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Closing Recap 4:10PM EST

Monday, December 22, 14

Index

Up/Down

Last

154.51

0.87%

17,959

S&P 500

7.90

0.38%

2,078

Nasdaq

16.04

0.34%

4,781

Russell 2000

4.24

0.35%

1,200

DJ Industrials

Equity Market Recap


It was a relatively slow session for major equities, but that didnt prevent markets from adding to
last weeks strong gains (which was 2nd best weekly gain in 2-years), melting higher throughout
the trading day. Volumes were very light ahead of the Christmas holiday this Thursday, but the
Dow still jumped over 150 points (new high), and the S&P closed at a new record level. The push
higher today came with lower oil (down 3%) amid OPEC comments and a rising dollar. Market
closed out a fourth consecutive day of gains, ahead of a very busy economic calendar tomorrow
(includes GDP) on this holiday shortened week. Note both Europe and Asia ended higher
overseas, while Emerging Markets also recovered; bonds gained; Transports and Consumers
jumped, while Biotech, Energy, Material stocks lagged (Utilities at record high)

Commodities
Oil prices fall; energy prices drop across the board (oil/natural gas); WTI oil fell over 3% to $55.26
per barrel (Brent held around $60) after United Arab Emirates energy minister said oil producers
outside of OPEC should cut their irresponsible output with excess supplies harming the market
(Saudi Arabia also echoed similar comments); the comments weighed on energy complex.
Natural gas prices grabbed attention earlier, falling to 2-year lows, on warmer weather forecasts
(which weighed on shares of UPL, CHK, RRC, QEP, and EQT), dropping nearly 10% to $3.148 mln
Btu. Also of note, prices at the pump have now fallen 88 consecutive days, the longest streak on
record (as per AAA)
Precious metals fell; gold down $21.40 to $1,174.70 an ounce, dropping to a 3-week low
(November low was $1,130.40 an ounce, a four-year low). No economic data today, but the
dollar remains strong into year-end, possibly weighing on precious metals (but failing to hold
some technical levels may have exacerbated the move to the downside today). March Comex
silver last traded down $0.38 at $15.65 an ounce

Currencies and Bond Market


The dollar index (DXY) pushed to the highs in the final hour of trading, up 0.15 to 89.75 (near
multi-year highs), as the euro traded to fresh 2014 lows against the U.S. dollar (below 1.222). The
dollar traded up against the yen, back to the 120 level
The Russian ruble extended gains from late last week after falling to record lows early in the
week (shy of 80 vs. USD) on oil price plunge. As oil prices have stabilized, the ruble has recovered
(note the ruble has declined 135% vs. the dollar from June to December, and rallied 31% in the
last 5 days, according to MKM)
Treasury markets gained, continued to be buoyed by record low bind yields in Europe (Germany
traded near new lows again); Treasury auctioned $27B in 2-yr notes at 0.703% (4 bps lower than
where it was trading), with a bid to cover at 3.21 below prior auctions

Macro

Up/Down

Last

WTI Crude

-1.87

55.26

Brent

-1.45

59.93

Gold

-21.40

1,174.70

EUR/USD

-0.0009

1.2220

JPY/USD

0.49

119.98

-0.012

2.160%

10-Year Note

Sector News Breakdown


Consumer
Retail; broad based rally in retailers ahead of holiday this week, with apparel, department stores,
hardlines all rising; FINL falls further after analyst downgrades (follows weaker quarterly results
last Friday); in dollar stores, Bloomberg reported FDO shareholders are leaning toward
adjourning tomorrows vote on a takeover by DLTR
Homebuilders advanced despite Nov existing-home sales falling (-6.1%) to 4.93M, below estimate
for (-1.1%) drop to 5.2M; data showed inventory fell 6.7% to 2.09M homes, Distressed sales 9%
of total sales; of which foreclosures 6%; short sales 3%; TOL, KBH, PHM active
Gaming news; Macau casino stocks fell after Chinese President Xi Jinping urged the city to
diversify its economy and strengthen supervision of the gambling industry (WYNN, MPEL, LVS);
CZR to acquire CACQ in all-stock merger to support restructuring http://goo.gl/5PbY8E
Movie theatres (CNK, AMC, RGC) with weak box-office weekend as MKM notes falls short of
expectations and declines for a fifth consecutive weekend (top 10-films grossed $124M, below
firms est. $143M, and down 8% YoY)
Energy
Energy stocks fade after strong gains last week on apparent short squeeze; stocks (especially
the nat gas leveraged names) are among worst performers in S&P, but down in general
(XOM/CVX fall after leading the Dow higher last week); land drillers among worst performers
with NBR, PTEN, HP falling (group pared losses late)
Natural gas prices weighed on select stocks; natural gas prices under pressure (prices -27.5%
over the last 3 weeks, on a lack of heating demand, continued high production growth & ample
inventories); today markets down lower after Bernstein notes Nat Gas may not be the safest
refuge from drop in oil in Q1 (names like SWN, UPL, CHK, RRC, ECA leveraged to nat gas fell)

Stock news; NE to buy back up to 15% of common shares; TESO reduces 4Q guidance on falling
equipment demand due to weak oil prices (sees Q4 eps 10c-15c vs. est. 32c); SLCA announces
boost in share buyback plan to up to $50M
MLP sector was little changed, recovering from earlier losses as crude prices declined again; the
Alerian MLP Index (AMZ) remained around the 452 level (touched year lows last week) saw
several of the MLPs dropping more than 5% with oil roll (ARP, VNR, LINE, BBEP, LGCY, NMM all
down)
Financials
All quiet in financial sector, tracking overall markets; in large cap space, OAO Rosneft said its deal
to buy MS oil-merchanting business ended after failing to win regulatory approval
http://goo.gl/mMtTP2 ; CNBC reported that GS sold its aluminum storage business
Consumer Finance; OCN chairman Erbey steps down, to take $50M charge in Q4, paying $100M
civil monetary penalty to NYSDFS for housing/foreclosure relief (shares of ASPS, AAMC fell in
reaction to OCN paying $150M); SYF downgraded to neutral at BTIGs on valuation/says results
could be noisy in coming quarters
Healthcare
Biotech sector lagged (led by GILD weakness the IBB down); ABBV and Pharmacy Benefit
Manager ESRX struck an exclusive hepatitis C deal where, ABBV agreed to discount the price of
its Viekira Pak hepatitis C therapy in exchange for exclusive access to Express Script's 25M
customers (Viekira gross price $83.3K for 12-weeks). Starting the new-year, GILDs competing
hepatitis C drugs, Sovaldi ($84k-for 12 weeks) and Harvoni (gross price $94.5K for 12-weeks), will
be excluded from ESRX formulary (as well as JNJs Hep C treatment); ENTA receives milestone
payment after FDA approval of ABBV drug
Movers on news; ACHN said its NS5A inhibitor, ACH-3102, in combination with Sovaldi
(sofosbuvir) achieved 100% SVR4 in 12 patients in six weeks, independent of baseline viral load,
gender and IL28B status; RDUS osteoporosis drug candidate successful in Phase 3 trial; BCRX
received FDA approval for flu Drug Rapivab; NLNK awarded a $30M Ebola contract from HHDS
Biomedical department
Industrials & Materials
Metals, Mining & Material stocks lag, after last week jump; South Korea filed a complaint with
the WTO seeking to nullify U.S. tariffs levied on imports of certain Korean steel products
(weighed on X); saw weakness in metals/materials, with FCX, AA, CLF, VALE among losers; gold
miners broadly weaker with gold off about 2% (NEM, ABX)
Transport index advanced; gains today were broad based, though airlines (LUV, ALK, JBLU) and
rails (KSU, CSX, UNP) outperformed (lower energy prices/
Aerospace & Defense; defense names were higher, led by RTN (awarded $2.4B contract to
Qatar), LMT, NOC, LLL and BA (some at record highs); aerospace suppliers however were weaker,
with AVAV, BEAV, and KLXI soft (PCP, HXL down as well)
Baltic Dry Index Falls 1.1% to 794 Points in London, which marks the 22nd consecutive days of
losses (longest run of drops since Aug. 2012)

Technology, Media & Telecom


Internets; FB trades to new 2014 highs in the Internet sector; TWTR also strong as SunTrust
analyst said on CNBC that he sees a "good chance" of a CEO change at the company within a
year; PCLN recovers 6% from lows
Semi-equipment stocks continue to add to 2014 highs, with gains in KLAC, AMAT, while semis
strong INTC led the Dow, and lifted semis (SOX index outperforms) few analysts positive on
sector today (recently)
Internet Security stocks have been strong in latest week (after Sony hack); Oppenheimer raising
price targets for CHKP, IMPV, PANW, and FTNT while reiterating Outperform on CYBR and VRNT;
also says FEYE begins to look more attractive at current levels
Hard disk drive stocks STX and WDC both downgraded to neutral at Longbow citing valuation, HD
TAM that is in middle innings of an enterprise and PC-driven recovery, lack of catalysts
Body camera stocks have been momentum plays in recent weeks; TASR today said Ontario Police
order 1,879 Taser X2 Smart Weapons (was also initiated Outperform and $28 tgt at OpCo)
Media/Telco news; Fox News Channel and Fox Business Network are no longer being carried on
DISH after the companies failed to agree on the terms of a new distribution pact
Other tech; BBRY upgraded by one analyst; GPRO rallied into IPO lock-up tomorrow (stock fell
last week ahead of event); momentum gainers IBM and CSCO also helped lift the Dow

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