Closing Recap

Friday, May 15, 15

Index

Up/Down

Last

DJ Industrials

19.88

0.11%

18,272

S&P 500

1.59

0.08%

2,122

Nasdaq

-2.50

0.05%

5,048

Russell 2000

-1.16

0.09%

1,243

Equity Market Recap

One of the quietest days of the year on Wall Street, trading in narrow range throughout the day,
as markets feel tired, but manage to hold at record levels, despite three negative economic data
prints today. U.S. stocks were little changed Friday, pausing a day after the S&P 500 index closed
at a record high. The NASDAQ actually ended lower for third straight week, but major averages
held small gains. The S&P 500 traded in its narrowest intraday range (0.33%) since Christmas Eve,
according to Bespoke; bonds end strong, with yields going out at lowest level of the week; the
dollar falls for 5th straight week, and gold rises for a 2nd. Stock movers were in retail (on several
earnings this week mostly disappointing), while stocks leverages to a move in interest rates
remained active (financials, utilities, telco). The S&P 500 cruised to an all-time high Thursday,
gaining 1.1% to 2121.10. It was the index's seventh record close in 2015. Transports
outperformed today after weakness mid-week (falling 1% back to back day).

Economic Data
The preliminary University of Michigan consumer sentiment survey for May fell to 88.6 vs. 95.9
prior month (which was also the expected estimate); Current economic conditions index fell to
99.8 vs. 107.0 last month, while expectations index fell to 81.5 vs. 88.8 last month
New York Empire Manufacturing index rise to 3.09, below est. of up 5.0; segment breakdown:
Prices paid fell to 9.38 from 19.15 prior month, New orders rose to 3.85 vs. -6.00, while number
of employees fell to 5.21 from 9.57, and inventory rose to 7.29 from 2.13
Industrial Production for April fell an unexpected (-0.3%), below estimates for it to hold
unchanged; while Capacity utilization fell to 78.2% from 78.6% in March, also below estimates.
The (-0.3%) decline in industrial production follows a (-0.3%) drop in March

Commodities
Oil prices end the day little changed (WTI crude small loss, Brent small gain), but did manage to
finish the week higher for the 9th consecutive week (first time ever). Concerns over a supply glut
in the market pressured prices early, but weakness in the U.S. dollar and a 23rd straight weekly
decline in the number of active U.S. oil rigs helped cut losses.

 June gold ends flattish, rising a dime to $1,225.30 an ounce, but posted a solid 3.1% gain for the
week, rising for a second consecutive week on dollar weakness; Platinum prices ended higher at
$1,169.10 an ounce, highest close since April 10th. In a report issued Thursday, the World Gold
Council said global gold demand in the first quarter fell 1% year on year.

Currencies
The dollar fell against the euro and pared gains against the yen following a string of weak U.S.
economic data points, highlighted today by a plunge in consumer confidence, which pushed back
investors' expectations for higher interest rates. The dollar posted its fifth consecutive weekly
decline (3-month low), as the euro rose to $1.1465 high, compared with $1.1354 before the
consumer confidence report was released. The dollar declined against the yen to Y119.38 from
Y119.62 before the data, but remained up 0.2% for the day.

Bond Market
Bond markets surge on Friday; in a 5-day period, the yield on the 10-yr has fallen over 20 bps to
end near a week low of around 2.14%; the weaker economic data the U.S. the tail end of the
week, coupled with better than expected 3-yr and 1-yr note auctions, helped rally bonds which
had been tumbling the last few weeks.

Macro

Up/Down

Last

WTI Crude

-0.19

59.69

Brent

0.11

66.81

Gold

0.10

1,225.30

EUR/USD

0.0034

1.1444

JPY/USD

0.16

119.34

-0.096

2.142%

10-Year Note

Sector News Breakdown

Consumer
Retailers; JWN one of few highlight earnings in retail, as Q1 comps/revs top views; JCP upgraded
at BMO Capital after earnings; DDS Q1 eps misses by 12c, while Q1 comp sales fell (1%); HBI
upgraded to Buy at Davidson saying post earnings pullback provides entry point as l-t drivers
intact; been a rough week for retail, with M, GPS, KSS, DDS all hurting sentiment after
earnings/comps; HGG Q1 eps loss worse than expected as revenues miss; BBBY jumped about 5%
midday after Leonard Green & Partners reports new stake of 0.6%, or 990k shares in 13-F
Consumer Staples/Restaurants; GMCR declined as its new cold brewing system wont be
available in all its retail outlets until next year, later than had been expected; it has been a busy
week of earnings for Restaurant sector, as LOCO shares fall overnight after Q1 eps/rev results
topped views, but comps missed (5.1% vs. 5.7%), and guidance disappoints; YUM upgraded to
Overweight at JP Morgan with a $108 tgt; no new developments re Avian flu in chickens flocks
Housing & Building Products; Raymond James downgraded seven builders as summer seasonal
pattern historically inverse of winters hope trade; also cites rising rates as well as new
indications economy has cooled, including softer GDP data, lower consumer confidence, sagging
retail sales; downgraded shares of KBH, LEN, MDC, PHM, RYL, SPF to market perform and TOL to
Outperform; building products maker EXP Q4 results fall short of consensus
Casino, Lodging & Leisure; in gaming, Barclays cuts targets on LVS and WYNN (downgrades) to
$55 from $59 and $105 from $160, respectively and cuts estimates to below-consensus for 2015
as reflects view that a recovery in Macau may take longer than expected (MPEL/MGM active)

 Autos; auto rental stocks were higher; HTZ in 1Q prelim announcement last night, said
equipment rental unit reducing operating costs/capex; HTZ reducing fleet capacity, sees closing
~5% of off-airport ops, about 200 stores, by end of 2Q and discloses raising prices ahead of
summer travel season (CAR shares jumped on the pricing); TSLA trades best levels since Nov
Energy
Oil prices fell, weighing on energy stocks; Baker Hughes (BHI) weekly rig count fell another 6 rigs
to 888, while oil rigs fell another -8 to 660; oil rigs have now plunged about 60%, or 935 rigs,
since peaking in mid-October and are at the lowest level since December 2010.) oil rigs now
down for a 23rd straight week
Other movers; MLPs were little changed, with AMZ index holding around 445 to end the week,
while Utilities were well bid, as rates came down across the bond market (making dividend
paying stocks more attractive); group got an additional lift midday after reports Maryland
approved merger between EXC/POM (on May 12th, SunTrust said in a note If the POM/EXC
merger is approved by the Maryland PSC on May 15th, they see 10% upside in POM shares)
Financials
Financials as a whole underperformed the market, leading laggard in the S&P, as bond yields
have fallen nearly 20 bps from high this week; XOOM rises on positive news letter mention;
regional banks hit hard on bond rally today (RF, STI, CMA, HBAN)
Insurance; Goldman Sachs initiated the life insurance sector with a Neutral, saying VOYAs
turnaround is not over as sees 12% upside and double-digit earnings growth; sees upside in AIZ
as it refocuses away from its unprofitable ACA-health business; rates MET and PRU Neutral as
think better entry points may be ahead
Monthly Master Trust Credit Card data: 1) COF April Net Charge-Offs (NCOs) 3.66% vs. 3.63%
MoM, while April delinquencies 2.77% vs. 2.92% MoM; 2) JPM April Credit Card NCOs 2.34% vs.
2.61% MoM, while April delinquencies 1.18% vs. 1.23% MoM; 3) DFS April NCOs 2.3% vs. 2.3%
MoM while delinquencies also in-line MoM at 1.6%; 4) ADS April NCOs 4.5% vs. 4.6% YoY, while
delinquencies 3.8% vs 3.9% MoM; 5) AXP April NCOs 1.5% (in-line w/ prior)
Healthcare
Large Cap Pharma; group overall outperforms as defensive names lead early, with Pharma/HMO
names higher; U.S. FDA warns that SGLT2 inhibitors for diabetes may result in serious condition
of too much acid in blood (LLY leveraged)
Biotech movers; REGN tgt raised to $550 from $400 at Credit Suisse on potential Eylea franchise
gains; TRIL initiated Outperform and $32 tgt at Oppenheimer; CLVS downgraded at Piper on runup in shares, but maintains $100 tgt; quieter after ASCO abstracts dominated headlines Thursday
Other movers on news; OVAS rises as AUGMENT fertility treatment continues to demonstrate
improved pregnancy rates in women with very poor prognoses; PTX said the FDA approved
Treximet for acute treatment of migraine to adolescents; SRNE rises as sells rights to Cynviloq to
NantPharma for $90M upfront (could get additional milestone payments)
Industrials & Materials
AG & Machinery; DE downgraded to Underweight at JP Morgan as believe the industry will
remain under pressure into FY16; MOS announced a $1.5B share buyback and boosted its
dividend as well
Transports; Goldman Sachs lifted its view on Logistic sector to attractive from neutral saying
pricing, better peak season ops to drive Ground margins higher and lead to EPS upside surprise;
the firm upgraded shares of UPS to Buy and upped tgt to $119; in rails, KSU was downgraded to
Neutral at Credit Suisse as still sees further downside

 Metals & Mining; MT upgraded to Buy at Bank America on the margin recovery story
unfolding in European steel; gold miners with move higher today (good week for gold names as
dollar falls, lifting NEM, ABX, GG, AEM)
Industrials/engineering names; CBI spiked on Bloomberg report that APC is poised to select a
construction team led by CBI as its main contractor for a potential $15 billion Mozambique
liquefied natural gas project
Technology, Media & Telecom
Internet; NFLX rises above $600 for first time ever on reports is in talks with Chinese online
broadcasting companies about bringing its content to China; P falls after Broadcast Music Inc.
says it won favorable rate decision against Pandora from a New York court; Chinese Internet
SINA and WB both lower after earnings; Internets FB, AMZN, EBAY, GOOGL also lower
Semiconductors; MU tgt cut to $25 at Nomura and lowered estimates due to on-going softness in
pricing, as a result of the weak PC backdrop which has persisted longer than suspected;
equipment names higher after AMAT reported slight upside to the current quarter and guided
next in-line (highest revenue reported in 3-years)
Software & Hardware; SYMC Q4 eps misses by a penny as sales outlook lower than estimates;
INOV upgraded to Buy at Goldman Sachs; ANET strong 1Q15 results well ahead of expectations,
although in-line guidance likely disappointed some investors; AZPN analyst upgrade; PAYC shares
fell after pricing 8M share secondary at $36.25 per share
Video gamers; U.S. Video Games sales rose 3% to $595.7m in April according to Research Group
NPD; software sales rise 13% to $256.7m in April, while hardware sales fall 4% to $183.9m
(shares of GME, ATVI, TTWO, EA leveraged to data); KING falls after earnings as Q1 bookings fall
QoQ and mid-point of guidance below

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 s uch. 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