Closing Recap

Monday, March 9, 15

Index

Up/Down

Last

138.94

0.78%

17,995

S&P 500

8.16

0.39%

2,079

Nasdaq

15.07

0.31%

4,942

Russell 2000

5.92

0.50%

1,223

DJ Industrials

Equity Market Recap

It was a strong start to the week for equities, as todays gains helped cut Fridays losses by more
than half, helped by a few M&A deals/proposals (AA/RTISPG/MAC), and investors taking
advantage following Fridays better job induced market pullback (as raises expectations of Fed to
act sooner re: rates). The Dow Industrials outperformed, helped by gains in Energy stocks (CVX
analyst day tomorrow), while the tech heavy Nasdaq lagged after AAPL held its special media
event today, revealing its new watch, among other products. Today marked the six-year
anniversary of the equity market Bull run, which has seen the S&P 500 surge over 200% from 676
closing low in 2009 (2,080 today). The Eurogroup of EuroZone finance ministers urged Greece to
speed up talks with international creditors on an economic reform program, needed to unlock
the next tranche of bailout money.

Commodities
Energy prices finished mixed, with WTI closing slightly higher (off best levels), while Brent prices
dropped more than 2%; on the day, WTI crude rose 39c to close at $50 even, while Brent
dropped 2% to around $58.55, narrowing the spread to under $9 now (negative for refiners, with
shares of TSO, HFC, WNR falling to lows late day). Note natural gas prices plunged, falling 15c (or
over 5%) to $2.693 mln Btu after reports this winter was the 19th warmest on record despite cold
Northeast temps http://goo.gl/7gznM5
Gold prices ended modestly higher (snapping its 5-day losing streak), helped today by some
Greece fears (bounced off 4-month lows) on renewed worries about the countrys ability to
finance itself in the near term. Gold futures for April delivery ended higher by $2.20 to $1,166.50
an ounce. Eurogroup chairman, Dutch Finance Minister Jeroen Dijsselbloem, said Greek
proposals werent complete and that the country wasnt likely to receive an aid tranche this
month, earlier reports said.

Currencies
The dollar index (DXY) was little changed (97.62) following its more than 1% jump on Friday after
the monthly Nonfarm payroll report came in above expectations. The euro remains weak
(1.0855), down at 11-year lows, after the ECB began its monthly $65B bond buying program (QE)
of sovereign debt today. The euro had already tumbled March 6 after stronger-than-forecast U.S.
labor data added to speculation the Federal Reserve will raise interest rates before year-end. The
dollar traded to 3-month high against the yen, rising above 1.2130

Bond Market
Treasury markets opened slightly better and traded sideways most of the session, with the yield
on the 10-yr holding around the 2.2% level the majority of the day. The sideways action comes
after bonds sold off Friday (and yields jumped, with the 10-ur up over 12 bps to 2.24%), following
the stronger jobs data. The stronger data caused a sell-off in bonds and a surge in the U.S. dollar,
as it increased market expectations of a Fed rate hike lift-off possibly as soon as June.

Macro

Up/Down

Last

WTI Crude

0.39

50.00

Brent

-1.22

58.51

Gold

2.20

1,166.50

EUR/USD

0.0018

1.0862

JPY/USD

0.38

121.21

-0.045

2.195%

10-Year Note

Sector News Breakdown

Consumer
Retailers; KORS traded 52-week low after Sterne Agee lowered estimates and targets after
negative data points; BBY may not carry the Apple Watch Reuters reported; luxury retail been
sliding RL and TIF (and KORS) 52-week lows, KATE has fallen 10% over last 3 sessions, MOV
trades lower on Apple watch, COH been one of better in space (but was laggard in 2014)
Consumer Staples; SYY extended its agreement to acquire rival U.S. Foods Inc. by 60 days, in
anticipation of antitrust hearings set to start in May; TFM was downgraded to neutral on
valuation at Bank America; Packaged Food stocks HAIN and WWAV targets raised at Bank
America as meetings validate growth opportunities
Restaurants; MCD said Feb. global comp sales fell (-1.7%), worse than est. for (-0.3%), while U.S.
comp sales also missed, falling (-4%) vs. Bloomberg est. (-0.7%) Europe better/APMEA miss
Housing & Building Products; shares of DHI, RYL and KBH upgraded to Outperform at JMP
Securities based on analysis of the impact of lower oil prices on Texas and improving
macroeconomic fundamentals across the U.S.; LEN downgraded to neutral at Buckingham, but
upgraded shares of PHM to buy; flooring company LL shares fall a 4th day (lowest since 2012)
Autos; GM announced $5B stock buyback plan; DLPH downgraded to neutral at Buckingham
Casinos/Gaming; GLPI offered to buy the real estate assets of PNK for $4.1B, or $36 per share,
which would become a separately traded public company under the offer, http://goo.gl/GIaCvT;
JP Morgan negative on gaming saying sees VIP gross gaming revs falling 27% this year, mass
dropping 6%, and lowers estimates again; cuts rating on Sands China, MGM China, SJM Holdings,
and Wynn Macau (but upgraded MPEL to neutral)
Staffing stocks higher; follows the better jobs data Friday; RHI, KFY, HSII higher

Energy
Energy stocks were mixed to mostly higher as oil priced; CVX shares outperformed (led Dow
higher) ahead of analyst meeting tomorrow; Oil drillers remain among weakest in energy
complex, as shares of DO, RIG, SDRL, NE trading at 52-week lows; WLL advanced on reports is
seeking a possible buyer, according to the Wall Street Journal http://goo.gl/dsNvc4
Refiners; PBF was upgraded to Outperform at Credit Suisse and upped tgt to $40 from $34 calling
it a key beneficiary of low crude prices (which lower its costs); also said shares of MPC, VLO, DK
attractive (group gave up early gains as the spread between WTI/Brent drops under $9was
above $13 just 2 weeks ago)
Financials
Large Cap banks; banks (JPM, BAC, C) were stronger after mixed results Friday (despite all 31
banks passing the Fed stress tests Thursday night and as bond yields jumped) note the Fed will
release CCAR results at 4.30 PM ET this Wednesday (where the Fed will approve or reject Banks'
capital actions plans); Commerzbank (CRZBY) said to pay $1.45B to settle U.S. charges
REITs; SPG proposes to acquire MAC for $91 in cash/stock deal for proposed transaction of
about $22.4B (includes about $6.4B of MAC debt) http://goo.gl/ICWnZR (shares of ESS, TCO, GGP
moved in reaction to deal)SPG also said it had agreed to sell selected Macerich assets to GGP
once a deal closes; DRH upgraded by two analysts today
Analyst calls; COWN downgraded to neutral at Nomura on valuation; WFC was upgraded to buy
at Miller Tabak; ASPS shares fell after Sterne Agee lowered target
Healthcare
Large Cap Pharma; VRX jumped midday after Reuters reported Bill Ackman's Pershing Square
Capital Management has acquired a 5% stake in Valeant for $3.3B http://goo.gl/PDZRVC ;
Concordia Healthcare Corp. (CXR.TO) to acquire Covis Pharma Commercial assets for $1.2b cash
http://goo.gl/bNBABm ; ANTH negative mention by StreetSweeper publication
Biotech; MDCO shares fell after asking appeals court Friday to overturn ruling that HSP generic
wouldnt infringe patents that expire in 2029; CTIC and BAX announce primary endpoint met in
PERSIST-1 trial; KYTH received FDA panel backing on ATX-101 (1st approved for double-chin)
Specialty Pharma; ACRX said the FDA wants an additional clinical study for Zalviso to assess risk
of inadvertent dispensing and overall risk of dispensing failures (downgraded at Nomura on
news; CTRV allowed by the FDA to advance into Phase 3 testing of its FV-100 drug for nerve pain
Services movers; AXDX shares declined after cautious mention by Citron research
http://goo.gl/nr3s5a ; EXAS announced agreement with IRWD to co-promote its Cologuard, the
first and only FDA-approved noninvasive stool DNA screening test for colorectal cancer
Industrials & Materials
Metals & Mining; AA to acquire RTI in stock-for-stock deal; RTI holders get 2.8315 AA shares for
each RTI share, representing value of $41 per share, a 50% premium to Fridays close for total
enterprise deal of $1.5B http://goo.gl/rpR0Z5 (shares of ATI/PCP rise in sympathy); iron ore
producer CLF downgraded to sell at Axiom as iron ore prices likely to collapse in N-T
Transports were mostly high; group led by strength in rails (UNP, CSX) on no specific positive
news; airlines held up despite little rally in oil with the market
Paper & Packaging; Jefferies said the IRS lifted Private Letter Ruling (PLR) moratorium today,
which opens up opportunity for MLP conversion for paper manufacturers (PKG, KS, IP, RKT)
Shippers/Tankers; the Baltic Dry Index posted its longest winning streak since August, rising 0.5%
to 568 pts (up 10 straight days) but coming off all-time lows

Technology, Media & Telecom

Tech; AAPL held a special media event todayintroduced its Apple Watch (said 18-hours of
battery life for typical use)Apple sport starts as low $349 for smaller, $399 for larger watch,
while Stainless steel priced $549-$1,099also announces Apple Watch Edition which starts at
$10,000said lowering Apple TV entry price to $69 from $99said there are growing number of
apps that support health and fitness said ResearchKit will be released next monthsaid new
MacBook uses 30% less energy, and is 24% thinner with full-size keyboard (priced at $1,299 and
$1,599), begins shipping April 10th
Media & Telco; TWXs HBO said AAPL will be exclusive launch partner for stand-alone (entire TV
and movie catalog - no cable or satellite sub required for $14.99 per month); VIAB said it sees
realignment largely done by end of month also said has no intention of buying CBS or any other
big company (comments at DB conference, as per Bloomberg); BBRY downgraded to sell at
Goldman Sachs with $9 tgt
Internet; AMZN downgraded to neutral at SunTrust on valuation; TWTR positive mention at JP
Morgan as reiterate OW and $67 tgt saying expects the accelerating pace of execution on user &
advertiser products to drive estimate upside; shareholder Starboard sent letter to YHOO board
with steps they believe could unlock value of $11.70 per share; EBAY shares broke out to new alltime highs, adding to Friday gains
Semiconductors; TSM downgraded at Pacific Crest saying near-term risks building as seeing high
inventory levels at top 5-customers; INTC shares fell, underperforms in DJIA and in semi sector
(recall there have been several cautious analyst comments over the last 2-weeks); ARW and AVT
downgraded at Longbow
Hardware/Software movers; VMW upgraded at Piper saying downside risk has subsided; GPRO
momentum to downside continues on competition fears (Xiaomi) and has been steadily falling
since lock up a month ago as well - lowest levels since August
Networkers; JNPR upgraded to buy at Goldman Sachs and raise tgt to $28 from $26 saying it
expects the company's sales and operating margins to bottom in Q1 (also upgraded NTGR to
Neutral at Goldman); GIMO upgraded to Overweight at Barclays, but downgraded FFIV which
recommended a security-related swap in networking

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