Closing Recap 4:05PM EST

Friday, January 30, 15

Index

Up/Down

Last

DJ Industrials

-247.02

1.42%

17,169

S&P 500

-26.06

1.29%

1,995

Nasdaq

-48.17

1.03%

4,635

Russell 2000

-24.88

2.09%

1,165

Equity Market Recap

Another absolutely wild day on Wall Street, that saw major swings in stocks, oil markets, gold
futures and Treasuries. U.S. equities closed on lows, as the S&P 500 Index posted its biggest
monthly decline in a year, as weaker-than-forecast economic growth overshadowed a rally in
energy shares sparked by a surge in the price of crude. Equities earlier tumbled more than 1%
amid concern over economies in Europe/Russia as data showed slower growth in America (GDP).
Markets then turned slightly positive mid-to-late afternoon as oil prices surged, ending higher by
8% (lifting the aforementioned energy stocks). However, once the oil markets closed, equities
resumed their downward momentum, touching new lows, led by Utilities, Staples, and
Industrials. The volatility in macro once again overshadowed several earnings reports
(AMZN/GOOGL/LLY), and several new issues that opened for trading today (SHAK/ONCE). Also
overnight, more continuation of the Greek saga, while markets also surprised after the Bank of
Russia cut interest rates on Friday
Several Fed comments today; as Feds Bullard (is not an FOMC voter this year) told Bloomberg
"I'd rather get off zero sooner ... and then react to data." It's reasonable, he says, to expect a rate
hike in June or July. Feds Plosser said today in a NYT interview We have had a better economy
than we thought it was going to be so (the) Fed needs to explain why it isnt reacting to dataif
(the) Fed waits too long, it runs risk of falling very behind the curve.

Economic Data
The U.S. economy slowed a bit more than expected in Q4 after expanding at the fastest pace in
eleven years for Q3, as GDP grew at a 2.6% annual clip (below est. 3%), which was below the
5.0% pace recorded in the prior period (was 1st estimate for Q4). Personal consumption came in
at 4.3% vs. est. 4% (Q3 ended 3.2%), while Core PCE was in-line at 1.1% (vs. 1.4% end Q3)
The Q4 Employment Cost Index (ECI) rose 0.6% QoQ (in-line with consensus) and vs. 0.7% prior;
Employment Benefits 0.6% vs. 0.6% prior and Employment Wages 0.5% vs. 0.8% prior
Jan Chicago PMI was reported at 59.4, ahead of estimate for 57.5, and above last months 58.8
reading; (below the recent high of 64.3 in August)
University of Michigan Sentiment reported at 98.1 (vs. 98.2 in the preliminary estimate) and the
index was 93.6 last month; expectations index rose to 91.0 vs. 86.4 last month

Commodities
Oil prices explode higher the final hour of the day; oil posted biggest gain since 2012, surging
$3.71, or 8.3% to $48.24 per barrel (but still posted its 7th consecutive monthly loss), on no one
specific story, other than an apparent squeeze in the commodity complex. Overall though, the
outlook still remains bleak in regards to demand (much bigger inventory builds this week
confirmed that). OPEC continues to hold steady its position not to cut production; note the U.S.
the weekly rig count fell another -90 to 1,543, most since 1987 (note several co.s announced
massive cap-ex cuts this week due to decline oil prices). With late surge, WTI crude finished up
6% for the week (but still down 9% for month); Brent futures closed higher by $3.86, or 7.86% to
settle at $52.99 per barrel; Natural gas prices fell over 2%
Note there were reports by CNN that in what could be an attempt to capture the city in northern
Iraq, or to divert Kurdish troops fighting the militants elsewhere, ISIS has launched an attack on
the center of Kirkuk maybe best explanation to the late day surge in oil
Gold prices gained $23.90, or 1.9% to settle at $1,278.50 an ounce (follows a 2.4% decline
Thursday), as the commodity complex saw a big squeeze late day, after an aggressive pullback
yesterday for most segments. Silver prices were up over 2% (after falling 7% yesterday)

Currencies
The dollar index (DXY) ended little changed after spending most of the day slightly higher holding
11-year high levels. The euro dropped back under the 1.13 level against the dollar, while the yen
showed some late day strength. Fairly limited movement considering the economic data

Bond Market
Treasury markets surge after another round of weaker economic data reports, as GDP for Q4
came in lower than expected; even hawkish comments from a few Fed members (indicating a
June rate hike is reasonable) failed to generate selling in bonds; the yield on the 10-yr drops to
1.66^%, while the 30-yr yield resumes decline to fresh low 2.24%; the German 30-yr bund yield
dropped to record low of 0.99%, while the German 10-year bund falls to record low 0.327%.
Overall, the 10-yr yield on pace for 50 bps drop in January (biggest since Aug 2011), and a 50 bps
drop for the 30-yr yield (biggest since August 2011)

Several IPOs opened for trade

Avinger (AVGR) opened at $13.15, after 5M share IPO priced at $13.00

First Northwest Bancorp (FNWB) opened at $11.75, IPO at $10.00
InfraREIT (HIFR) opened at $27.10 after 20M share IPO priced at $23.00
Shake Shack (SHAK) opened at $47.00, after 5M share IPO priced at $21.00
Spark Therapeutics (ONCE) opened at $45.10 after 7M share IPO priced at $23.00
TRACON Pharmaceuticals (TCON) opened at $10 after 3.6M share IPO priced at $10.00

Macro

Up/Down

Last

WTI Crude

3.71

48.24

Brent

3.86

52.99

Gold

23.90

1,278.50

EUR/USD

-0.0012

1.1308

JPY/USD

-0.88

117.40

10-Year Note

-0.09

1.661%

Sector News Breakdown

Consumer
Retailers generally weaker; AMZN surges after quarterly results on improved gross margins, and
ongoing strength in EGM segments; DECK huge disappointment as Q4 revs miss and cuts yearly
eps/rev outlooks/saw order cancellations in Dec (hit footwear names FL, GCO, DSW, FINL); HBI
Q4 eps beat/sales miss and midpoint yearly guidance short of consensus views; CHS upgraded to
buy at Janney; COST announced a special $5 dividend, paying out $2.2B to investors
Home furnishing/builder sector generally weaker, with shares of RH, WSM, BBBY, PIR as well as
home improvement stocks LOW, HD trading downhomebuilders lower PHM, KBH, LEN fall
(note BZH reported this morning)
Restaurants; SHAK opened at $47.00, after 5M share IPO priced at $21.00 (saw weakness in
space overall after deal LOCO, PBPB, PLKI, JACK)
Staples; in tobacco, MO mixed results as sales volumes fell (but profit jumped); in food, TSN Q1
beat and reaffirmed guidance outlook; GMCR initiated Underperform at CLSA ($130 tgt); PG
another analyst downgrade (2nd since earnings); NWL a decliner on earnings
In autos; HMC cut its year profit forecast again, saying net income will probably be 545 billion
yen, below prior view of 565 billion yen; supplier LEA beats highest eps estimate
Gaming & Leisure; casinos fall, as Las Vegas Strip Casino Gambling revenue fell 16.41% in Dec
(LVS, WYNN, MGM were lower)
Energy
A massive surge late day in oil (WTI crude ended higher by more than 8%), lifted shares in the
energy complex across the board: equipment/services/majors all surge (NBR, CAM, DNR, HP) just
to name a few with a late day surge
More companies cut cap-ex budgets for 15 following oil drop; CVX said to spend $35B in cap-ex,
which is 13% lower than total investments for 2014 (also said to suspend share buybacks, which
hurt energy names initially); GDP cut 15 cap-ex $90M-$110M vs Dec. view $150M-$200M
News; PBR fell after Moodys lowered its grade on debt to Baa3, the lowest investment
classification, and said the ratings remain on review for a further cut; BHI said weekly total US rig
count drops -90 to 1,543 rigs
Solar sector; SWI Q4 EPS/revs topped consensus views (upgraded at Deutsche Bank), though Q1
revs were shy of consensus; RBC Capital upgraded shares of SPWR, JASO and TSL to Outperform
in the wake of the huge solar rout seen over the last few months
Frack sand sector; Guggenheim downgraded shares of SLCA to neutral and said the frack
sand/proppant market is worse than expected, rapidly deteriorating in 1Q (firm sees sand
proppant demand down 31% in 2015) shares of HCLP, EMES, CRR have been weak
Subsea oilfield services companies are expected to underperform when crude prices rally, and
investors should start to rotate into U.S. land-levered names RBC said (CAM/FTI active on
comments)
MLP sector; the Alerian MLP Index (AMZ) jumped late day with oil bounce; NFG cut its 2015 eps
view and said was eyeing market for midstream MLP IPO; CPLP was upgraded at Stifel; NS
jumped on earnings

Financials
Credit cards jump on better earnings from V and MA; V announces a 4 for 1 stock split after Q4
EPS and revs top consensus, while MA EPS beats by a nickel as consumer spending picked up
(revenue climbed 14% in Q4 to $2.42B)
Canadian Banks; Barclays downgraded shares of BMO, RY and TD to Underweight saying the
slowing domestic banking market will limit earnings growth
Insurance; CB declined today despite eps beat, a buyback announcement and written premiums
rose 5% to $1.3B (profit did drop 1.9% on investment income); PFG
Asset managers; LM Q3 EPS beat by 1c and announced $1B stock buyback; BEN shares dipped
after Q1 EPS missed by 2c on weaker revs (Net outflows $3.5B vs. outflows $100M QoQ);
investment advisor/asset manager earnings have been mixed at best this quarter
Mortgage services; saga continues for this group, with shares of AAMC fall following some
cautious comments by JP Morgan (NSM, OCN, WAL, HLSS, ASPS have been very volatile)
Healthcare
Biotech movers; BIIB surges after guiding 2015 profit $16.60-$17, well above consensus of $16.35
after solid quarterly results; ICPT shares leap after its OCA got breakthrough designation for the
treatment of nonalcoholic steatohepatitis (NASH) with liver fibrosis; in therapeutics, ONCE
opened at $45.10 after 7M share IPO priced at $23.00
Pharma; sector was generally weaker, though LLY advanced after earnings (warned of forex hit
due to stronger dollar in guidance); ABBV Q4 eps beat, but said sales of its new hepatitis C drug
(Viekira Pak), would be slower than investors and analysts previously projected (said would take
until end of 2015 to reach $3B in annual sales); MRK, JNJ, PFE were lower
Dental stocks slip after ALGN guides Q1 EPS 29c-32c below est. 45c (XRAY, SIRO move)
Healthcare IT firm CPSI falls as Q4 missed and guided year EPS/revs below consensus
Other earnings movers: gained on earnings CPHD; decliners: IDXX falls on forecast cut;
Industrials & Materials
Transport index broadly lower; group led by weakness in airlines early today as UAL, DAL, AAL fall
(note HA big drop on earnings/pricing pressure); though weakness across the board early as
nearly all Dow Transport components trading lower
Machinery/trucking; MTW earnings mixed, but said to split into two companies; PCAR fell after
Q4 revs fell short of consensus (CMI, NAV leveraged)
Metals & Mining; cement maker CX downgraded by one analyst; RS downgraded at Bank
America; gold miners with nice bounce today as gold partially recovers from 2.4% decline
yesterday (NEM, ABX, GG, KGC rise)
Industrial; MOG/A lowered its full-year eps forecast; TXT upgraded at Bank America on valuation;
IR Q4 beats, but guides Q1 and year below views; ADES fell as KPMG resigns as accounting firm
E&C stocks; CBI declined after saying contractor delays will slow completion of new nuclear
reactors in Ga. by 18 months
Forest & Paper stocks; it has been a busy week of earnings for this group, with WY rising on
mixed results today (EPS beat/revs miss) as sees Q1 wood product earnings significantly higher
QoQ (have seen earnings from PCL, PCH this week)
Shippers/tankers; Baltic Dry Index Falls 3.8% to 608 Points in London (index is down 95% from alltime record high in 2008) fell 5% today to 632, as per CNBC

Technology, Media & Telecom

Internet; GOOGL mixed quarterly results, but did say mobile advertising on YouTube is up more
than 100%; GRPN upgraded to buy from sell at Ascendiant and up tgt to $10 as sees improving
execution and near-term catalysts; YHOO analyst upgrade (follows 2 down days on earnings
results and BABA results)
Telecom; The FCC released its list of winners in the record-setting AWS-3 auction. T bid $18.2B;
VZ bid $10.4B; DISH had a big presence, bidding $10B ($13.3B gross); TMUS bid $1.8B
Hardware/Storage sector; XRX cut its 2015 outlook citing a weaker euro/also outlook for current
quarter below; QLGC rallies on earnings, while ELX declined
Software stocks; group remains under pressures this week as N the latest to fall after earnings
(quarter fine, but guided next quarter revs slightly below views for-ex remains an issue for
many names in this sector); PFPT reported better results; SYNA surges as Q2 EPS/revs well above
consensus; sees Q3 revs $450M-$490M (120%-140% up YoY); MSFT weakness continues after
earnings disappointment this week
Other movers on earnings; semi player BRCM a winner after quarterly earnings/guidance; optical
stocks fall after JDSU missed Q2 estimates and provided soft Q3 guidance (hit shares of CIEN,
OCLR, CAVM, FNSR)

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