Closing Recap

Monday, March 2, 15

Index

Up/Down

Last

DJ Industrials

155.93

0.86%

18,288

S&P 500

12.88

0.61%

2,117

Nasdaq

44.57

0.90%

5,008

Russell 2000

9.27

0.75%

1,242

Equity Market Recap

New all-time highs.again! U.S. markets posted tremendous returns for the month of
Februarythough March didnt start off too shabby eitheras upside momentum was spurred
once again by M&A activity, a surprise rate cut from the Peoples Bank of China, and continued
enthusiasm over U.S. equities. The Nasdaq Composite Index jumped above 5,000 level for the
first time since March 27, 2000 (note coming into today, the NASDAQ has closed above 5K only 2
times in its history and only traded above that level 7 times in existence), as strength in
semiconductors (amid M&A deal in space NXPI/FSL) led tech higher. The Dow Jones Industrials
(posted new intraday all-time high) were helped by jump in shares of Visa (V) after Costco struck
a deal with the company and as MCD momentum takes stock to best levels since July, though
gains were broad based (INTC, CSCO, BA, NKE all gains over 1.5%)
Defensive sectors were under pressure as bonds were weaker, as well as sectors such as Telecom
& UtilitiesEnergy stocks were once again among the days biggest losers
After posting some of the best gains for February since 1998, the NASDAQ Composite jumped
7.08%, the S&P 500 rose 5.49% and the Dow Industrials rose 5.64%, major averages started out
the new month on a positive note.

Economic Data
Personal Income for Jan rose 0.3% (below est. 0.4%), while personal spending fell by (-0.2%),
slightly worse than the expected (-0.1%) decline. PCE core inflations for January was in-line with
expectations at 0.1% MoM and 1.3% YoY
ISM Manufacturing fell slightly to 52.9 in February from 53.5 last month (and vs. est. of 53.0);
said new orders fell to 52.5 from 52.9, employment fell to 51.4 from 54.1, while Inventories rose
to 52.5 from 51.0; said Backlog of orders rose to 51.5 from 46.0
Construction Spending for January dropped (-1.1%) vs. est. for a 0.3% increase (prior month was
upwardly revised to 0.8% from 0.4%)
U.S. Feb. Manufacturing PMI 55.1 above Flash Reading 54.3; said New Orders rise to 55.8 vs 55 in
Jan.( Highest reading since Oct. 2014), while Employment falls vs prior month

Commodities
WTI crude ended lower, falling -17c to settle at $49.59 per barrel (off low of $48.71, but off high
of $51.04), but still ended better than Brent, which tumbled over 4%, as we saw a narrowing of
spread between WTI Crude and Brent today (but follows the spread reaching its widest level in
over a year last Fridayover $13). The spread dropped back under $10 per barrel (weighed on
refiners stocks whose margins affected negatively when spread narrows)
Gold prices ended down slightly, falling $4.90, or 0.4% to settle at $1,208.20 an ounce (ended
near lows as unchanged most of the afternoon - but down from overnight highs $1,223). Today
marked the first decline for gold in four sessions

Currencies
The dollar index weakened early morning after mixed data, but found itself in familiar territory
by the end of the daybroadly higher against rival currencies. The dollar dropped early, after
surging to 11-year highs late last week, but moved back above the 120 level against the yen,
while the euro dropped below 1.12 (ahead of expected ECB QE actions this week); the dollar
index (DXY) at 95.43 (off early lows of 95.06)

Bond Market
Bond markets were lower all day, with bond yields climbing across the board on mixed economic
data. Earlier, the PCE core data met expectations, while gauges of manufacturing activity in
Europe delivered a positive surprise. The yield on the 10-year note jumped over 6 bps to 2.07%,
while shorter term 2-yr note yield rose 3 bps to 0.658%. Note, the 10-year yield closed higher on
Friday, snapping three days of declines and clinching its largest one-month yield gain since June
2013.

Macro

Up/Down

Last

WTI Crude

-0.17

49.59

Brent

-2.88

59.70

Gold

-4.90

1,208.20

EUR/USD

-0.0012

1.1184

JPY/USD

0.54

120.15

10-Year Note

0.079

2.091%

Sector News Breakdown

Consumer
Retailers; after strength in earnings the past week, saw some retailers pulling back some (JCP,
DDS, SSI); MW cautious mention in Barrons saying shares may drop to mid-$20s after Jos. A.
Bank acquisition; COH downgraded at Standpoint; DKS, BBY report earnings tomorrow
Consumer Staples; ANFI Q3 EPS beat consensus by 10c; WTW downgraded to Underweight at
Morgan Stanley after weaker earnings results last week; AVP outperformed in the staples sector
Restaurants; MCD recent upward momentum continued, as traded above $100 per share for first
time since July 9th; SONC posts Q2 comp sales rise of 11.9% (overall, restaurants to the upside in
what has been a strong earnings season so far)
Housing & Building Products; LL shares plunge on 60 Minutes report that co sold flooring
containing levels of formaldehyde higher than California health and safety standards (also
negative comments by Whitney Tilson and analyst downgrade); homebuilders were flattish

 Autos; TSLA dropped after Barclays said customer deposits include pre-delivery payments, co.
no longer just building cars to meet existing orders; CAR agrees to acquire Maggiore Group for
$170M; MBLY (driver assistance) momentum to downside after earnings last week
Gaming & Leisure; regional casino stocks were higher, led by shares of ISLE, BYD, PNK, PENN
(note there positive sector commentary late last week from Macquarie); WBAI provided further
info on its temporary suspension of lottery sales; in leisure, BID shares fall after Q4 eps misses;
Cruise liners RCL, CCL, NCLH all rise on positive industry note from Jefferies
Energy
Energy stocks were laggards, despite a bounce in oil prices overnight, led by weakness in drillers
and refiners (spread in WTI/Brent narrows today)
Offshore drillers mentioned cautiously at BMO Capital saying market deteriorating faster than
expected, sees significant downside new normal (downgraded ESV to underperform); group
weakest in S&P (DO, RIG, NE)
Refiners fall; given the spread between WTI/Brent today traded back under $10 after one-year
high of over $13 on Friday, seeing pullback in shares of refiners today, led by VLO, HFC, WNR,
PSX MPC & TSO - note refiners have been strongest among energy sectors over last few months
MLPSs GLNG downgraded to hold at Clarkson; SMLP said the DOJ requested materials for
Meadowlark incident; the Alerian MLP Index (AMZ) dropped over 1% today to 441 level
E&P sector; GDP filed to sell 12M in stock; LPI priced 60M share secondary at $11.05; SD
downgraded to sell by one analyst and cut tgt to $0 from $1
Financials
Large Cap banks; banks/financials trading higher on the bounce in rates today...SCHW, ETFC
higher...as well as banks C, JPM, BAC...10-yr yield around 2.07%; IBKR said Feb Daily Average
Revenue Trades (DARTS) up 9% YoY to 633K
Credit cards; Visa (V) rises as Citigroup Inc. will replace AXP as the exclusive issuer for Costco
Wholesale Corp.s credit cards in the U.S. and Puerto Rico and transactions will be processed by
Visa Inc. (V) beginning April 1, 2016; AXP positive mention in Barrons
Mortgage Finance/Lending; shares of NSM and WAC both downgraded to market perform at FBR
Capital; RESI posted Q4 results; AAMC also a mover on earnings; NAVI falls after Dept. of
Education announced termination of collection contract with NAVI subsidiary Pioneer Credit
Recovery; GNW disclosed material weakness in its 10-K
Puerto Rico; The U.S. FDIC said Friday Puerto Rico-based bank DRL was closed, and its business
taken over by BPOP http://goo.gl/1zMa1E
Asset managers; Citigroup downgraded BLK to neutral and upgraded OMAM to buy saying they
remain selective across the A/M, Broker/dealer and Exchanges coverage universe though are
most bullish on Alternatives (both fundamentals and valuation) followed by Exchanges
Banks; PACW to buy SQBK for $27.49 per share, in $790M stocks/cash deal; SQBK holders to
receive 0.5997 shares of PacWest http://goo.gl/lGcf3l ; WBS urged to spin off its HSA Bank unit
by holder Kerrisdale Capital to unlock value
REITs; ARCP filed amended 10-K to restate certain results; disclosed results of investigation that
found execs received more payments than committee authorized.
Healthcare
Large Cap Pharma; ENDP to sell its AMS urology portfolio to BSX for up to $1.65B
http://goo.gl/Eo6bTP ; CAH to acquire Cordis from JNJ for $1.94b in cash http://goo.gl/ZxVPqp ;
ATHX signs exclusive partnership and license agreement with Chugai Pharmaceutical Co.; PCRX
falls after complete response letter from FDA on new Exparel use; ISIS downgrade at Stifel; ACT
Biotech; PTCT downgraded at JP Morgan after run in shares; ALXN said its Asfotase Alfa Gets FDA
Priority Review in HPP; GEVA downgraded to neutral at JP Morgan on Kanuma launch; XLRN
provided data on kidney cancer study; AKAO downgraded to Underperform at Credit Suisse

Industrials & Materials

AG & Machinery; JOY downgraded to neutral at Bank America citing challenging end markets
Transports were broadly higher, led by gains in airlines (UAL, JBLU AAL, DAL); ALK upgraded to
buy at Stifel but downgrades SAVE to neutral
Metals & Mining; GTI rises on unexpected Q4 profit; MT filed automatic mixed securities shelf;
TKR upgraded to buy at Bank America
Packaging sector downgraded to Market Weight from Overweight at Wells Fargo saying current
valuation levels reflect known catalysts/continues to view IP, CCK, as top picks/remains OP rated
on BERY, GEF, OI and PKG
Tankers & Shippers; the Baltic Dry Shipping Index rises for a fifth day, gaining 1.5% to 548 pts,
according to Baltic Exchange data; shares of SB downgraded by two analysts
Technology, Media & Telecom
Semiconductors surge; NXPI to acquire FSL for about $16.7B including debt or $36.14 per share in
cash/stock http://goo.gl/0BwoZR (shares of SWKS, MCHP, ISIL, ONNN, ARMH all rise); Citigroup
cautious on ALTR, XLNX and INTC after checks indicate Altera's 14nm tape out at Intel has been
pushed out again from Q2 to the second half of the year; the SOX Index jumped over 2.5% early
on the announcement of NXPI/FSL best levels since 2000)
Software & Hardware; MVNR acquired by MITL for about $560M with MVNR holders to get
$17.94 http://goo.gl/ilvyyg; SYNA fell after QCOM subsidiary introduced Snapdragon Sense ID 3D
Fingerprint Technology; JCOM withdraws tender offer for CARB and enters into confidentiality
agreement; profit taking in winners last week on earnings (CRM/ADSK); GPRO shares traded sub
$40 per share after reports Chinese smartphone maker Xiaomi has launched an action camera
that rivals the GoPro Hero at $64
Networkers; ARUN to be acquired by HPQ for $24.67 per share/deal at $3B http://goo.gl/XtZZsZ
(group was overall up slightly to flattish as reports had been out prior)
3D stocks; SSYS Q4 eps/revs slightly miss, but reaffirms 2015 forecasts; Medical products
distributor HSIC entered into a multi-national distribution agreement with DDD
Media; GCI announced its corporate governance plans for its proposed print-operations spinoff,
and after "productive conversations" it includes a deal where Carl Icahn withdrew two board
nominations he had made in January; NLSN filed to sell 8M shares of stock; CBS advanced on
positive analyst mention
Telecom; Frances Orange SA (ORAN) is considering launching a bid to tie-up with Telecom Italia
SpA (TI) http://goo.gl/3SG70c ; defensive Telecom providers were weaker today (T/VZ); BBRY
announced Sprint is now reselling BES12 to enterprise clients, as well as BlackBerry's recentlylaunched BBM Meetings, BBM Protected, and BlackBerry Blend solutions for enterprises.

Want a free trial to The Hammerstone Report 4x Daily ? Sign-up for a trial today at
www.thehammerstonereport.com
Please be sure to check out The Hammerstone Institutional Feed for News and Analysis for the
Informed Trader at www.hammerstoneinstitutional.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