Closing Recap

Monday, April 27, 15

Index

Up/Down

Last

DJ Industrials

-42.44

0.23%

18,037

S&P 500

-8.76

0.41%

2,108

Nasdaq

-31.84

0.63%

5,060

Russell 2000

-15.50

1.17%

1,252

Equity Market Recap

Markets end lower; It looked initially that equities were set to extend record closing levels
reached Friday for the S&P 500 and Nasdaq as major averages jumped early ahead of AAPL
earnings tonight and ahead of the Fed 2-day meeting (Tues/Wed). The S&P Small Cap 600 Index
rose nearly 1% to new intraday record highs, while the S&P and NASDAQ also climbed (note
NASDAQ historic intraday highs of 5,132.52 was back on March 10, 2000traded highs of
5,119.82 earlier today before failing). But major averages pulled back from highs ahead of what
could be a potentially big catalyst driven week (two central bank meetings FOMC/BoJ, as well as
the busiest week of earnings this quarter), as oil prices declined
Ahead of the FOMC two-day meeting (starts tomorrow/announcement and press conference
Wednesday); it has been 6 years that the Federal Reserve has held its key interest rate near
zero, but no expectations for any change just yetthough investors will look for comments about
timing of potential hikes down the line (some had speculated June, but given latest economic
data readings, looking further out may seem more in the cards)
China jumped another 3% overnight (up 40% YTD), as Chinese oil and shipping shares surged on
reports of possible mergers among Chinas largest state-owned businesses. The Shanghai Index
surged 133 points to settle at 4,527, while the Hang Seng Index jumped 1.33%, or 372 points to
settle at 28,433. Europe ended higher, with Germanys Dax jumping nearly 2%
Sector movers; Biotech stocks underperformed (continued weakness after BIIB earnings miss
Friday, and as gene therapy stocks fell); Transports lagged on trucker weakness; semiconductors
up early, pared gains (AMAT ended merger deal with Tokyo Electron); managed care stocks slid
(AET tomorrow); metals & mining names outperformed; Pharma fell, led by MYL after the
company rejected TEVAs recent proposal; for profit education stocks fall as COCO shuts down
Busy earnings tomorrow morning, with big cap pharma with AET, BMY, MRK, PFE, HSP reporting,
as well as some other large cap companies: CMI, PH, AGCO, NOV, VLO, F, COH, JBLU and UPS

Commodities
WTI crude oil prices ended the day a little lower, dropping 16c to close at $56.99 per barrel (off
highs of $57.89 and low $56.52), on no specific news. Oil prices jumped earlier (recall posted 6th
straight weekly advance last Friday), as geopolitical fears remain, but has steadily moved higher
in recent weeks on hopes actions taken by companies will reduce the supply glut.
Ahead of a 2-day FOMC policy meeting starting tomorrow, gold had one of its biggest moves
higher in weeks, jumping $28.20, or 2.4% to settle at $1,203.20 an ounce (highest closing level
in about 2-weeks)despite an uneventful move in the dollar. Regarding the Fed, it has got to
account for a long recent string of weaker-than-expected economic reports and Q1 GDP growth
that's likely going to come in at less than 1%.

Currencies
The U.S. dollar slid throughout the session, as the dollar index (DXY) dropped -0.2% to 96.75
level, though the euro was little changed at around 1.088, while advancing modestly against the
yen early (around the 119 level), ahead of the FOMC meeting this week. The greenback is coming
off a week of declines vs. rival currencies, after subpar/disappointing economic reports. Likely
more positioning ahead of the 2-day FOMC this week (results Wednesday).

Bond Market
Bond markets weak initially, with yields on the 10-yr rising near 1.95%, but advanced late despite
an uninspiring 2-yr note auction. No major economic data today to move markets, as investors
await FOMC and BoJ meetings later this week. The U.S. Treasury auctioned off $26B in 2-year
notes at a yield of 0.54%, with bid-to-cover ratio at 3.30 (below prior auction at 3.46) and indirect
bidders awarded only 38.1% of auction (compared to 45.7% last and 44.6% avg over last 4)

Economic Data:
U.S. Markit flash services PMI fell 1.4 points to 57.8 in April, erasing much of the 2.1 point rise to
59.2 in March. It compares to 55.0 in April a year ago. The employment component rose to 55.4
from 54.0, and is the best print since last June
U.S. April Dallas Fed Manufacturing declined (-16.0), worse than estimate for (-12.0) drop; said
six-month outlook at -5.9 vs 3.0 prior month

Macro

Up/Down

Last

WTI Crude

-0.16

56.99

Brent

-0.47

64.81

Gold

28.20

1,203.20

EUR/USD

0.0007

1.0880

JPY/USD

0.11

119.10

-0.008

1.909%

10-Year Note

Sector News Breakdown

Consumer
Consumer Staples; in tobacco, the FTC is set to approve the RAI/LO deal by a 4-1 vote despite
some objections by agency staff according to the NY Post; product names EL upgrade to
Outperform at CLSA and boosts tgt to $96, while cuts PG to Underperform citing lack of upside;
grocers remain weaker ahead of earnings (WFM)

 Restaurants; after a strong week of earnings (CAKE, DNKN, DPZ), stocks lower today
Casinos; Macaus 13.5% YoY drop in March visitor arrivals, reported earlier, will cause more
concerns as to the health of Macau, although visitation trends fairly consistent for months
now, visitation to casinos has been tracking negative for at least half a year Union Gaming
reported in note (shares of WYNN, MPEL, LVS, MGM active)
For-profit education stocks; COCO shut down 28 schools in a move that will displace close to 10K
students; shares of APOL, CECO, DV, STRA, ESI, LOPE, APEI, LINC, BPI active; DV was downgraded
to Hold at Stifel
Leisure stocks; Goldman Sachs downgraded SIX to neutral as believes Six Flag's ticket price per
capita over the next two quarters could be weaker than expected, but upgraded SEAS to Buy
saying it expects the company's brand to turn around under new CEO
Autos; TSLA rises as improvements increase delivery confidence according to Credit Suisse, while
Deutsche Bank said announcement may be more significant than the market anticipates (shares
pushed back above 200 moving day average 226.83); auto parts maker TEN Q1 EPS/revs missed
Energy
Energy was higher with move in commodity complex, and as analysts getting more constructive
after several month pullback; gins in oil majors, service, and E&P names
Oil and shipping shares rose sharply in China and Hong Kong, after a state media report said the
Chinese government may cut the number of central government-owned big companies through
massive mergers. Beijing has been mulling a merger between PetroChina Co. (PTR) and China
Petroleum & Chemical Corp. (SNP) and between Cnooc Ltd. (CEO) and unlisted China National
Chemical Corp., the report said. http://goo.gl/VUIBFa
Offshore drillers, capital equipment and offshore supply vessels at Wells Fargo; upgrading CAM
and FTI to OP from MP and downgrading SDRL back to Underperform; lowering valuation ranges
for the offshore drillers and OSVs, and adjusting EPS estimates for capital equipment names, and
upgraded Capital Equipment to Overweight from Market Weight
Oil services sector upgraded to neutral at Goldman Sachs saying sentiment to improve given 2Q
catalysts such as U.S. lower-48 oil production flattening and U.S. rig count bottoming; said N.A.
operating margins nearing trough in 3Q for some service co.s; prefers U.S. land over intl and
offshore and upgraded shares of PTEN, NBR, HP and CJES (downgraded OII)
Sand fracking stocks; Wunderlich downgraded EMES to Hold and cut tgt to $40 from $65 after
lowered its 2015 distribution guidance on Friday by 47%; now believe frac sand market
conditions are much worse than previously anticipated; HCLP downgraded to Hold
Alternative Energy; SYMX jumped after Paulson & Co. reports 11.7% passive stake; solar stocks
were broadly higher early (FSLR, SPWR, SCTY); Japan said to propose 7% solar power by 2030,
according to reports in the Nikkei
MLPs; Caliber Midstream Partners LP, the owner of an oil and gas pipeline network in North
Dakota, is exploring a sale that it hopes could value it at as much as $1 billion, including debt,
Reuters http://goo.gl/niUNzN; the Alerian MLP Index (AMZ) little changed, but around best levels
since early March (448 level off mid-March lows of around 410)
Utility stocks lagged; group was higher Friday, giving up some gains (EXC, PEG, D fall)

Financials
Large Cap banks; yields little bounce, banks follow to upside; HSBC gained on Bloomberg report
citing London newspaper report saying the lender may spin off its U.K. consumer bank as the
company pledged to review its domicile; DB shares fall after company overhaul plans fail to
impress investors; AXP downgrade at Nomura
Insurance; TRV upgraded to Outperform at FBR and up tgt to $119 on improved reserve outlook
and recent sell-off; group overall was flattish into earnings (HIG tonight)
Mortgage Finance; FBR said thinks NRFs manufactured housing portfolio with $1.6B in assets has
reached an inflection point.feels over the next few quarters, some sort of value creating event
could be on the table
Asset Managers; EV downgraded to Sell at Citigroup and cut tgt to $36.50 after comprehensive
review of the business which surfaces two structural issues (believe the risk/reward is heavily
skewed to downside)
Brokers & Exchanges; Deutsche bank slightly lowered price targets and estimates for the
exchanges (CBOE, ICE, CME) 2-3% upon reducing trading volume estimates with the slow start to
2Q in April so farreiterates SCHW as firm top pick
Financial guaranty stocks; MKM Partners said upcoming earnings for AGO, MBI, AMBC to focus
on Puerto Rico citing govt suggestion may run out of liquidity, forcing a government shutdown
over the next few months if it is unable to come to market with a $2.9 billion debt offering
Healthcare
Large Cap Pharma; MYL rejected TEVAs $82 per share offer, says offer would have to be
significantly above $100 per share http://goo.gl/VGqlQy (remains committed to offer for PRGO)
Other Pharma news; BMY says primary endpoints successfully met in Ally-1, Phase 3 trial
evaluating a 12-week regimen of daclatasvir and GILDs Sovaldi once-daily with ribavirin for the
treatment of chronic hepatitis C; more pharmaceuticals companies are buying drugs that are
seen as undervalued, and then raising the prices, reports the Wall Street Journal
Biotech; sector underperformed, with IBB ETF falling 4% (fell Friday after BIIB earnings/rev miss
on weaker Tecfidera sales); CELG acquires privately-held Quanticel Pharmaceuticals for $100M in
cash and up to $385M in various R&D and regulatory milestones; RGLS shares fell after
presenting data on its hepatitis C therapy RG-101
Managed care/HMO stocks came under pressure late morning, with UNH, AET, CI, ANTM falling
early; busy day of earnings tomorrow with AET as well as large cap Pharma BMY, MRK, PFE
Gene therapy stocks fall after CLDN said Phase 2 Cupid2 study didnt meet primary of
secondary endpoint (Study of cardiovascular gene therapy agent Mydicar in patients with
advanced heart failure); shares of other CART stocks moved in sympathy early including JUNO,
BLUE, QURE, ONCE, BLCM, ATRA, ADRO (CLDN downgraded by one analyst on data)
Specialty Pharma; AKRX to restate previously issued financial reports for annual period ending
Dec. 31 and 2Q14, 3Q14, 4Q14 due to errors found during 1Q15 financial review
Medical devices/equipment; LH Q1 EPS beats by 10c while boosts year eps outlook, but cuts
revenue outlook; ATHN cautious mention in Barrons; HAE Q4 eps missed by 5c as year outlook
trailed estimates; INCR rises after boosting year outlook
Industrials & Materials
Materials; it was a day of gains for metals, mining, machinery, and ag, helped by strength in Asian
markets (China particularly), and as investors scoop up beaten up stocks
Transports weak; Trucking stocks fell after media outlets reported a truck driver strike at four
trucking firms that service the ports of Los Angeles and Long Beach; trucker CHRW downgraded
to Sell at UBS as believe co is facing a potential slowing in EPS which could put downward
pressure on stock (rpts tonight); in airlines, VA falls after analyst downgrade (shares surged
Friday after pulling secondary); overall though, transports were weaker underperforming the
broader markets (airlines and truckers)

 Metals & Mining; NEM upgraded to Outperform at Credit Suisse and raised tgt to $30 after
earnings last week; gold miners on gold spike/NEM follow through; FCX leading gainer in S&P 500
Index early; steel names also moving higher (X, AKS, NUE); aluminum names also recovering
Chemicals; Nelson Peltz's Trian has been seeking four seats on DDs board and proxy advisor ISS
has backed electing Peltz and Myers to the company's board, according to CNBC
Technology, Media & Telecom
Hardware; all about AAPL tonight as reports quarterly results after the close; IBM momentum
higher continues since mixed Q1 report last Monday (best levels since Oct)
Internet; AMZN downgraded at Argus following run-up in shares; TWTR downgraded at SunTrust
ahead of earnings; Chinese Internets move after SOHU and CYOU guidance, while BIDU positive
analyst mention ahead of earnings (OpCo) China strength lifts most China ADRs; NFLX tgt raised
to $725 at Stifel; TRUE upgraded at Goldman Sachs; JD positive initiation at JP Morgan lifts shares
Semi movers; AMAT scrapped merger plans with Tokyo Electron citing problems with the U.S.
Department of Justice http://goo.gl/ttBppo (lifted KLAC/LRCX among others); MRVL downgraded
by a few analysts after cutting its revenue forecast late Friday to $710M-$740M from prior
$810M-$830M citing weaker than expected PC, storage markets and emerging market demand;
ALTR downgraded to neutral at RW Baird; TXN upgraded at Raymond James after pullback
IT services/equipment; IGTE to be acquired by Capgemini for $4B http://goo.gl/XGixxn
Telco/Media; TWX tgt raised to $97 at Citi as says HBO Now apt to be worth $5 per share; Towers
were mixed, while defensive telecom stocks gained (T); media in general stronger; not much new
in cable space after CMCSA dropped $40B deal to buy TWC last Friday
3D stocks weaker again as several analyst lower rating/target on DDD after lowered guidance
Friday; DDD/SSYS downgraded from Buy to Hold at Canaccord (DDD tgt to $27 from $50 and
SSYS to $51 from $82) on diminished long term growth expectations (XONE/VJET others)
Internet security stocks advance early (HACK ETF hit new highs), led by PANW, PFPT, CYBR, FEYE,
IMPV early has been a solid earnings season for group thus far; Oppenheimer said believe the
toxic threat landscape coupled with increased spending should bode well for security
softwarebut group gave up gains, ahead of CUDA results tonight

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