Closing Recap

Friday, March 20, 15

Index

Up/Down

Last

DJ Industrials

168.29

0.94%

18,127

S&P 500

18.86

0.90%

2,108

Nasdaq

34.04

0.68%

5,026

Russell 2000

11.34

0.90%

1,266

Equity Market Recap

U.S. stocks rose on Friday, lifted by results from Dow component Nike (NKE), while the Nasdaq
Composite got a lift from biotech strength (BIIB), and as the dollar pulled back. With todays
gains, market ended the week higher, snapping its 3-week losing streak. The Nasdaq Composite
surged back above the 5,000 level (helped by Biotech/BIIB data) to best levels since March 2000.
The Dow Industrials trade back above the 18,000 level, while the S&P 500 jumps back above
2,100. There was more volume traded than normal today amid quadruple witching option
expiration. Oil prices rose for the first time in 5-weeks, commodities surged on the pullback in the
dollar, bonds remained strong, and equities keep pushing the limits.
Overseas, Japanese stocks finished higher, rising to a new 15-year high as the yen softened
against the U.S. dollar. Shanghai stocks rise an eighth day in a row and settled above 3,600 for
the first time in seven years. UKs FTSE 100 rises above 7,000 for the first time ever
The wording of the latest Federal Reserve policy statement fits neatly with a scenario where the
U.S. central bank takes no action "for quite some time," said Charles Evans, the president of the
Chicago Fed, on Friday. Evans was explaining his vote for the policy statement despite his
position that the Fed should be cautious and not hike rates until 2016

Commodities
April WTI crude oil futures (rolls to May Monday) finished Friday higher, rising $1.76, or 4% to
settle at $45.72 per barrel and posted its first weekly climb in over a month, helped the last few
days by a falling dollar (as the inventory data/fundamental landscape was not good this week
once again showing supply continues to grow). Note natural gas prices reversed negative
midday, after rising as much as 3.8% earlier.
Gold for April delivery advanced $15.60, or 1.3% to settle at $1,184.60 an ounce, registering its
first weekly gain in three. Gold posted a near 3% gain for the week, rising for a third straight
session after investors interpreted Wednesdays Fed policy statement and Fed Chairwoman Janet
Yellen comments as dovish (outside of the lowered growth forecasts), feeling the central bank
would raise rates more slowly than market participants had previously anticipated. The Fed
commentary created selling pressure in the U.S. dollar, which also helped dollar denominated
commodities (ex: gold, silver, oil)

Currencies
The dollar plummets on Friday, capping the end of a very volatile week for the greenback, with
dollar index (DXY) falling more than -1.5% to 97.85 (off high 99.121) and down roughly -1.9% for
the week. A weaker dollar often provides support for dollar-denominated commodities, including
gold. The euro touched intraday high of 1.0860 (yesterday overnight high was 1.0919), before
paring gains, but still posted a strong effort, while then dollar fell to around 1.20 low against the
yen. The dollar has dropped since the FOMC on the expectation that Federal Reserve policy
makers would leave rates lower for longer after lowering their economic outlook.

Bond Market
Bonds finish the week stronger, with yields continuing their precipitous drop after the FOMC
meeting on Wednesday gave no reason to end the bond buying that has occurred for years.
Yields fell sharply this week, with the benchmark 10-yr yield falling to 1.92% (was 2.25% just 2
weeks ago following the better jobs data), while the shorter end of the curve was hit hard

Macro

Up/Down

Last

WTI Crude

1.76

45.72

Brent

0.89

55.32

Gold

15.60

1,184.60

EUR/USD

0.0154

1.0814

JPY/USD

-0.59

120.18

10-Year Note

-0.050

1.927%

Sector News Breakdown

Consumer
Retailers up with market as retail index jumps 1% early; NKE helped lift the Dow Industrials after
Q3 EPS and worldwide futures orders top consensus views (revs missed) said 3Q global futures
orders in constant currency +11%, vs. est. +9.9% (better orders for N.A., China) as margins rose;
TIF Q4 results in-line, but sees 30% decline in Q1 eps and worldwide sales -10% (other high end
retail was little changed); PIR upgraded to Outperform at Oppenheimer (broad gains in hardlines
WMT, COST, TGTas well as apparel/department KSS, M, TJX)
Mattress retailers rise; MFRM Q4 EPS and revs both above views , while guidance for FY16 mixed
as sees eps below consensus, but revs above (SCSS, TPX were active)
Consumer Staples; no real specific stories in space, but also edging higher with market; the
weaker dollar on day also took some pressure off Staples group, with several food/consumer
products companies leveraged to FX moves
Restaurants were stronger on DRI earnings and better equities (higher oil does not hurt); DRI Q3
EPS/revs beat and raises its year eps view to $2.45-$2.48 from $2.25-$2.30; EAT, CAKE, CMG rise;
note SBUX traded to new all-time highs this week
Housing & Building Products; homebuilders get another positive earnings report, as KBH Q1
EPS/revs top consensus, while 1Q net orders up 24% YoY to 2,189 (follows better LEN results
yesterday) said avg selling prices of homes delivered up 8%; building material maker OC was
upgraded to Overweight at Barclays; LL shares lag markets

Energy
Energy stocks benefitted from oversold conditions, and a jump in oil prices, lifting shares of
beaten up names this week (Energy was one of few sector laggards this week); shares of RIG,
NBR, NOV, NFX, FTI some of the leaders in energy space on the S&P 500
The Baker Hughes (BHI) weekly rig count fell -56 in the latest week to 1,069 (15th consecutive
weekly decline), while the oil rig count fell -41 to 825 and nat gas rig count down -15 to 242 (note
the overall rig count had fallen -67 to 1,125 with oil rigs down 56 to 866, and gas rigs down 11)
Refiners; Wells Fargo said the caution flag a bit higher given recent outperformance on
seasonally strong crack spreads and favorable differentials; downgraded TSO to market perform
from outperform; PBF, VLO, PSX are only remaining outperform-rated refiners
The Obama administration confirmed final rules on hydraulic fracturing activities on public and
tribal lands, in an effort to set a national standard for a patchwork of state regulations governing
drilling practices. Key components of the rule, which will take effect in 90 days, include
requirements to test the quality of the cement work designed to prevent natural gas from
seeping outside a well, and adhere to stricter standards for storing toxic fluids left from drilling
Financials
Large Cap banks enjoyed a strong day, with large cap banks jumping on the day, led by JPM, BAC,
GS, C, and MS; insurance names also stronger, with gainers PRU, MET, PFG leading; in REITs, SPG
sends final offer to acquire MAC for $95.50 per share from $91 offer prior http://goo.gl/1luocC
Online brokers; AMTD downgrade to Neutral at Goldman Sachs citing valuation as well as retail
trading activity is trending a bit softer in calendar 1Q with a negative mix shift away from higher
commission options (lower rates also not helping group SCHW, ETFC but not affecting today)
Healthcare
Large Cap Pharma; SHPG upgraded to Outperform at Bernstein with $295 tgt following several
new developments; LLY joins with Chinese biotech to develop/market cancer drugs, as will pay
$65M upfront to Innovent Biologics to co-develop at least 3-experimental cancer drugs; AZN
seen as potential target again if oncology drugs lag, Bloomberg says http://goo.gl/dAKgXT;
THRX/GSK said FDA advisory panel said efficacy and safety data for Breo Ellipta dont support
expanded use of drug to treat asthma in children ages 12-17
Biotech pares gains after another fresh all-time high for IBB/XBI on several data points; index
pulls back on some profit taking; BIIB new highs as Phase 1b data on BIIB037 in Alzheimers
disease seen much better than earlier studies of Lillys solanezumab and Roches crenezumab;
ICPT positive results from a new subgroup analysis for Phase 2b FLINT study of obeticholic acid
(OCA) in patients with nonalcoholic steatohepatitis (NASH); PRTA advanced as its Parkinsons
disease drug met primary endpoints of safety and tolerability in an early-stage study
Other movers on news; TKMR 7.5M share Secondary priced at $20.25; total U.S. retail
prescriptions for GILDs Harvoni and Sovaldi hepatitis C drugs totaled 12,119 in week ended
March 13, up 4.4% from prior week (Bloomberg); MNKD script numbers for Afrezza fall, as NRx
down 19.5% WoW
City of Hope Medical Center/National Cancer Institute suspended participant recruitment in
Phase 1 CAR-T clinical trial for treating patients with high-risk acute lymphoblastic leukemia,
according to clinicaltrials.gov yesterday (note CAR-T stocks were active KITE, CNDO, BLCM, XON,
BLUE , JUNO after jumping yesterday)
Hospital stocks underperformed in general - THC, CYH, LPNT

Industrials & Materials

AG & Machinery; HON added to conviction buy list at Goldman Sachs as believe is the most
compelling pick among the Multis (traded to new all-time highs)
Transports; a spike in energy prices didnt really phase transports today; saw shares of airlines
mixed on the spike, though overall transport sector; XPO tgt raised to $51 at KeyBanc based upon
our greater confidence in the Companys ability to achieve its longer-term revenue tgts
Metals & Mining; AKS the 3rd steel maker to issuing profit warning in recent days as sees Q1 EPS
loss (23c-28c) vs. est. break-even and shipments down 14% QoQ (also recent warnings from NUE
and STLD, which has weighed on ATI, X, WOR, RS)
Chemicals & Materials; ARG says based on sales to date and current trends, now expects YoY
organic growth for 4Q to be 1%-2% (down from prior view 6%-7%) and guides Q4 eps $1.13$1.16, down from $1.25-$1.30
Engineering & Construction sector; CLSA said ests for the sector has more downside risk, M&A
unlikely in N-T given lack of buyers; lowers EPS ests for CBI, FLR, JEC, KBR, MDR
Tankers/Shippers; The Baltic Dry Index rose 1.2% to 591, highest since end of January
Technology, Media & Telecom
Internet; FB traded to fresh all-time highs again, up above $84 per share (recent optimism
surrounding ad rev growth); BABA positive mention at JPM as recommends buying shares on
weakness on the belief the company owns one of the top global Internet platforms; CTRP rises as
Q1 rev growth forecast 40%-50% above views of 32%; high beta up with market
Semiconductors; group along for the ride today, with the semi index (SOX) jumping another 1%
today (attempting to reclaim 2015 highs (which would be fresh 14 year highs); nearly every
component of the index was higher today, led by ASML, BRCM, SNDK, CREE, INTC, MU
Software & Hardware; SAP said the slide in the Euro will help boost its software revs and profits;
RALY upgraded at Deutsche Bank after narrower year EPS loss guidance; DATA downgraded at
Mizuho on valuation (firm likes QLIK); INFA jumped midday after Reuters reported several
private equity firms are preparing to make offers to acquire the enterprise software
http://goo.gl/aN5k10 ; shares of AMBA (new all-time highs) and GPRO advance
Internet security stocks lagged overall market; FEYE, PANW, FTNT, QLYS (nothing specific)
Telco & Media; CHL guided 2015 capex below expectations driven by lower 4G network
investments; CHA 2014 net income below estimates

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