Closing Recap

Monday, July 13, 15

Index

Up/Down

Last

DJ Industrials

217.00

1.22%

17,977

S&P 500

22.91

1.01%

2,099

Nasdaq

73.82

1.48%

5,071

Russell 2000

13.40

1.06%

1,265

Equity Market Recap

It was another strong showing for equity averages, lifting back above key technical levels, as
Greek PM Alexis Tsipras gave in to European demands for immediate action to receive up to
EU86B euros of aid he needs to keep his country in the euro area. The news, coupled with
another rally overnight in Asia (China 2% gain, 3rd day in a row of gains), several M&A reported
deals over the weekend (details below), and general market upside momentum, lifted stocks
globally ahead of earnings this week (big tech/banks this week), and the Fed (Chair Yellen holds
semi-annual monetary policy meeting with Senate/House this week). Gainers today include high
beta sectors Internet (NFLX, AMZN, FB all reached 52-week highs), Biotech (led early) and
Financials (optimism ahead of earnings this week), while defensive Utilities, Telecom names
lagged. Markets rallied overnight, extended gains after the open, and held all day. Equities rallied
1.2% Friday, the best showing since early May 8, but is 1.7% below its record set in May. Today
also marked the fifth straight day the Dow Industrials have moved 200 points (either direction).

Greece
News of a bailout agreement between Greece and its creditors helped lift major stock averages
for a third consecutive daybut Athens Parliament still has to ass pension overhauls and sales
tax increases that voters overwhelmingly rejected in a referendum just one week ago. The fact
that an apparent resolution is in place to receive the funds lifted sentiment, but now Greece has
to implement European Union rules that make it easier to wind down broken banks, including by
sharing the cost with investors and creditors. Story still not over is bottom line!

Commodities
Crude oil prices end lower by more than 1% to $52.50 per barrel, as optimism over an Iran deal
helped ease pricing pressures (WTI oil high $53.17 and low $51.26). Also in news this morning,
Saudi Arabia confirmed it's pumping a record amount of oil, as the country said it pumped
10.564M barrels of oil per day in June, which tops its previous record set in 1980. More on Iran,
disputes over attempts to probe Tehran's alleged work on nuclear weapons unexpectedly
persisted Monday, diplomats said, threatening plans to wrap up an Iran nuclear deal by midnight
the latest in a series of deadlines for the negotiations.

 Precious metals end lower, with gold falling -$2.50 or 0.2% to settle at $1,155.40 an ounce,
falling for a third straight session, this after Greece paved the way to a new bailout deal with
creditors, giving the country a third bailout program in five years and remain in the euro. Also
weighing, weakness ahead of Federal Reserve Chair Yellen giving testimony to Senate & House
this week on monetary policy (Fed has signaled it plans to boost interest rates this year)

Currencies
The dollar was stronger across the board today; the euro slid to intraday lows late in the session
(approached the 1.10 level to downside, down more than 1.4% on the day), while the greenback
jumped to highs of 123.54 vs. the yen (best levels in 2-weeks), and held that level throughout the
day. The dollar index up more than 0.8% to 96.75 levels

Bond Market
Bonds fell early, but recovered midday to pare its losses; moves comes after weakness in
Treasuries most of last week; bonds slid as Greece and China concerns appear to have abated on
last minute debt deal with Euro leaders/creditors, and China markets rally a third day; bonds fall
as yields jump across the board (10-yr was above 2.46% early before pulling back to 2.42%)

Macro

Up/Down

Last

WTI Crude

-0.54

52.20

Brent

-0.88

57.85

Gold

-3.90

1,154.00

EUR/USD

-0.0157

1.1005

JPY/USD

0.64

123.42

10-Year Note

0.015

2.426%

Sector News Breakdown

Consumer
Retailers; group generally higher with overall market; ASNA shares fell after cutting its FY15 EPS
view to 57c-60c from 70c-75 and lower Ebitda; WMT cut its free shipping minimum order to $35
from $50; RL upgraded to Overweight at Stephens
Consumer Staples; JAH to acquire disposable tableware maker Waddington Group for about
$1.35 billion http://goo.gl/DBdxKV ; PEP downgraded to Neutral at Susquehanna and cut tgt as
assign less probability to a split or take out; BGS buys Spartan Foods from Linsalata for $50M;
Restaurants; group also broadly higher on improved market confidence; Wunderlich said both
the Knapp Track and Black Box Intelligence reported that Industry SSS for June were modestly
better than Ma (RRGB top casual dining pick); YUM reports earnings tomorrow
Housing & Building Products; homebuilders up slightly to little changed (group has been an
outperformer, even during weaker markets), while building material names remain strong
Casinos & Gaming; sector stronger overnight in Asia after Macau Business reported the
government may ease plans to ban smoking rooms on gaming floors (shares of WYNN, MPEL,
LVS, MGM were active today)
Lodging & Leisure; in lodging, MKM Partners cut VAC to Neutral as upside appears fully priced,
while firm top pick for Q3 is WYN; in leisure, IMAX upgraded at Piper; Theaters (AMC, CNK, CKEC,
IMAX) strong early after another strong weekend at the box office (Minions $115M)
Auto sector; REMY to be acquired by BWA for $29.50 per share, in $1.2B deal
http://goo.gl/sg4fQj ; Auto retailer AN upgraded to Overweight at Morgan Stanley and up tgt to
$70 from $47; Credit Suisse likes auto suppliers MGA and LEA into the quarter, more cautious on
BWA and DLPH

Energy
Energy stocks were mixed, with refiners leading, and group following price of oil once again;
Saudi Arabia told OPEC it raised oil production to a record as the organization forecast stronger
demand for its members crude in 2016 (Saudi pumped 10.564 million barrels a day in June)
Refining stocks surge; Citigroup remains bullish on sector as adds PBF to Focus List and removed
VLO after having it on the list for a year but maintain Buy ratings on almost all the refiners (note
refiners have been strong for months, VLO, TSO, MPC, WNR, PSX, HFC strong)
E&P; Morgan Stanley upgraded PXD to Overweight with $190 tgt and downgraded MUR to
Underweight on relative call on MURs performance vs. large cap E&P peers; Barclays said E&P
shares are down ~25$ since early May, but still trade at 30% premiums to historical multiples
MLPs; pipeline unit of oil refiner MPC, which is MPLX to acquire MWE for about $15.8B, paying
$78.64 per unit, to create the 4th-largest MLP (deal represents a 32% premium from Friday close)
http://goo.gl/cv3RcZ ; overall Alerian MLP index another small bounce in an overall strong tape
(AMZ), holding around the 400 level
Utilities; the defensive sector lagged today as yields perked up and investors looked to higher
beta stocks; in news, BKH agreed to buy natural gas distributor SourceGas Holdings LLC for
$1.89B from investment funds managed by General Electric Co. and Alinda Capital Partners LLC
and will assume $720M of debt http://goo.gl/Fiv2yg
Financials
Large Cap banks lead today, as rates rise early amid bond pullback (following bond losses last
week); financials take center stage this week, as group among first to report quarterly results
(JPM, WFC TuesdayBAC, BLK, USB WedKEY, SCHW, BBT, GS, WBS, C Thursday); BK was
named as a new long for Greenlight Capital according to Bloomberg
Insurance; ALL upgraded to Outperform at KBW with $76 price target saying continued rate
increases should help raise margins; VR downgraded at KBW on valuation
Asset Managers/Advisors; LM said assets under management was $699.2B, down from Marc; JNS
mentioned favorably in Barrons saying shares may be worth $22 amid recent improvement in
fund performances; FIG upgraded to Outperform at KBW
REITs; Goldman Sachs downgraded VNO to Neutral and tgt cut to $100, while cut SLG to Sell and
tgt to $105 from $122 as sees risk of higher short-term rates; overall REITS as a whole were little
changed (IYR ETF)
Healthcare
Managed Care/Large Cap Pharma; CNC upgraded at FBR after pullback following HNT deal; ANAC
surges as its Atopic Dermatitis drug met its primary and secondary endpoints in phase 3 studies
(tgt raised to $190 at Wedbush); JNJ to report earnings tomorrow morning; OHRP posted
positive phase 2 stud results on OHR-102
Biotech movers; group overall was strong early (as was overall market), but high beta names get
good lift; REGN price target raised to Street high of $650 at Deutsche Bank as believe the street is
underestimating Dupilimab, a drug with Ph3 data this year that could be $10B+; earnings for
group not really til next week/week after (CELG, BIIB, AMGN)
Medical devices; two deals in sector today as; 1) EW to buy privately held heart device maker
CardiAQ Valve Tech for up to $400M http://goo.gl/C9CSJI (shares upgraded by a few analysts); 2)
MDT to acquire RF Surgical for $325M http://goo.gl/p17WZJ ; HOLX upgraded to Buy at Evercore
Industrials & Materials
Multi-industry/Machinery; IR upgraded to Buy at Stifel as expects the company's results to be
boosted by an ongoing, long-term rebound in U.S. nonresidential construction (lifts other HVAC
names early LII); heavy machinery/equipment names up with broader market

 Transports; Brazilian airline GOL rises after expanding its partnership with DAL; Transports in
general strong on weaker commodity prices and with risk trade in place, as Dow Transport
Index up now up over 300 points from Wednesday lows (best levels since June 25th); truckers and
airlines among outperformers in sector
Metals & Mining; iron ore prices rose for a third straight session up 0.4% to settle at $50.30 an
ounce; VALE said is withdrawing 25 mt of iron-ore supply from this month (BHP, RIO, CLF all
moved higher on headlines as did steel makers X, AKS, STLD, NUE); SVL booted its year output
view today; precious metals were mixed as gold prices slump again (AEM, NEM)
Aerospace & parts; PCP strong (announced deal/no terms); AER shares look undervalued
according to Barrons at PER 8x and may rise 35% to $62 within the next year as global travel
boom boosts demand for aircraft leasing; defense names rise (LMT, BA, RTN)
Chemicals; PAH to buy UK's Alent Plc for about $2.1B in cash http://goo.gl/QhgAOz; chemical
names rising on the day, LYB, HUN, DOW after deal; DD bounces off 52-week lows last week
Technology, Media & Telecom
Internet outperforms; GRPN upgraded to Outperform at Macquarie on risk/reward; NFLX tgt
raised to $780 from $620 at Goldman Sachs, while ITG had cautious comments amid slight Q2
deceleration in revs and subs (new all-time highs today into earnings Wed); AMZN trades new alltime highs; GOOGL downgraded to Hold at Pivotal; Z tries to bounce after earlier 52-weeklows,
falling last week on CFO resignation; FB trades new record highs today as well - above $90 level
Semiconductors; SWKS upgraded to Overweight at Stephens and ups tgt to $120; RTEC raises Q2
revenue forecast to about $59M, above est. $54.7M; AAOI guides Q2 eps and revenue above
consensus views; JP Morgan said European semis STM and ARMH at risk (downgrades both);
MXL estimates upped at JMP on channel checks; Semi index (SOX) was higher, but lagged overall
markets into INTC earnings Wednesday; AMAT named new long for Greenlight Capital; Semiequipment conference Semicon West takes place this week
Hardware; AAPL upgraded at Societe Generale; FIT initiated coverage by several analysts (3 buys
and 6 neutrals; GRMN mentioned positively in Barrons saying share may rise 35% to $60 per
share; HDD maker STX lowers Q4 rev view to $2.9B (had seen $3.2B-$3.3B) on lower margins
(numbers have come down last few weeks on lower PC demand outlook WDC as well)
Internet security stocks were softer today; group got negative warning last week from CUDA,
which hit shares; sector also prepares for another IPO in sector this week (the cybersecurity
software provider Rapid7 (RPD) increased sales by 40% to $24M in Q1; shares of PANW, CYBR,
FEYE, CHKP were all active
Components; BRCD cut at RBC on challenges and disruptions at key OEM partners; GLW
downgraded to Underperform at Bank America as no longer think Cornings target of flat display
profitability in 2015 is achievable; ARRS cut its Q2 forecast citing stronger headwinds than
estimated; PLXS lowers Q3 eps to 67c-70 from 71c-79c saying 3Q results hurt by issues
Media/Telecom; CMCSA (new all-time highs) as revealed its cord-cutter focused streaming video
service, now offering pricing details on its 2-Gbps "Gigabit Pro" high-speed Internet option, and
aggressively promoting it; WIN downgraded to Sell at UBS saying dividend in question

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