider the specific investment objectives, financial situation, and particular needs of any individual subscriber, person, or entity