Closing Recap 4:05PM EST

Friday, January 16, 15

Index

Up/Down

Last

DJ Industrials

190.60

1.10%

17,511

S&P 500

26.67

1.34%

2,019

Nasdaq

63.56

1.39%

4,634

Russell 2000

21.93

1.90%

1,176

Equity Market Recap

U.S. markets end the week on a positive note (near highs), snapping their 5-day losing streak, but
still finished the week in negative territory. The S&P 500 Index (futures were 30-points off their
overnight lows) ended higher by over 1.3%, while gains were broad based, led by Energy.
Economic data was generally better, as Consumer Sentiment Reading touched best level in 11years, while CPI dropped the most in 6-years (due to falling energy prices), but even without core
food & inflation, inflation expectations declined. Earnings were generally received better today
after a week of disappointments (mainly financials). Materials/Metals had a rough week on
slowing demand growth fears, though gold prices surged following the surprise move by the
Swiss National Bank yesterday to decouple from the euro. A volatile week for sure, but earnings
volume picks up starting Tuesday (markets closed Monday), along with ECB Meeting Thursday

Economic Data
Industrial Production for Dec fell (-0.1%), in line with estimates (after rising 1.3% in Nov), while
Capacity utilization fell to 79.7% from 80% in Nov.
Consumer Price Index for Dec. CPI fell (-0.4%), in lie with consensus, while core CPI (ex: food &
energy) was unchanged vs. est. 0.1%; said CPI for Energy fell (-10.6%) YoY
Prelim Jan. Michigan Sentiment rose to 98.2 (highest since 2004) vs. est. 94.1 and 93.6 prior
month; Current economic conditions index rose to 108.3 vs. 104.8 last month

Commodities
Oil ends higher; what a wild week for oil prices - plunged to lows into the close Thursday (seeing
10% turnaround from its highs), while Fridays action saw WTI crude surge into the close (into 3day holiday weekend), rising more than 5% on the session at $48.69. Oil ended its 8-week losing
streak with the late day push higher late day. Overnight the International Energy Agency (IEA)
helped lift crude after saying a collapse in oil prices should slash growth in non-OPEC oil
production, boosting demand for producer groups output; comments/coupled with sharp
declines this week, helping lift oil prices this morning (and related stocks)

 Gold prices closed out the week in strong fashion, rising over $12 to $1,276.90 an ounce, a 4month high as gold gained 4.25% for the week (this after a $30 surge on Thursday. March silver
rose over 3%, while copper bounced. The sharp moves the last two days come in a continued
reaction to Switzerland's abandoning of a cap on the franc

Currencies
The dollar index (DXY) surged early, trading to best levels since 2003, rising as high as 93.262
before paring gains into the close; the euro plunge continued, testing 1.15 to the downside
against the U.S. dollar before recovering (also lowest level since 2003). The dollar also rises
against the yen, recovering from recent declines. The dollar, meanwhile, was generally higher, as
the Swiss franc gave up some of Thursdays hefty gains that came when the Swiss National Bank
scrapped its currency cap.

Bond Market
Bond prices ended lower, ending 5-staright days of gains, as yields ease off lows; a surge in
consumer sentiment to its highest level in eleven years helped lift equities and pare recent
weakness in treasuries; the yield on the 10-year fell to as low as 1.705% overnight, but ended
back above 1.8% (up over 11 bps from lows; the 30-yr yield bounced off record lows, trading to
2.43% (profit taking after a strong few weeks also likely to sell-off today). Events that can move
bond markets next week include, Greeks head to the polls on Jan. 25 to vote in a snap election,
and the ECB Meeting next Thursday.

Items to watch next week

U.S. Equity markets closed on Monday for Holiday
Global business and political leaders will meet in Davos, Switzerland, for the World Economic
Forum to discuss a range of economic issues and current affairs (tail end of the week)
U.S. President Barack Obama delivers his sixth State of the Union address the day before he
sends a delegation to Havana to begin talks on normalizing relations with Cuba (Tuesday night)
The International Monetary Fund releases its update to the World Economic Outlook.
China publishes growth figures.
European Central Bank President Mario Draghi is expected to announce government-bond
purchases after the Governing Council holds its first policy meeting of the year. (Thursday)
Japan, Canada and Brazil make decisions on monetary policy.

Macro

Up/Down

Last

WTI Crude

2.44

48.69

Brent

1.59

49.86

Gold

12.10

1,276.90

EUR/USD

-0.0065

1.1568

JPY/USD

1.37

117.54

10-Year Note

0.046

1.821%

Sector News Breakdown

Consumer
Retailers; sector generally higher with market (discretionary been weaker of late on soft retail
sales data); BURL upgraded to buy at Sterne; FDO cut tom hold at Jefferies (no more bids
expected); LULU upgraded at CLSA and positive mention at Argus (raise est. and tgt); TGT
upgraded to buy at Bank America; home improvement retailers HD/LOW bounce
Restaurants; BJRI prelim Q4 sales slightly below estimates, but strong comp sales; RNDY
guidance weak (downgraded at Bank America); CMG trades to highs end of day
Autos; ALV downgraded to Underperform at RBC saying consensus estimates appear too high, as
believes will need to invest at a high rate to support its active safety targets; after a dreadful
week for auto retailers (AAP/ORLY) and suppliers (BWA/MGA) after some softer outlooks, little
bounce for some today
Staples; SAM trades to record high on positive initiation (over $300 per share); HSY trades to alltime high after analyst upgrade
Energy
Oil services stocks among the biggest gainers in energy today, led by SLB after quarterly earnings
topped consensus (announced dividend boost and over 9k job cuts, while cutting cap-ex) note
BHI/HAL report next week; shares of OIH ETF surges (WFT, HAL, BHI all rise); E&P stocks also
surging, as group has been one of hardest hit sectors amid crude drop shares of NFX, PXD, APC,
HP among early leaders; BHI said total rig count fell by 74 to 1,676 in the latest week (oil down 55
and gas down 19) lowest total since October 2010
European oils; shares of RDS.A, TOT, STO, BP all downgraded at JP Morgan saying it expects
2015/2016 consensus estimates for Big Oil names to decline by more than 50% as oil price
outlooks come down; Canaccord cut ratings on BP and E; note BP rises on relief as US judge rules
less oil spilled in Gulf of Mexico oil disaster than US government had claimed
Oil drillers rise, with gains in DO, NE, RIG (all of which provided fleet status updates overnight
taking rigs down), also as broader energy stocks bounced today
Natural gas leveraged stocks rally (CHK, DVN, EOG, EQT); overnight RRC revised 2015 cap-ex to
$870M, down from $1.3B (with 95% targeted for Marcellus), while targeting production growth
of 20% YoY (2014 YoY production growth approximately 24%)
MLPs; the Alerian MLP Index higher (AMZ) by nearly 2%; HCLP leads group after boosting
distribution outlook to 0.675c from 0.625c...other leaders on oil rebound include BBEP, CLMT,
OKS (boosted div earlier this week), MMLP; TOO was upgraded to buy at UBS
Financials
Foreign exchange trading service stock FXCM said clients had significant losses, generated
negative equity balances owed to FXCM of ~$225M and may be in breach of some regulatory
capital requirements (stock was halted after falling 88% pre-market) CNBC later reported that
LUK gives FXCM $300M in financing to continue normal ops; GAIN said in response to FXCM
disclosure that it generated a profit for the day, considering both trading profit and negative
client equity, following the surprise announcements by the SNB. IBKR said after the CHR/EUR
movement caused customer losses in excess of their deposit with IBKR of ~$120M
Banks reported (regionals strong): 1) GS posted lowest annual trading revs since 2005 as FICC
weaker than expected on significantly lower net revenues in credit products, mortgages
(EPS/revs slight beat); 2) PNC Q4 EPS tops estimates/gains on commercial lending; 3) STI Q4 eps
beats by 8c (lower provisions/NCOs); 4) CMA EPS beats by 5c (loan growth better/NIM
weaker/provisions lower); 5) PVTB eps misses

 Asset managers; TROW downgraded to Underweight at JP Morgan saying fundamentals show

deterioration in more volatile market; been a busy week for asset managers, with AUM for Dec
mostly coming in below Nov totals
Mortgage service providers remain active; ASPS guided Y15 adjusted EPS $4.40-$7.95 vs. est.
$5.33, with revs $804M-$935M (est. $918.7M) and said believes OCNs existing non-GSE portfolio
provides a long-term stream of revenue and earnings to Altisource (shares of AAMC, HLSS moved
higher with ASPS guidance)
Healthcare
Fairly quiet in the healthcare sector today outside of a few headlines; DEPO to buy US rights to
Nucynta from JNJ unit for $1.05B http://goo.gl/uZn6ZA; biotech stocks recover from prior days
weakness (AMGN, CELG, BIIB, GILD, ALXN, VRTX higher); RCPT received positive mention by Jim
Cramer on CNBC Mad Money and this morning as well; Healthcare staffing firms TMH and EVHC
downgraded to neutral at Citi saying stocks of both are priced to near perfection at current
levels; AET and GILD confirmed discount pricing for Hep C drug Harvoni/Sovaldi
Industrials & Materials
Transports; group was mixed, as rails leading transports with NSC, CSX, KSU among top gainers in
DJ Transports, while airlines were laggards, UAL, LUV, ALK, DAL
Metals & Mining; gold miners extend gains for the week after gold prices surge (shares of ABX,
GG, KGC, NEM, AUY rise); industrial metals were mixed on global growth fears, with steel,
copper, aluminum, iron ore names active (has been a rough week for them given World Bank
lowered growth outlooks)
Packaging & Paper; Wells Fargo boosted estimates for BERY, IP, PKG, REX-GB and RKT while
decreasing 2015 estimates for BLL, CCK, MWV, OI and SON; upgraded IP to Outperform saying
firm is favorably disposed to the containerboard stocks (IP, PKG and RKT) in light of lower
energy/fiber costs as well as potential for spring price increase announcement
Forest product stocks LPX and WY were weaker later day after weekly OSB numbers came in
weaker than expected
Aerospace & Defense; supplier PCP fell, saying Q3 EPS results hurt by factors including lower
demand from oil and gas distribution customers, lowering outlook for EPS/revs; Aircraft leasing
companies AL and AYR downgraded at JP Morgan saying it sees better risk/rewards elsewhere in
the space following the recent outperformance of shares
Technology, Media & Telecom
Semis were little changed after first major chip maker, INTC, reports better quarter, but slightly
lower guidance for revs/margins; also cut its cap-ex outlook, but equipment stocks were
unphased; QCOM downgraded by one analyst
Internet; Cowen upgraded NFLX to Outperform and up tgt to $382 (but says can envision a bullcase scenario of $470 which suggests 45% upside); PCLN traded back above $1,000 level after
falling yesterday on euro weakness (though euro lower again today);
Software; EOPN rises as WSJ reported company is seeking a buyer after its stock plunged
http://goo.gl/qiZfJc ; video games in focus after NPD Group said total U.S. video game sales in
Dec. fell (-1%) YoY to $3.25B, while hardware sales (-4%), software (-2%), accessories +8%; ATVI
Call of Duty: Advanced Warfare Top Game of 2014
Media/Advertising/marketing; TUBE was upgraded at RBC on valuation and its upbeat view of
the company's video demand-side platform; OMC was cut at FBR Capital as believes estimates
are too high (note Evercore cut OMC yesterday); VIAB & FOXA assumed buy at Stifel

 Other movers; CRRC to be acquired by QUAD for $20.50 per share http://goo.gl/WQLWif; TESS
falls as pulls year forecast; TSRA raised guidance after AMKR agreed to pay TSRA $155M in
patent settlement; RGC said it would not pursue sale of company after strategic review
Internet security stocks in focus again after NY Post had its Twitter account hacked today; also
note Cybersecurity set to be topic during State of the Union address by President next Tuesday
(shares of PANW, SYMC, CHKP, CUDA, PFPT, FEYE were higher)

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 t o 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