Closing Recap 4:10PM EST

Monday, December 15, 14

Index

Up/Down

Last

DJ Industrials

-100.25

0.58%

17,180

S&P 500

-12.71

0.63%

1,989

Nasdaq

-48.44

1.04%

4,605

Russell 2000

-11.63

0.95%

1,140

Equity Market Recap

Where is Santa rally? An extremely volatile trading session for equities, which ended on a down
note, coming on the heels on the worst percentage loss trading week in over 3 years for major
averages. The Dow Industrials were up over 100 points early in the session, but traded down
more than 100 late day. Weakness started overseas with Europe (Germany down -2.7%) and
Emerging Markets (Russia plunges again), the S&P 500 now down about 4% from early December
record intraday highs. Oil prices another sharp downturn, off more than 2% (but falling more
after hours), with gold prices falling as well sector selling was broad based. The S&P 500
dropped below 2,000 for the first time since October
European stock markets ended lower for a 6th consecutive session (Germany -2.7% or 260 points
to 9,334 it was just 5 days ago Germany topped the 10K level for the first time). In emerging
markets, Russia falls again (RSX ETF -13%), given the plunge in oil prices, as major market falls
again (down 20% in December already, 50% YTD); ruble slides to record lows against US dollar
(tops 60 level). Russian ADRs stocks YNDX, QIWI, VIP, LUKOY, and MBT all falling to new 52week lows. MSCI Brazil Index hits fresh 52-week low earlier (Russia said GDP to fall 4.5% in 2015
if oil stays at $60)
Emerging markets are ending the year much like how they began it -- in freefall. From Russia to
Venezuela, Thailand to Brazil, stocks, bonds and currencies across the developing world are
plunging. The Russian ruble tumbled past 60 for the first time on record today while Venezuelan
dollar bonds sank below 40 cents on the dollar and Thai stocks fell the most in 11 months. Brazils
corporate debt market is reeling on probe of PBR - Bloomberg

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

Commodities
Energy futures end lower (reversed overnight gains WTI high $58.73), falling nearly 2% when it
was all said and done (falls more after pits closed down as much as 4%). 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)
Precious metals slid for a 4th session after recent run up; gold falls $14.80, or 1.2% to settle at
$1,207.70 an ounce (the 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. Silver prices underperform, falling nearly 3% to $16.57 an
ounce. Dollar gains again today/FOMC weigh on sentiment

Currencies
All eyes fixed on the Russian ruble today, as the dollar gained as much as 13% at one point, as
falling oil prices were compounded by fears that some of Russias largest companies could
default on their dollar-denominated debts (ruble down nearly 50% YTD). The ruble weakened
9.1% to 64.0005 per dollar, the steepest slide on a closing basis since the year Russia defaulted
on local-currency debt (1998). The yen gained throughout the morning vs. the dollar, dropping
back under 118 by midday (nearly 100 bps move today), while the euro declined. The dollar index
held around 88.50 (up 0.15)

Bond Market
Treasury markets were down slightly most of the day, holding gains from last week, with the
yield on the 10-yr staying near multi-year closing lows around 2.1%; the 30-yr yield drops down
below 2.75% and shorter term yields also remain depressed (5-yr 1.56%). Economic data today
was mixed, but given fact of bond strength over the last 2-weeks despite better jobs data, tell
you bonds not trading on economics for now

Macro

Up/Down

Last

WTI Crude

-1.90

55.91

Brent

-1.33

60.52

Gold

-14.80

1,207.70

EUR/USD

-0.0026

1.2436

JPY/USD

-1.12

117.63

10-Year Note

0.011

2.111%

Sector News Breakdown

Consumer
Retail; PETM to be acquired by BC Partners consortium for about $8.3B/$83 a share
http://goo.gl/nqGBNU; with 9 days left until Christmas, retailers were one of few bright spots in
an overall choppy market (apparel M, KSS, AEO, URBN rise); Kering explored sale of Puma
athletic brand, Bloomberg reported http://goo.gl/5SWzv3
Autos; Ford (F) was downgraded to hold at Deutsche Bank as is more cautious about investing in
U.S. auto names; GPI downgraded to neutral at Sidoti
Gaming/Leisure; Wells Fargo said now estimates Dec. Macau gaming revs decline of (-30%) vs.
prior est. of down (-23%-27%) based on recent checks (WYNN, MPEL, MGM, LVS); CZR said to be
planning to skip $225M junior bond payment; in cruise lines, CCL/RCL both mentioned positively
in Barrons, saying shares may rally 20% next year

Energy
Energy stocks were mixed, despite another 2% drop in oil prices; saw some large cap names like
XOM hold up, as well as drillers like DO, but energy complex remains very depressed as oil prices
dropping more than 2% today
News movers; Canada Pension said to weigh TLM bid as Repsol nears deal http://goo.gl/sQrHgF ;
APA agreed to sell its stakes in two liquefied natural gas projects to Woodside Petroleum for
$2.75B http://goo.gl/oxAK6c ; XCO suspends cash dividend
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
Refiners; Bank America upgraded PSX to Buy, downgrading HFC to Neutral, and downgrading PBF
and DK to Underperform says outlook for US refiners is challenged by increased output, thinner
absolute product margins and crude spreads
Coals; SXC says to cut coal production by over 50% as evaluating further options to wind down
coal ops; begins contingency plan to downsize coal mining/cuts jobs
Utilities; ETR was upgraded by two analyst after Friday NY court decision on its Indian Point nuke
plant; JP Morgan upgraded PCG to overweight citing favorable risk/reward scale, while
downgrades SRE to neutral as sees stock as adequately pricing in growth options through 1H15
Analyst energy changes; OXY upgraded to buy at Sterne Agee called a compelling oppty (but
resumed sell at Goldman Sachs); SD downgraded to neutral at SunTrust ($2 tgt); GST cut to
neutral at SunTrust on concern of falling oil impact; XOM upgraded to Market Perform at BMO
Solar weak; Final decisions on anti-dumping/countervailing duties from U.S. ITC, ITA expected
within next 30 days, Brean Capital noted; views on FSLR, SUNE, SPWR wont change if both
bodies ruled against taking action on manufacturers based in China, Taiwan
MLPs; more analyst rating changes given sharp pullback in sector following oil decline; MMP was
upgraded to buy at Argus; Oppenheimer downgraded NSLP, MEMP, MCEP, and LGCY to Perform
saying continued deterioration in oil prices and rising current yields on the E&P MLPs,
distribution cuts become more likely, more extensive and potentially sooner than previously
anticipated (note the Alerian MLP Index (AMZ) falls another 2.5% today); LINE, BBEP, CLMT,
LGCY among top losers on the day
Financials
Financials were weaker with overall market, no specific stories today for banks, but investors
have been selling group off on credit fears leveraged to sell-off in energy
Monthly Master Trust Credit Card data released: 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% vs. 1.94% MoM; 6) AXP Nov NCOs 1.4% vs. 1.3% MoM/delinquency steady at 1%
Regional banks (South/Texas) remain weak; banks with energy exposure have stayed under
pressure (credit/servicing); shares of BOKF, CFR, CMA, TCBI have been weak
Insurance stocks; names like MET, PRU, PFG fall with overall market; William Blair downgraded
AGII, CNA and MKL as high expense structures, low operating leverage, and declining investment
income will create near-term obstacles in a challenging property-casualty environment
Insurance Broker targets raised at UBS; raises AON to $96, to $64 for MMC and upgrades WSH to
buy and ups tgt to $50 supported by our forecasts of rising return on invested capital
Stock movers on news; ARCP shares fall as Chairman and CEO David Kay steps down; BDGE to
acquire CBNY for $20.03 per share in all-stock deal valued at $141M http://goo.gl/jCGrS2

Healthcare
Very quiet once again in the Healthcare sector, with biotech stocks getting slammed today VRTX,
CELG, AMGN, BIIB, GILD all down sharply - the IBB -2.5% today); managed care names little
changed, hospitals down slightly; and large cap Pharma mixed (LLY, MRK)
Stocks movers; BDSI lower after one analyst (Roth) said scripts for latest week on Bunavail were
in-line to slightly negative
Industrials & Materials
Industrial movers; HON provides guidance at meeting (2015 eps/sales guidance trails estimates)
as sees 2015 EPS $5.95-$6.15 (est. $6.10) and revs below as well; RBC agrees to buy EMRs Power
Transmission Solutions for $1.44B http://goo.gl/rNkcjm
Transports; UPS was downgraded on valuation at Deutsche Bank; truckers helped keep the Dow
Transports afloat today (shares of EXPD, JBHT rise), while airlines and rails were mixed
Machinery; AGCO to buy back as much as $500M in stock; Deutsche Bank tgt changes in
machinery sector, raising ALSN to $41 from $33 and upgrade to buy, but cuts tgts on CAT, TEX,
and MTW saying outlook for the global machinery sector is balanced into 2015, but trucking is
poised to outperform
Metals & Mining; BHP downgraded to Underperform at RBC Capital; AA agreed to acquire
privately-held German titanium maker Tital (no terms disclosed); steel exhibiting some strength
after weeks of declines (X), while copper producer FCX remains in downward sloping action; gold
miners remain weaker as gold prices drop nearly $15 today (NEM, GG)
Shippers/tankers; the Baltic Dry Index fell over 2% to 845 points, its 17th consecutive losing
session (Capesizes decline to 8-month low, down 13 days)
Technology, Media & Telecom
Tech sells-off early, led by shares of AAPL (no specific news, appeared momentum driven);
couple of earnings releases this week in tech sector, with ORCL, RHT, JBL, ACN, BBRY, PAYX this
week; Internet names were mixed
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
Software/hardware; ORCL upgrade to Overweight at Morgan Stanley (ahead of earnings this
week); SPLK called most preferred among enterprise software at Wedbush as market
opportunity remains strong; NOW called top pick at RBC
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
Movers; RVBD to be acquired by Thoma Bravo for $21 per share/$3.6B http://goo.gl/qy6oAA

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