Closing Recap

Friday, February 13, 15

Index

Up/Down

Last

DJ Industrials

46.52

0.26%

18,018

S&P 500

8.41

0.40%

2,096

Nasdaq

36.22

0.75%

4,893

Russell 2000

6.79

0.56%

1,223

Equity Market Recap

It was another winning day on Wall Street, and a stellar week in all, with many indices finishing at
or near all-time high closing levels. Sentiment improved throughout the week, amid positive
developments for Greece/Ukraine help drive the overall tape. Halfway through the month, and
February gains have already wiped out all of Januarys losses. The Dow Industrials top 18,000
level for first time in 2015 (all-time closing high 18,053.71 on 12/26/14), the S&P 500 Index
topped its December 29th all-time closing high of 2,090.57 (trading to a new all-time high). The
S&P MidCap 400 Index at all-time high, while the Russell 2000 Index trading above its record
close of 1219.11, while the Nasdaq Composite also at 15 year highs. Oil prices surged more than
2% this week, while Treasuries ended on a weaker note (yields on 10-yr back above 2%). Sector
gainers this week include Tech (+3.8%), Materials (+2.8%), Consumer Discretionary (+2%), and
Industrials (+1.4%), while Utilities and Telecom lagged. Europe stronger this week, helped
overnight by better EuroZone GDP data (Germanys DAX was over 11K). Reminder, U.S. equity
markets closed Monday for Presidents Day
Greece and the rest of the euro zone need to come to a political agreement over the country's
debt crisis in order to stop the outflow of deposits from Greek banks, the European Central
Bank's vice president said on Friday. Constancio said that the outflow of deposits from Greek
banks was a problem to which he would welcome a fast solution

Economic Data
Import prices fell sharply again in January by -2.8%, mainly because of much cheaper oil, but was
less than the estimated decline of -3.2%. Excluding fuel, import prices declined by -0.7% last
month. The decline in import prices in December, meanwhile, was revised to 1.9% from 2.5%
Consumer sentiment slipped in February to a three-month low, after the University of Michigan
index released Friday showed sentiment reading of 93.6 from 98.1 in January (and well below
consensus of 98.1). The current economic conditions index fell to 103.1 vs. 109.3 last month

Commodities
Energy prices rise; WTI crude ended the session higher by $1.57, or 3.07 to settle at $52.78 (up
2.1% for the week), helped late day after the WSJ reported that oil fields operated by COP, MRO,
and HES in the Bahi field in Libya were attacked. A combination of spending cuts by oil companies
and further declines in the number of active U.S. oil rigs (today BHI said the weekly total rig count
fell another 98 to 1,358) have helped stabilize oil prices, and ease over supply concerns (though
weekly inventory data still showed bigger builds). Brent prices also at 2015 highs, closing at
$61.52, up 3.78%
Gold prices ended the week on an up note, rising $6.40, or 0.5% to settle at $1,227.10 an ounce,
and cutting its weekly loss to -0.6%. Gold was hurt this week on low inflation expectations,
mixed data (good early part of week, weaker tail end) and expectations pushed up for a rate hike
as early as summer (a fluctuating dollar helped slightly). March silver jumped 50c, or 3%, to end
at $17.294 an ounce, for a weekly gain of around 3.6%.

Currencies
The U.S. dollar partially recovered after Thursdays pullback, but still remains strong, about 1%
off 11-year high levels; the dollar index (DXY) was up 0.10 to 94.20 (hi 94.309 low 93.899), but
it was a quiet day for currencies (after weeks of volatility given Swiss move a few weeks ago, as
Central Banks devalue their currencies to help exports). The euro was little changed on the day,
ending around the 114 level against the dollar and yen advanced slightly

Bond Market
Bond markets lost ground late day, as the yield on the 10-yr closed back above the 2% level (far
cry from the 3% level the start of 2014, but up about 40 bps from last weeks lows. Treasury
auctions were mixed (strong 10-yr Wednesday but weak 30-yr yesterday); the 30-yr up at 2.63%
(was at 2.2% last week), while the 5-yr yield went out around 1.51%

Macro

Up/Down

Last

WTI Crude

1.57

52.78

Brent

2.24

61.52

Gold

6.40

1,227.10

EUR/USD

-0.0008

1.1395

JPY/USD

-0.35

118.77

+0.037

2.023%

10-Year Note

Sector News Breakdown

Consumer
Consumer Staples; sector under pressure amid currency hit from stronger dollar; CPB cut its year
sales forecast to -1% to up 1% from prior 0%-2% and lower eps view; CAG now sees FY2015 EPS
$2.13-$2.18, below est. $2.26 citing negative currency impact; SJM Q3 profit fell 4% and lowered
its year outlook on coffee-segment weakness; KRFT CFO to leave after Q4 eps/revs beat (follows
weaker guidance from K yesterday and guidance comes ahead of CAGNY conference next week)
Retailers; VFC helped lead retailers higher as Q4 eps/revs meet views; ANF and GPS were bot
downgraded at Credit Suisse to Underperform saying a pick-up in deflationary pressure in the
U.S. apparel market combined with mounting FX headwinds leaves them cautious; COLM surged
on earnings beat (guides year $2.10-$2.20 vs. $2.07); SSI upgraded to buy at Sterne Agee;
Consumer Discretionary ETF (XLY) another new high (daily it seems)

 Restaurants; RRGB disappoints as both Q4 EPS and revs miss consensus (follows weaker
CAKE/PNRA results Thursday); still weakness in space (also as oil prices climb off lows)
Auto sector; some news in supplier sector as TRW Q4 eps easily tops views on better revs, but
guidance for revs for year fall short of consensus; BWA and AXL were both downgraded to hold
on valuation at Deutsche Bank; BWA also cut at Goldman Sachs
Energy
Energy stocks advanced, posting a strong week, as oil prices surged to their best level of 2015;
APA rises again after earnings the day prior (also analyst upgrade); the weekly Baker Hughes rig
count declined another 98, down to 1,358 rigs; BP lost ruling on bid for $750M RIG insurance
Oil drillers; SDRL shares fall after saying it wiped $1.1B from its Q3-2014 backlog as it expects two
contract extensions signed with PBR will no longer be concluded as agreed (one firm notes DO
has 6 rigs with PBR, RIG 5, PGN 3 and NE 1); HERO downgraded at Howard Weill and cut tgt to $1
Utilities; sector with a dreadful week, as investors look to riskier assets and sell defensive sectors
(Utilities); rising rate environment (not huge, but 10-yr yield up 40 bps from early last week), also
hurting dividend paying sectors; weakness today led by EXC, ED, PCG, DTE
Refiners; Goldman Sachs upgraded shares of VLO saying the company is a compelling turnaround
story w/upside from midstream/logistics MLP segment, but downgraded TSO to neutral (follows
earnings miss yesterday); sector rating remains attractive; top picks VLO, MPC, PSX, DK
MLPs; the Alerian MLP Index rises to best levels in a week, up as oil prices jump 3%, led by shares
of LGCY, TCP, LINE, HCLP NGLS-$44.16: Reports Q4 Beat; EBITDA $258M vs. GHS $227M & St.
$236M, DCF $199M vs. GHS $166M & St. $186M
Financials
Financials were among leaders early, but reversed with market
Top movers; AXP extends losses from yesterday after COST deal termination (downgraded at
Bank America today) stock down over 8% last 2 days on news;
Insurance; AIG Q4 eps missed views but announced a $2.5B stock buyback; however, AIZ shares
fell after missing top/bottom line results
Mortgage Finance; WAC shares jump after Barrons said shares could easily hit $30-$35, citing
a fund manager at GoodHaven mutual fund (NSM/OCN mixed)
Healthcare
Large cap Pharma; SLXP rises on reports SHPG working with advisers on a potential offer, Reuters
said http://goo.gl/N1xukH (recall yesterday Bloomberg reported VRX said to weigh offer of over
$150 per share for SLXP http://goo.gl/kCozDh); IRWD fell on wider Q4 loss; JNJ bounces after
weakness yesterday tied to patent concerns; MNK analyst upgrade; the FDA will review NVS
New Drug Application (NDA) for LCZ696 under its Priority Review program
Biotech; CYTK upgraded to Overweight at Piper saying regulatory path looks capital efficient,
sees 60% chance of success in Lou Gehrigs, potential U.S./EU market introduction in 2018; XON
to acquire ActoGeniX, a European clinical stage biopharmaceutical company
Therapeutics; BLPH IPO opened at $10, after pricing 5M shares at $12; ALNY posted narrower Q4
loss as revs beat; other movers on earnings, dialysis company DVA shares fell on weaker
guidance

Industrials & Materials

Transports lagged; sector down, led by airlines, as oil surge continues (AAL, DAL, UAL lower) SKYW standout to upside after Deutsche Bank upgrade; truckers (CNW) and logistics/services
(JBHT) helped support the sector
Multi-industry/cap equipment; group was led higher early on stronger oil prices, and recent
momentum; shares of ITT advanced on earnings
Aerospace/Defense; Rolls-Royce Holdings PLC cut its profit forecast for the year; AME was
upgraded to buy at RW Baird; defense stocks mostly lower (GD, RTN, LMT)
Metals & Miners; Steelmaker ThyssenKrupp AG said it turned a profit in Q1; precious metals
bounced today, helping lift gold miners (ABX, NEM, GG), as well as silver producers (SLW/PAAS)
Tankers/Shippers; the Baltic Dry Index extended drop from record as Capesizes decline and
overall index fell 1.9% to 530 pts
Technology, Media & Telecom
Internet; group remains strong, with GRPN rising on better results, online travel names extend
gains after EXPE/OWW deal announced yesterday, while large cap players NFLX, GOOGL, AMZN
(near 52-week high), were higher; SSTK and SFLY both fall on guidance
Media/Telecom sector; CBS rises as Q4 results topped vies helped by higher ad sales, improved
ratings and rising fees; ad agencies active after IPG mixed Q4 results (EPS miss/revs beat), boosts
dividend/buyback; SNI downgraded to neutral at MKM Partners on slower than projected
advertising growth in 4Q; cable moved higher on LBTYA
Video games; KING jumps as posts better-than-expected bookings & EBITDA on successful Candy
Crush Soda launch; ZNGA Q4 results in-line, but Q1 guidance falls short of consensus (revs
$155M-$165M vs. est. $195M); U.S. Jan. video game sales fall 5% to $625.7M, according to NPD
Group; said hardware sales fell 23% to $185.5M, while software sales rose 6% to $235.7M
Semis; MCHP and SNDK upgraded to buy at Drexel; MU falls amid analyst day presentation
(shares have surged this week into it); MX files 2013 10-K with restated statements back to 2011
reveals lower profitability (few analyst downgrades); FSL rises as NY Post said recently hired
investment bankers to explore a sale http://goo.gl/KzndVG
Software; QLIK rises as total revenue came in better than consensus driven by license revs
($113M); CYBR the latest internet security provider to post better earnings/guidance (group has
outperformed of late by FEYE, PANW, IMPV, SYMC); shares of LOGM, MTSN, WWW, JCOM were
others that advanced following earnings
Hardware; AAPL shares pullback off record highs after surging more than 6% over the past week;
GPRO shares remain weak as momentum now to the downside after earnings a week ago
(supplier AMBA fall in sympathy); KN reported weak results/guidance as the defect issue created
significant margin pressure

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 to 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