Closing Recap

Friday, June 26, 15

Index

Up/Down

Last

DJ Industrials

57.12

0.32%

17,947

S&P 500

-0.63

0.03%

2,101

Nasdaq

-31.69

0.62%

5,080

Russell 2000

-3.55

0.26%

1,279

Equity Market Recap

U.S. equities ended mixed on the day, with the Tech heavy NASDAQ led lower by weakness in the
semiconductor sector after Micron (MU) posted a disappointing quarter/guidance that weighed
on the sector, while the Dow Industrials posted a gain due to shares of Nike (NKE) after its
earnings handily topped consensus. The NASDAQ was down as much as 1% at its worst levels.
Bonds were also under pressure, with yields jumping near best levels of the year.
Next up, all eyes on Greece on this pivotal weekend. Under review by EuroZone finance
ministers, The Guardian reported, is a plan to give Greece enough money to get it until the end of
November. An emergency meeting on Saturday is set for the group to discuss the plan. Without
new funds, Greece is in danger of being unable to make its EU1.54B payment due to the IMF on
Tuesday. Greece was presented with 24-hr ultimatum at Thursdays Eurogroup meeting, EU
Summit, Greek govt official said
China was crushed overnight, as the Shanghai Index fell 7.4% to 4,192.87 at the close, bringing its
drop from this years high to 19% (near the 20% correction territory). Chinese stock-index futures
tumbled by the 10% daily limit, while the benchmark index in Chinas smaller exchange in
Shenzhen sank 20% from this years peak.

Economic Data
June Final Michigan Consumer Sentiment rose to 96.1, above estimates and prior prelim reading
of 94.6 (prior month was 90.7 last month); the expectations index rose to 87.8 vs. 84.2 last
month, while current economic conditions index rose to 108.9 vs. 100.8 last month

Commodities
Oil prices ended little changed, bouncing off earlier weakness, with WTI crude falling 7c to
$59.63, and logging a loss of 0.6% for the week. Brent crude also bounced off lows to post a small
gain for the day. Energy prices ended lower despite another week of bullish inventory data.
Gold prices reversed late day, to close higher by $1.40 to end at $1,173.20 an ounce (snapping a
5-day losing streak), but still posted a 2.4% decline for the week. Gold normally provides
investors a safe haven place to put money in times of uncertainty, but uncertainty over the
outlook for Greece has pressured the euro, in turn providing a lift to the U.S. dollar

Bond Market
Bond markets with a sharp downturn today (and for the week), sending yields jumping across
the board into a pivotal weekend for Greece. The yield on the 30-year jumped to nearly 9-month
highs of 3.245% with todays bond market pullback, while the 10-year yield closed in on YTD high
for yields (around 2.5%). The week saw bonds falling on better economic data (housing has been
strong of late), while auctions were mixed (better 2-yr, weak 5-yr, slightly better 7-yr); rates on
the 10-yr topped out around 2.5% last week

Other Interesting tidbits

It has been a historic week for the U.S. with three huge news announcements: 1) The biggest
news today as the Supreme Court, by a vote of 5 to 4, ruled that gay and lesbian couples across
the country have a constitutional right to marry; 2) Senator Lindsey Graham (R-S.C.), now a
candidate for president, agreed with Governor Nikki Haleys call to take down the Confederate
flag from the grounds of the South Carolina Capitolalso several retailers, including AMZN, WMT,
EBAY pulled the confederate flag after nine black worshipers were shot to death in a Charleston,
South Carolina, church last week; 3) and yesterday, the Supreme Court ruled 6-3 that tax
subsidies in the Affordable Car Act can be provided nationwide to help people afford health
insurance on exchanges set up by the health-care overhaul.

Macro

Up/Down

Last

WTI Crude

-0.07

59.63

Brent

0.06

63.26

Gold

1.40

1,173.20

EUR/USD

-0.0041

1.1165

JPY/USD

0.17

123.80

10-Year Note

0.07

2.473%

Sector News Breakdown

Consumer
Retailers; footwear stocks leading today, after NKE and FINL quarterly results both come in above
consensus (NKE new all-time highs several analyst raise targets), as NKE futures orders surge
past expectations (shares of other footwear stocks, FL, GCO, DSW all active); TGT was
downgraded to Market Perform at BMO Capital; athletic apparel names also rise on NKE/FINL
Consumer Staples/Restaurants; in food names, CALM was initiated buy and $65 tgt at Davidson
today; protein producers were broadly lower (SAFM, TSN, PPC) possibly tied in part to concerns
of tighter import restrictions from China; restaurants were mostly higher, possibly in reaction to a
strong sentiment data point, with MCD, YUM, CMG moving
Housing & Building Products; few analyst changes in product stocks as CL King upgraded OC to
Buy from neutral, while RH was upgraded to Buy at BB&T Capital with $120 tgt; has been a good
week for builders given better LEN earnings and economic data
Gaming/Casino; Credit Suisse the latest to suggest staying away from the sector; firm notes after
its sharp correction, they upgrade Wynn Macau to Neutral but downgrade Galaxy given a slowerthan-expected ramp-up of its new casino may trigger earnings cuts

Energy
Energy stocks slide again on a rough week for energy prices; also not helping mixed rig count
data from Baker Hughes (BHI) which said the weekly total rig count rose 2 to 859, though oil rigs
did decline for a 29th straight week, falling -3 to 628 (and still down more than 65% from midOctober peak levels; overall energy stocks remained under pressure
MLPs; Bank America upgraded Upstream MLP VNR to Buy & downgraded ARP to Underperform;
said MEMP remains a top pick given liquidity and hedges and added BSM as second top pick
because as believe it is positioned to deliver on MQD given low leverage & subordinated units
Coal/Alternative energy; CNXR cuts IPO to 8M shares and range to $15 (from $19-$21); BTU
shares fell after Moody's Investors Service downgraded the company's credit rating last night;
Canadian solar stocks weaker (CSIQ) on reports a band of small Canadian solar panel
manufacturers is banking on an upcoming trade decision in hopes of surviving an onslaught of
low-priced Chinese imports. The four Ontario companies say they hope a decision next week by
Canada's International Trade Tribunal will uphold duties on imports they say are priced below the
Chinese companies' actual cost of production.
Energy movers; LNG shares rose midday after The Energy Department announced today that it
has issued a final authorization for Sabine Pass Liquefaction, LLCs Expansion Project (Sabine Pass)
to export domestically produced liquefied natural gas (LNG) to countries that do not have a Free
Trade Agreement (FTA) with the United States; CRC falls after Bloomberg noted BlueMountain
Capital saying common stock worthless as runoff value of CRCs producing wells does not
come close to covering debt
Financials
Banks/financials reacted positively in response to move higher in rates today (comes after
weakness early in the week on valuation downgrades by some analysts give run in recent shares)
MidCap banks: Credit Suisse upgraded ZION to Outperform and revised estimates on group as
estimate that ZION, KEY, CMA and FITB have 10%+ potential EPS upside on better than expected
NII relative to company guidance assuming higher rates and historical deposit beta
REITs; Bank America lowered targets on Healthcare REITs DOC, HCN, HCP, MPW, NHI, SBRA, SNH
& VTR as believe as we near the Fed's first rate hike, healthcare REITs are likely to underperform
vs. broader REITs said see limited upside given the length of triple net leases
Business Development Companies; UBS said ARCC, GBDC and AINV - with broadly developed
originations platforms and strategies coupled with superior management teams - remain our top
picks; also continues to favor CPTA, OFS and TPVG, reflecting our view of these BDCs as
advantageously positioned in niche areas of the market with compelling growth stories.
Healthcare
Large Cap Pharma; LLY tgt also raised to $92 at Leerink on higher odds that cholesterol drug
evacetrapib will meet primary endpoint in Phase 3 Accelerate stud (was also added to equity
core portfolio at Bank America); MCRB shares surged on the first day of trading, after its 7.43M
share IPO priced at $18.00; ZTS shares give up late gains yesterday (jumped initially on WSJ
report that VRX made approach) http://goo.gl/0peyvd - today CNBCs David Faber said Valeant
taking a look at Zoetis as a courtesy to Pershings Bill Ackman (citing Bloomberg)
Hospitals mentioned favorably by Wall Street analysts after positive Supreme Court ruling
yesterday sent shares soaring. The high court upheld a key piece of President Barack Obamas
Affordable Care Act, lifting the main threat hanging over the industrys prospects; shares of HCA,
THC, CYH all gained more than 8% (Wells Fargo upgraded THC, HCA and CYH, while Oppenheimer
and Leerink among some of the analyst raising targets on group)
Biotech was weaker; CLDN shares plunge after the biotechnology company said it might be
forced to liquidate; XOMA was mentioned positively by Biotech Insider; NLNK filed $250M mixed
shelf; large cap names were down modestly

Industrials & Materials

Industrials & Machinery; EMR estimates were cut at Credit Suisse on negative May order data
and sees material downside risk to Q3, FY15, and FY16 consensus estimates; DE shares break out
to new 52-week highs (note higher grain prices overnight as corn futures up 1.6%, was up as
much as 3.7% to $3.97/bushel), as too much rain in U.S., not enough in Europe has sparked
largest weekly rally in corn and wheat in 3 years; GTLS rises on analyst upgrade
Transports still lagging overall markets, with truckers the latest sector to falter (airlines and rails
have already tumbled in recent weeks/months); the Dow Transport Index fell to an eight month
low yesterday, and its holding bearish by staying below 8500 (currently in correction territory,
down 10% from November record highs)
Metals & Mining; gold miners were little changed, but at the low end of this weeks trading range
given another weak showing for gold prices (NEM, ABX); industrial metals were mixed (some
steel names lower, while FCX, AA higher)
Technology, Media & Telecom
Internet; NFLX fell $50 from its Wednesday high of $706 after news of its 7 for 1 stock split; ETSY
tgt cut to $9 from $13 at Wedbush and maintains Underperform; Chinese Internet names under
pressure given the 7.5% plunge in Shanghai shares overnight (BABA, JD, BIDU, SINA, CTRP)
Semiconductors; MU shares plunge as quarterly results/guidance fall well below already lowered
expectations (revenue and margin well below consensus, reflecting on-going PC DRAM demand
and pricing weakness); Jefferies lowered estimates for INTC after MU noted weaker near-term PC
trends during its MayQ earnings report; the SOX lower as much as 3% on PC demand fears from
MU report (SWKS, ON, SNDK, CY, CAVM fell); ARMH declined on Bernstein downgrade
Software & Hardware; few IPOs opened for trading today in the software sector as APPF 6.2M
share IPO priced at $12.00, while XTLY 7.037M share IPO priced at $8.00; GIGM to acquire 70%
stake in Strawberry Cosmetics for about $93M lifts shares
Internet security; Barclays initiated CHKP init an Equal-weight and $90 tgt; cut FEYE to EW but up
tgt to $56; PANW init OW and $210 tgt as believe PANW can grow billings 30%+ through FY17
driven by 15-20% growth in product as share gains continue and 35-40% growth in recurring
billings; FTNT init OW and $50 tgt as believe FTNT can grow revenue 20-25% through FY16
Services/equipment; SNX downgraded at CLSA after earnings miss and guidance citing recent
operating issues

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