Closing Recap 4:10PM EST

Thursday, February 5, 15

Index

Up/Down

Last

DJ Industrials

211.41

1.20%

17,884

S&P 500

20.91

1.02%

2,062

Nasdaq

48.39

1.03%

4,765

Russell 2000

17.05

1.44%

1,208

Equity Market Recap

Equities end higher; The Dow Industrial Average advanced for a 4th day (S&P would have been up
a 4th if not for late day ECB/Greek headline induced pullback late Wednesday), amid M&A deal
news, upbeat earnings (ORLY, EL, SNA, LB some top gainers in the S&P), a sharp rebound in oil
prices (rises 4%), and as fears eased regarding the Greece debt situation. Economic data was
mixed, but investors prepare for the monthly payroll data tomorrow, with an estimate of 230K
and unemployment to hold steady at 5.6% (note private payroll ADP report this Wednesday was
above 200K, but slightly below consensus); markets will also watch for wage growth. All 10
sectors in the S&P 500 advanced, led by Materials, Healthcare (boosted by PFE/HSP deal and
bounce in Biotech stocks), Energy and Financials.

Economic Data
Weekly jobless claims rose by 11,000 to 278,000 (below est. 290K); the average of new claims
over the past month, meanwhile, fell by 6,500 to 292,750; continuing claims increased by 6,000
to a seasonally adjusted 2.4 million
The U.S. trade deficit in December widened sharply to its highest level since 2012 as a stronger
dollar added to imports and weighed on exports. Commerce Department said the trade deficit
jumped 17.1% to $46.6B, the largest since November 2012 (est. was for deficit of $38.0B). It was
the biggest percentage increase since July 2009
U.S. productivity in Q4 shrank at a (-1.8%) annual pace (vs. expectations for 0.1% increase), as
the increase in the amount of time employees worked outstripped the gain in output (hours
worked shot up 5.1% - the biggest increase since 1998). Prior month was revised higher to 3.7%
from 2.3%. Unit labor costs surged 2.7% vs. est. 1.2%, though revised lower prior

Commodities
Crude oil ends higher; the volatility in the energy markets incredible of late, ending the day
higher by $2.03, or over 4% to settle at $50.38 per barrel. The move comes after WTI crude
surged as much as 9% Tuesday (before closing up 7%), only to fall 8% yesterday (dropped as
much as 10%), and surging back 5% today. The fundamental picture has not changed, as
inventory data yesterday continued to show a supply glut of oil. Efforts have been made by
companies to try and stem the oversupply, by cutting cap-ex and pulling rigs.

 Natural gas prices ended weaker after weekly inventory data showed a drawdown of -115 bcf,
smaller than the est. for -120 bcf (trades down 2% to $2.60)
Gold prices ended little changed, falling -$1.80 to $1,262.70 an ounce, in what was a lackluster
trading session. Gold failed to rally despite the 3rd decent pullback in the U.S. dollar over the last
four trading days. Several comments out of Central Banks, low rate environment, and market
unsure as to what the Feds next move will be, keeping lid on gold (this after gold posted its best
month in three years in January, rising 8%)

Currencies
The U.S. dollar declined for the third time in the last four days, with the index down about -0.4%
to 93.60, ending near the lows of the day (overnight high was 94.492); the euro extended gains
against the US dollar, rising to 1.15 level (up 1.3%) two times before failing. Currency volatility at
a two-decade high (as per CNBC)

Bond Market
Bond markets were fairly subdued ahead of the Nonfarm Payroll report tomorrow morning at
8:30 AM. Will another strong report create selling pressure in bonds finally? Many Fed speakers
over the last week have suggested a rate hike in June was reasonable, but markets appear to
not believe, as well respected Warren Buffett and Jack Welsh (former GE CEO) said just yesterday
the Fed should not hike rates given the strength in the dollar and low inflation. The 10-yr yield
held around 1.8%, the 5-yr 1.3% and the 30-yr 2.4%

Macro

Up/Down

Last

WTI Crude

2.03

50.48

Brent

2.68

56.84

Gold

-1.80

1,262.70

EUR/USD

0.0132

1.1477

JPY/USD

0.27

117.55

10-Year Note

0.014

1.814%

Sector News Breakdown

Consumer
Retailers; KORS Q3 results top estimates, but guidance for Q4 falls short of consensus (Q3 comps
did fall short of est. 8.6% vs. 12%); LB jumped to all-time highs after earnings beat/$250M
buyback/dividend boost; UA Q4 results top estimates/to buy two fitness apps for $560M; SMRT
declares special $5 dividend and Jan comps rise 6.6% vs. 3.6%; CONN Q4 revs miss/comps rise;
ZUMZ comps top estimates, while BKE misses; COST downgraded at Deutsche Bank
Auto sector remains strong; ORLY good quarter with a 6.3% comp vs. guidance of 3%-5% and
consensus at 4.5% (AAP/AZO); GPI Q4 eps/revs top views (follows recent AN strength on
earnings) SAH, KMX, PAG active on reports also after good GM and monthly auto sales data
Consumer Staples; GMCR cut its year EPS and sales outlook after Q2 EPS missed; consumer
products maker EL jumps on quarterly beat (despite lowering next quarter/year outlooks); PBH
raises lower end of year view after revs beat, while SPB quarter beats; tobacco giant PM Q4 eps
misses by 6c as volume shipment fell; COTY jumps on earnings
Restaurants; YUM sees 1Q EPS down 20% from last year/path to 10% growth more challenging;
DNKN Q4 eps misses/comps beat/boosts dividend; WEN upgraded at Susquehanna; GRUB guides
Q1 revs $83M-$85M vs. est. $80.1M; MCD Japan Jan. comp store sales plunge 39% YoY
Building Products/Housing related; USG Q4 EPS misses by 13c, as revs fall short as well; RH Q4
prelim EPS meets high end of views; VMC Q4 EPS/revs top views as shipments jump 15% in Q4;
SNA rises on earnings; home security maker FBHS falls as 2015 forecasts below ests.;
homebuilders paring some recent gains (rising rates?)

Energy
Energy stocks outperform; group solely moving with price of oil the past few days; earnings in
space pick up over the next week, but continue to see capex reductions/rig count declines
Oilfield Service news; ATW delivered strong execution, costs well below expectation; NE Q4 eps
missed and said plans to defer MLP (retirement of three older rigs removes capacity from the
industry); PTEN also missed quarterly EPS (plan dropping to 16 rigs); WFT numbers worse,
announces additional 3K jobs cuts (bring recent total to 8K) job cuts in January so far, WFT 8K,
SLB 9K, BHI 7K, HP 2K; BHI upgraded at Morgan Stanley
Cap-ex cuts; SU earnings fell short of expectations/cap-ex reduced by $1B to $6.2-$6.8B; EQT Q4
beats and reit year sales vol/cuts year cap-ex to $2.05B from $2.5B; CPE guides 15 capex $150m$165m, down about 25%-30% from 14
MLPs; the Alerian MLP Index (AMZ) jumped over 1%, as continue to tracks move in oil prices;
many companies still paring back cap-ex budgets; big jumps today in shares of BBEP, LINE, LGCY,
EVEP; MPLX rises after earnings (which missed by 5c); MMP said overall crude pipeline
shipments to rise 10% in 2015 YoY/seeking partner for $1B Saddlehorn Pipeline
Utilities; Latest New England Capacity Auction results generated higher prices for CPN and lower
for EXC according to SunTrust
Financials
Large cap banks pared gains late day, with shares of C, JPM, and BAC falling from highs
Other movers on news; OCN rises - Keefe Bruyette said likely to react positively after filing
update; LAZ declares special $1 dividend; ADS Q4 EPS beats, but guides Q1 and core outlook
below estimates; BPFH jumped after Dow Jones reported two of Canadas biggest banks RBC and
CIBC) looked at the company as a potential acquisition target http://goo.gl/0hqEV2 ; CTP
received a $7 a share takeover bid from a Chicago rival (NY Post) http://goo.gl/Dm4MEb
Insurance movers; ALL falls despite Q4 operating beat (also $3B stock buyback); PRU Q4 results
miss and decline in excess capital (shortfall driven by retirement, individual life, and
international); LNC topped views, but also weakens with other insurers; in reinsurers, RE beats
Regional banks; Bank America upgraded KEY to Buy from Neutral, while downgrading FITB to
Neutral from Buy
Healthcare
Major Pharma; HSP to be acquired by PFE for $90 per share, in $15B deal http://goo.gl/6XELv6;
TEVA Q4 eps was in-line, while Copaxone revs topped estimates; SNY Q4 sales top consensus and
expects 2015 Business EPS to be stable to slightly growing; AGN Q4 eps easily tops consensus;
AZN Q4 eps missed the mark, but said it will buy ACTs Respiratory business; VRX said raised its
offer to $400M in cash to acquire the world-wide rights to Dendreon's PROVENGE and other
certain assets http://goo.gl/t4TZ2v
Managed Care; ANTM confirmed last night that it was the "target of a very sophisticated external
cyber-attack; said hackers obtained data on tens of millions of current and former customers and
employees; CI rises as Q4 eps topped consensus on higher revs amid growth in fees/premiums
Other movers on earnings; medical device maker IRBT Q1 EPS/revs miss and guides year eps/rev
forecast below estimates; shares of AFFX, BDX, LCI, PRGO rise on earnings, while OSUR dropped
Biotechs; just a day removed from testing the 50 day moving average to the downside for the
biotech index (XBI), the group rallying more than 1% today (GILD weighed on group yesterday
post guidance); AEGR jumped after holder Sarissa (reporting 5.8% stake) sees engaging in talks
with AEGR; shares of CELG, BIIB up

Industrials & Materials

Heavy duty truckers; CMI expects revenue to grow 2%-4%, below the consensus 9% growth for
FY15 (Q4 eps/revs beat); NAV was downgraded to Underweight at JP Morgan and cut tgt to $28
after mgmt. admitted at analyst event it had been harder than anticipated to regain HD market
share; JPM upgraded PCAR to Overweight citing the recent pullback in shares and the higher
than expected January industry orders
Transports mostly higher, led by truckers despite mixed results from CNW overnight (stocks
leads), while rails also higher (CSX, UNP, KSU); airlines lagging in sector, as shares moving in
sympathy with direction of oil (which rallied today) ALK, LUV, UAL, DAL low
Chemicals/Materials; GRA approved a plan to separate into two independent, publicly traded
companies; DD said says Trian refused any proposals that did not include Peltz joining board; the
S&P 500 Materials index (XLB) rises over 2% to best level since November
The Baltic Dry Index, which tracks freight rates for ships carrying raw materials, has slumped to
its lowest point in 29 years, hit by a shipping glut, falling commodity prices and declining import
demand from China; today fell an 11th day to low of 564 points
Packaging; BLL said its board of directors is in discussions concerning a possible acquisition of
Rexam PLC (REX.LM) earlier, Rexam Plc said it was in talks to be potentially bought by BLL for
about $6.54B http://goo.gl/F6SrER
Metals & Mining; CX seeks to sell $1B-$1.5B of assets over 12-18 months; Steels cautious at
Cleveland Research (RS/NUE/X) saying carbon scrap prices are looking down by as much as $80100 per ton for February
Technology, Media & Telecom
Internet; GRPN in talks to sell stake in South Korea's Ticket Monster, the WSJ reported
http://goo.gl/lswWti ; TWTR struck a deal with GOOGL to make its 140-charactre updates more
searchable online (TWTR reports tonight after the close); GLUU reported strong Q4 results and
raised 2015 guidance/signs deal with Katy Perry; LNKD, P, YELP, EXPE report after the close;
GPRO rises into earnings after the close (supplier AMBA also higher)
Telecom/Cable; VZ is close to selling nearly $10B asset sale to FTR http://goo.gl/KubqjS; CHTR Q4
revs top views, with strong sub numbers & cuts capex to about $1.7B from $2.2B in 14 (cable
names CVC, TWC, CMCSA, also still benefitting from post net neutrality proposal yesterday);
Sprint (S) Q3 op revs top consensus, while Q3 Ebitda also better ($1.04B vs. $869M); BT (BT.LN)
finalized a deal to buy mobile operator EE for 12.5 billion pounds ($19B) http://goo.gl/9uqt3R;
MBT upgraded by one analyst lifted shares
Media; FOXA issued downward FY15 and FY16 guidance revision (after Q4 beat) which weighed
on media (TWX, CBS, VIAB); RRD to acquire CRRC for $23 in cash or 1.3756 in RRD shares
($261M) http://goo.gl/ZUxHcS
Internet Security stocks moves higher following news of new data breach, as Anthem said
hackers stole personal data in cyber-security breach; FEYE rises as hired by Anthem; shares of
PANW, PFPT, IMPV, CUDA, SYMC remain active
Storage/Hardware/Software; Software; DATA surges as guides 2015 revs $565m-$580m vs. est.
$552.5m and 4Q license revs up 75% YoY; TDC Q4 eps beat, but guided year outlook below views
(notes neg for-ex hit); EOPN to be acquired by Insight Ventures for $8.60 in cash, deal valued at
about $273M http://goo.gl/F27dKm ; MSFT to acquire calendar app maker Sunrise for over
$100M; BRCD upgraded to buy (from sell) at Citigroup; CDNS drops on earnings

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