Closing Recap

Monday, June 1, 15

Index

Up/Down

Last

DJ Industrials

29.76

0.17%

18,040

S&P 500

4.37

0.21%

2,111

Nasdaq

12.90

0.25%

5,082

Russell 2000

3.16

0.37%

1,249

Equity Market Recap

Another wild ride for major averages, ending slightly higher on the day after falling initially.
Several moving parts for the major averages this week, which include Greece debt settlement
deadlines ($302B IMF debt repayment due by Greece Friday), the OPEC meeting, and Nonfarm
payroll jobs data (also on Friday). Major averages recover after the S&P 500 posted its biggest
weekly loss in the last 6 weeks. The dollar jumped following better manufacturing, construction
spending data this morning (followed mixed PMI readings out of China and the EuroZone
overnight). The better data also lifts bond yields (sending bonds lower).
Sector movers included semiconductors after INTC confirmed weeks of speculation, by acquiring
ALTR in near $17B deal (follows AVGO/BRCM $37B deal last week in semiconductor space);
Transports ended strong led by airlines, after LUV said it will cap growth in 2015 seating capacity
at 7%, backing off a plan last month to expand as much as 8% (which hit the industry); Biotech
active as results/data released from the ASCO conference over the weekend (highlights below)
The Feds Rosengren said in speech today it was too soon to know whether the first-quarter
swoon in the U.S. was temporary or reflects broader changes in the economy; called for patience
on rates saying growth too slow to warrant increase in rates

Economic Data (broadly better today)

April Personal Income rose 0.4%, slightly above estimates of 0.3% (prior month 0%), while
Personal spending was unchanged vs. est. 0.2% (prior month revised up to 0.5% from 0.4%); Core
inflation (PCE) rose 0.1% MoM vs. est. 0.2% (and up 1.2% YoY vs. est. 1.4%); said compensation at
0.2% in April vs 0.1% the prior month and savings rate at 5.6% in April vs 5.2% the prior month
Construction Spending for April rose 2.2%, above estimates for a 0.8% increase, as March was
revised to up 0.5% from down -0.6%. Private construction rose 1.8% in April, while Private
residential construction rose 0.6% (construction-spending increase largest since May 2012)

 U.S. ISM manufacturing index rose to 52.8 in May, above the 51.5 reading in March and April
(which were the lowest since 50.1 in May 2013), and above estimates of 52.0. Component
breakdown: employment bounced to 51.7 after dropping to 48.3 in April, while new orders rose
to 55.8 from April's 53.5. New export orders dipped to 50.0 from 51.5
Markit said May manufacturing data remained in expansion mode in May, as the final reading of
the top-line index comes in at 54.0, compared with a flash reading of 53.8 and the end-April level
of 54.1 (year ago 56.4); said New Orders fall to 54.3 from 55.3 in April (lowest in more than a
year), while Output falls vs prior month to lowest reading since Dec. 2014

Commodities
Oil prices end flattish, with WTI crude down a dime, closing just above the $60 per barrel mark
(off lows of $59.33 per barrel and $60.64 high). All eyes on OPEC meeting this week, which
concludes Friday in Vienna. Analysts expect that OPEC will maintain its current production quota
of 30 million barrels per day at the meeting, set for Friday, June 5th. However, Brent oil prices
ended down nearly 1%. Saudi Oil Minister Ali al-Naimi, upon arrival in Vienna, said demand is
picking up, while supply is slowing
Gold prices reverse, end lower; gold settled lower by $1.10 to $1,188.70 an ounce, after rising as
high as $1,204.70 an ounce. Gold prices initially advanced after the Feds Rosengren called for
patience on rates saying growth too slow to warrant increase in rates in a speech today.
However, a surging dollar, on better economic data offset the early strength, as investors bet a
rate hike was more likely following the strong reports (comes ahead of key jobs data Friday)

Currencies
Dollar strength a top story today, following better than expected data points today (Personal
Income, ISM Manufacturing, Construction spendingthough Personal spending data missed). The
greenback rose to best levels since 2002 against the yen (as it approaches 125 high of day
124.92), while the euro sank (and held) around the 1.09 level (about 1-month lows). The dollar
index rose about 0.5% to 97.40 level (high 97.68).

Bond Market
Bonds fall/yields rise; it was a slow grind higher throughout the day for bond yields, moving up
between 5-6 bps from Fridays closing levels, just shy of the 2.20% level, as better economic data
led to a pullback in bond prices. Federal Reserve Chairwoman Janet Yellen recently said that the
central bank will raise rates this year, as long as U.S. economic data continued to improve.

Macro

Up/Down

Last

WTI Crude

-0.10

60.20

Brent

-0.68

64.88

Gold

-1.10

1,188.70

EUR/USD

-0.0054

1.0933

JPY/USD

0.69

124.83

10-Year Note

0.053

2.188%

Sector News Breakdown

Consumer
Retailers; after volatility/activity the last few weeks due to earnings, sector fairly quiet today
(PVH set to report earnings after the close); note May same-store sales data to be released this
upcoming Thursday
Consumer Staples/Restaurants; in beverages, KO upgraded to Outperform at BMO as believe
reasonable earnings expectations and undemanding valuation have created an attractive entry
point; in food, POST upgraded to Outperform at Wells Fargo; tobacco stocks were weaker
Housing & Building Products; housing related names; PIR cut to Neutral at Wedbush and cut tgt
to $12; LL said it relabeled some flooring products because a supplier placed California Air
Resources Board compliance numbers on the items even though they weren't applicable
Casinos active as revenue for May drops 37.1% from a year earlier, its 12th-straight month of
decline, but slightly better than the Bloomberg est. for a 38.5% drop (shares of WYNN, MPEL,
LVS, MGM active); also weighing on casino stocks, Macau is moving ahead with a full smoking
ban and Beijings smoking ban which includes smoking rooms in airports/train stations; BYD
upgraded to Outperform at Credit Suisse following management meetings and came away with
increased optimism for a recovery in Las Vegas locals market
Energy
Energy stocks lagged the overall market, on no specific news (other than investors preparing
ahead of the OPEC meeting results later this week no changes to quota are expected)
Major Oil comments at Deutsche Bank as upgraded OXY to Buy and cut HES to Hold from Buy;
notes does not expect a major roll-over in Non-OPEC supply through 2017, and still see a call on
US onshore growth of 500 Mb/d in 2017 with 2H16 ramp; likely need $65-$70/bbl oil to
incentivize and support this growth
Coal stocks at Goldman Sachs; neutral view, as prefers Illinois Basin over PRB within thermal coal;
calls negative trends in thermal coal secular; upgraded FELP to buy as pure-play Illinois Basin
exposure, distribution growth and raises ANR to neutral with 70c tgt; downgraded CLD to sell
w/$3 tgt on margin compression from pure-play exposure to PRB coal (buy on SXC/Neutral ACI)
Movers on news; NFX said sees 2Q production at the lower end of range; PXD boosted its
planned FY15 cap-ex view to $2.2B from prior $1.85B
MLPs; FGP to Buy Bridger Logistics for $837.5M, to expand its midstream services business,
paying $562.5M in cash and issue 11.2M of its units for Bridger http://goo.gl/L02j4E ; EPD to
acquire all member interests in EFS Midstream from affiliates of PXD and Reliance Industries for
$2.15B http://goo.gl/DWtNqO ; Morgan Stanley focus on liquidity, valuation, the commodity
backdrop, and potential catalysts to identify the strongest MLP companies (OW on MEMP/VNR)
Utilities; DUK upgraded to Outperform at Bernstein; utilities as a whole advanced despite a jump
in yields today in bonds (best levels since 1st week of May)
Financials
Large Cap banks; group among best movers on rise in interest rates today; Citi (C) upgraded to
Buy at Goldman Sachs saying trading cheaper than 96% of stocks in the S&P on EPS and below
book, we see an attractive risk-reward skew at current valuation; SF is in advanced negotiations
to acquire BCS U.S wealth management unit, according to three people familiar with the
situation Reuters http://goo.gl/Zno9Tz
Insurance; XL resumed Neutral at JP Morgan (up from prior Underweight prior UW) saying its
transformational acquisition of Lloyds of London insurer Catlin could result in increased scale,
ROE improvement, and substantial cost savings despite initial dilution to tangible book; PRE and
AXS starting a public campaign this week to convince shareholders of the merits of their $13
billion merger, with their top executives leading the charge http://goo.gl/g5z1OY

Healthcare
ASCO Conference details led the group today; among biggest movers today: AST positive longterm data from Phase II trial of the Asterias VAC1 dendritic cell cancer study; BMY CheckMate057 data opens door for competition (recovers from Friday losses); CALA marks the introduction
of encouraging initial clinical data with CB-839; CLVS experimental drug shrunk tumors in 82% of
women w/certain type of deadly ovarian cancer; EXEL reports positive Melanoma Phase II data;
study E1512 met primary endpoint; HALO w/better-than-expected trend for overall survival;
IMGN higher response rate seen in ovarian cancer study; MNTA updated results from Phase 1
trial of necuparanib in pancreatic cancer; MRTX preliminary results of MGCD265 tyrosine kinase
inhibitor at ASCO 2015; ONTY receives 2 complete responses/12 partial responses seen in Phase
1b study of ONT-380; PBYI Neratinib was questioned at ASCO in low-risk patients; PFE Paloma-3
study more than doubled PFS in previously treated breast cancer patients; RXDX posted Phase I
trial data for Entrectinib; TGTX posted updated efficacy data for TGR-1202/TG-1101+TGR-1202;
VBLT reported positive results from an early phase trial of treatment for malignant brain tumors
Managed care sector remains active after reports Friday that HUM said to explore takeover
approach by CI about a possible deal, while reports indicated AET had also expressed interest;
HUM said to work with Goldman Sachs on possible sale http://goo.gl/QJ6VuO
Services; ESRX downgraded at Raymond James and cautious comments at Cowen saying if ANTM
were to emerge as winning bidder for HUM, likely ANTM would take its business in-house, letting
contract with ESRX expire at end of 2019 (or sooner)
Other movers; MRTX downgraded to Hold at Brean Capital/tgt raised to Street high $50 at Piper
after presents preliminary results of MGCD265 tyrosine kinase inhibitor at ASCO 2015; MOH and
CTLT bot filed to sell shares of stock
Industrials & Materials
Machinery; monthly class 8 trucking data to be released tomorrowWells Fargo expects May
orders to be 20K-24K, (down 16% YoY and slightly below April's 22,405); PCAR upgraded to
Outperform at BMO Capital this morning (watch CMI, NAV as well)
Railroads; Railcar makers TRN and GBX called appealing in Barrons saying 7 qtr-worth of
industrywide order backlog suggests the boom still has a ways to go; UPS positive mention in
Barrons; rails mentioned cautiously at RBC (notes estimates below consensus for most carriers)
noting sudden deterioration in energy prospects/downward spiral in coal volumes, while
Raymond James cautious on Canadian rails today (cuts CP rating)
Other transports; UPS positive mention in Barrons; airlines advanced late day after LUV said it
will cap growth in 2015 seating capacity at 7%, backing off a plan last month to expand as much
as 8% that helped send airline shares plunging (AAL, UAL, DAL, JBLU bounce)
Metals & Mining; NUE positive mention in Barrons saying best in class steel company and sees
sector as near a bottom; gold miners get a lift early (AEM, NEM) on bounce in gold; X acquires
AKS Desco interest for $25M; industrial metals weakness continues (aluminum AA/CENX)
Chemicals; OMG to be acquired by APO for about $1.03B/$34 per share http://goo.gl/z0fgjn
Shippers/Tankers; SBLK upgraded to Hold at Deutsche Bank saying shares now appear to better
discount headwinds associated with the dry bulk market after sell-off; the Baltic Dry Index was
unchanged from Friday; FRO upgraded by two analysts
Technology, Media & Telecom
Semiconductors; ALTR acquired by INTC for $54 per share/$16.7B deal http://goo.gl/LvM1XX ;
the semiconductor group active following the news (and last weeks $37B deal by AVGO for
BRCM); Barrons suggested that BRCM agreement to be acquired by AVGO may reflect
executives willingness to sell out, raising some red flags that tech asset value may be
approaching its peak; XLNX upgraded to Strong Buy at Raymond James after ALTR news; SEMI
shareholders file to sell 15.9M shares of stock; AMBA new highs into earnings tomorrow

 Internet group strong; SINA surges after pact with CEO for a $456M cash investment; AWAY rises
as PCLN Kayak travel search will now include nearly 200K AWAY vacation rental listings; EBAY
trading at all-time highs (spin-off with PayPal expected to be completed in 2H'15); NFLX weaker
on cautious analyst commentary; LNKD with strength today (first push higher in over a month); P
shares fell after AAPL said to announce $10 per month streaming service (as per WSJ)
Software & Hardware; TXTR urged by shareholder to explore strategic alternatives; CA
downgraded to Sell at Citi after M&A deal for RALY; in hardware, GPRO with a positive mention
by Piper saying its Q2 and FY15 estimates for GoPro look conservative after tracking how the five
current GoPro action camera devices rank among the top 100 electronics items
Comm & Equipment; JNPR downgraded Neutral to Sell at MKM Partners as think there's a good
chance the company will miss consensus expectations in 2H15; FFIV downgraded to Neutral at
Citigroup on limited additional upside as ADC market begins to mature
Media & Telecom; DISH received a positive analyst comment as Wells Fargo said the stock has
potential upside of 60%-75% saying CEO Charlie Ergen can either enter the wireless market via a
partner, enter the wireless market via an acquisition, pursue a wholesale lease and/or sell all or
part of the business; DIS with positive mention in Barrons over the weekend

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