Mid-Morning Look 11:00AM EST

Monday, December 15, 14

Index

Up/Down

Last

DJ Industrials

11.30

0.07%

17,292

S&P 500

2.22

0.11%

2,004

Nasdaq

-6.22

0.13%

4,647

Russell 2000

-3.85

0.33%

1,148

Markets volatile early; reverses earlier gains, as the S&P 500 dropped below 2,000 for the first time
since October. Equity markets were up early, but have since been erased (more than 1% reversal from
overnight highs), as major averages try and recover from one of its worst weeks in years (Dow industrials
fell 3.78% last week, biggest % weekly drop since Nov. 2011, while S&P 500 fell 3.5%, biggest since May
2012). Mixed economic data this morning (manufacturing unexpectedly turns negative in NY, while
Industrial Production jumps), throwing mixed signals, while oil prices also reverse from earlier gains (WTI
high $58.73). Oil prices at new 5-year lows, treasuries remain little changed, gold down ahead of FOMC
this week, and the dollar rises. Russia rally drawing attention as its stock market tumbles further and
Ruble drops more than 6% vs. the dollar (biggest one day drop since 1999).
Economic data
***Empire Manufacturing for Dec declined an unexpected -3.58, vs. forecasts for an increase of 12.40
(follows Nov reading of 10.16); employment component was little changed at 8.3 from 8.5, but the
workweek slid to -11.5 from -7.5. New orders plunged to -2.0 from 9.1
*** Nov. Industrial Production rose 1.3%, above est. for 0.5% increase (rose 0.1% in Oct), while Capacity
utilization rose to 80.1% from 79.3% in Oct. (est. 79.4%)
*** NAHB Homebuilding Sentiment reading dips to 57 from 58 in November and below ests for reading
of 58; Future single family sales falls to 65 from 66 last month
In foreign markets, Russia markets falling again (down 20% in December already, 50% YTD); ruble slides
to record lows against US dollar (tops 60 level) in Asia, Nikkei falls (1.6%), while China rises 0.5%;
European markets reverse earlier gains to trade lower. Japanese PM (Abe) wins the national elections in
a landslide victory, securing 2/3 of the seats in the Lower House; MSCI Brazil Index hits fresh 52-week
low earlier

Treasuries, Currencies and Commodities

In Currency markets, all eyes on the Russian Ruble tumbled past 60 for the first time against the
U.S. dollar, falling 5% to 61.25 per dollar, leading the Bank of Russia to sell $350 million to stem
the slide said Bloomberg (down over 20% this month on plunge in oil). The dollar index (DXY) rises
to 88.53 (up 0.18);
Precious metals sliding for a 4th session after recent run up; gold around $1,210 level, down
about 1% (would be longest decline in 5-weeks), ahead of the FOMC meeting later this week
(moving closer to raising rates?). Note gold futures dropped over 8% in Q3, falling to a 4-year lows
last month before recovering
Energy futures reverse/turning negative after overnight gains, A few notable stories in energy
over the weekend include: 1) The UAE prime minister said OPEC will stand by its decision not to
cut output even if oil prices fall as low as $40 a barrel and will wait at least three months before
considering an emergency meeting; 2) Libyan National Oil Company said two oil ports stopped
operating because of fighting (which supported oil earlier). WTI traded as high as $58.73 before
reversing back under $57 per barrel)
Treasury markets little changed early, with bonds holding gains from last week, with the yield on
the 10-yr holding multi-year closing lows around 2.1%; the 30-yr yield down at 2.75% and shorter
term yields also remain depressed (5-yr 1.56%)

Upcoming Events to Watch this Week

The Federal Open Market Committee (FOMC) meets to decide U.S. interest-rate policy, and will
give new forecasts for the economy and inflation as growth picks up.
The Bank of England publishes the results of its stress tests on U.K. banks.
Japans central bank will announce monetary policy.
European Union leaders meet for a two-day summit in Brussels to discuss the regions economy
and policy toward Russia and Ukraine.
Obamacare deadline. Many people enrolled in plans under the Patient Protection and Affordable
Care Act will have them automatically renewed if they dont shop for new coverage before
todays deadline
Earnings this week: Oracle Corp., FedEx Corp. and General Mills Inc. will report quarterly results

Macro

Up/Down

Last

WTI Crude

-1.06

56.74

Brent

-0.39

61.46

Gold

-8.40

1,214.30

EUR/USD

-0.0042

1.2420

JPY/USD

-0.35

118.39

10-Year Note

0.022

2.122%

Sector Movers Today

Nasdaq 100 changes; The PowerShares QQQ, the NASDAQ-100 tracking ETF, will see the addition
of three new members (effective prior to market open on Monday, 12/22) additions include
AAL, EA, and LRCXdeletions EXPE, FFIV and MXIM
Monthly Master Trust Credit Card data: 1) JPM Nov. Net Charge-Offs (NCOs) 2.61% up from
2.26% MoM/Nov. delinquencies hold at 1.34%; 2) COF Nov. Net Charge-Offs 3.47% vs. 3.16%
MoM/Nov. delinquencies 3.36% vs. 3.31% MoM; 3) DFS Nov. Net Charge-Offs 2.4% vs. 2.1%
MoM/Nov. delinquencies 1.8% vs. 1.8%; 4) ADS Nov. Net Charge-Offs 3.8% vs. 4.4% MoM/Nov.
delinquencies 4.1% vs. 4.3% MoM; 5) BAC NCOs rise to 3.08% vs. 2.81%/delinquency 1.91%

 Semis; CRUS upgraded to Overweight with $28 tgt at Barclays (from UW) on more Apple
content; BRCM upgraded to buy at Evercore/ISI; CY upgraded to Outperform at Wedbush; SNDK
upgraded to buy at Summit Research; Davidson downgraded TQNT and RFMD to neutral on
balanced risk/reward; NVDA called to pick in semi-sector at Wedbush citing strong demand for
increased semi content in autos
Energy stocks are mixed; rising early after another massive pullback in E&P, oil service related
names last week on the 12% drop in oil prices, but have pared gains; one area higher early, after
Utica well results surprise to upside for RRC, which also lowered its FY15 capital budget to $1.3B,
down 18% from this year (several analysts positive on well results notes positive for CNX, EQT,
RICE, MHR, SWN, ECR

Stock GAINERS

CCL/RCL ; both mentioned positively in Barrons, saying shares may rally 20% next year
ETR +1.5%; upgraded by two analyst after Friday NY court decision on its Indian Point nuke plant
HON +0.5%; provides guidance at meeting (2015 eps/sales guidance trails estimates)
ONVO +6%; rises a 3rd day/ advanced 15% on Friday after CEO appeared on CNBCs Fast Money
OPK +0%; enters into hGP-CTP agreement with PFE
ORCL +2.5%; upgraded to Overweight at Morgan Stanley (ahead of earnings this week)
PETM +4%; bought by BC Partners group for about $8.3B/$83 a share http://goo.gl/nqGBNU
RRC +4%; posts very positive Utica well results/cuts FY15 cap-ex views
RVBD +8%; to be acquired by Thoma Bravo for $21 per share/$3.6B http://goo.gl/qy6oAA
TLM ; Canada Pension said to weigh bid as Repsol nears deal http://goo.gl/sQrHgF

Stock LAGGARDS

ARCP -7%; Chairman and CEO David Kay steps down

F -3%; downgraded to hold at Deutsche Bank
SXC -3%; said to cut coal production by over 50%
XCO -6%; suspends cash dividend to provide added funds to reinvest into company

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