Closing Recap

Friday, July 17, 15

Index

Up/Down

Last

-33.84

0.19%

18,086

S&P 500

2.30

0.11%

2,126

Nasdaq

46.96

0.91%

5,210

Russell 2000

-5.72

0.45%

1,267

DJ Industrials

Equity Market Recap

It was all about the Nasdaq Composite today, outperforming early after Google quarterly results
were well received by Wall Street (shares were up 15%), only to pick up steam late day, pushing
the Index above 5,200 for the first time ever, as Biotech stocks traded to fresh all-time highs and
semiconductors bounced off the lows. Also lifting markets, positive economic data, with strong
June Housing Starts/Building Permits (as Wall Street ignored a decline in monthly Consumer
Confidence). Earnings this week have been similar to last quarter (earnings beating, but revs not
so hot), but enough to keep pushing markets higher. Earnings kick into full gear next week with
about 450 companies reporting earnings next weekAAPL, MSFT, CAT, AMZN, BA, AXP, IBM,
HAL, MCD, LLY just a couple of headliners next week.
Outside of tech strength, underlying market today was weaker, as regional banks were hit by
CMA earnings and comments about provisions related to energy loans (hitting Texas related
banks/energy exposure loans); transports rallied on mixed KSU, while trucker JBHT missed/guide
lower; energy complex down in general as oil prices falling again (hitting chemicals along with
weak results from CYT); precious metal stocks hitting 52-week lows (ABX, GG) as gold falls to
lowest since 2010; though shippers/tankers rally (SBLK, NM) after an 11th straight gain for Baltic
Dry Index note the market holding up again today by Tech still no fear as VIX below 12!

Economic Data
Housing starts jumped 10% in June to an annual pace of 1.17M, above ests of 1.106M, while
prior month was upwardly revised, led by a surge in construction on complexes with five units or
more. Construction on multi-dwelling projects soared to the highest level since 1987. Also,
building permits for new construction, a sign of future demand, rose to an annual rate of 1.34M the highest level in eight years and well above consensus for 1.15M
Consumer prices for June rose a seasonally adjusted 0.3% (in-line), helped by rising costs for
housing, gasoline and food such as eggs; while CPI core (ex: food & energy) rose an in-line 0.2%.
Over the past 12 months the main CPI has risen by an unadjusted 0.1%, the first time it's shown a
yearly increase since December. Core prices are up a mild 1.8% in the past year.
Consumer sentiment fell to a preliminary July reading of 93.3 from a final June level of 96.1,
according to the University of Michigan gauge released Friday (est. was for 96.0 reading)

Commodities
Energy futures end lower by a few pennies, bouncing late in the session to close around the
break-even level (was down 2c to $50.89), off earlier lows of $50.14 (but still at lowest
settlement since April 9th). Prices fell this week amid a stronger dollar, Iran agreeing to nuclear
deal with US/others (raises fear of increasing Iran output), Crude stockpiles at Cushing,
Oklahoma, the biggest oil-storage hub in the U.S., rising a third week to 57.1M barrels through
July 10, and amid speculation the surplus will be prolonged as U.S. drillers return rigs to fields.
Prices pared losses late day after Baker Hughes weekly rig report showed a resumption of rigs
being taken off line after additions the last 2-weeks.
Gold falls; Precious metals scored its longest weekly loss since February, falling every day this
week (and now 7-consecutive sessions), making it 4-weeks of declines, amid comments from Fed
Yellen about raising rates this year, and as better economic data has lifted the dollar this week.
The dollar strength has weighed heavily on commodity/gold miners ABX, GG, AEM). Gold futures
fell earlier to its lowest levels since 2010, off more than 1.1% or $12.00 to $1,131.90 an ounce,
down 2% for the week)

Currencies & Bonds

The dollar index (DXY) was higher again, capping a strong week for the greenback that lifted on
better economic data reports, confirmation the Fed will likely lift rates this year, and Greece
averting a potential exit from the Euro. The dollar pared gains vs. the yen, which traded to a 3week high of above 124 (after touching low of 120.41 mid last week) after receding fears on
Greek debt and Chinese stocks. Overall, the dollar headed for its best week in two months, as the
euro fell to 7-week lows (dropping to lows of 1.0841 today)
Bond markets were little changed for most of the day, with the yield on the 10-yr around 2.35%
(Flattish) for most of the session, despite generally better economic data.

Macro

Up/Down

Last

WTI Crude

-0.02

50.89

Brent

0.18

57.10

Gold

-12.00

1,131.90

EUR/USD

-0.0027

1.0849

JPY/USD

-0.09

124.05

10-Year Note

-0.001

2.341%

Sector News Breakdown

Consumer
Retailers; BBY downgrading to Underperform at Bank America on a mixed product cycle and
limited catalysts for multiple expansion (cut tgt and estimates); TSCO was upgraded at Piper and
lifted tgt to $116 as expects strong results; UBS said on COH that survey picked up some
unexpected improvements that could signal more sustainable comps ahead (cut tgt to $34); ecommerce name ETSY surged with Internet names
Consumer Staples & Restaurants; after several names continued to show weakness in casual
dining, little bounce back today (SHAK), though still weakness in likes of LOCO, DPZ (follow
through selling post better eps), EAT and BLMN; JAH 16M share Secondary priced at $54.50;
tobacco follow through strength after PM earnings

 Housing & Building Products; failed to rally despite strong June Housing starts/Building Permits
data point, as permits (sign of future demand), rose to an annual rate of 1.34M - the highest level
in eight years and well above consensus for 1.15M; builders LEN, PHM, KBH shares have stalled
lately, as well as building materials and home related retail stocks; MLM upgraded at BB&T
saying the recovery in U.S. construction remains strong
Casino, Lodging & Leisure; casinos and gaming stocks fell (WYNN, MPEL, MGM, LVS) as Macau
Legend said it expects 1H net loss on decrease in gaming revenue as well as increase in staff costs
and higher depreciation for Harbourview Hotel
Autos; car rental stock HTZ jumped after it completed its more than two-year restatement of
historical financial statements and now expects to reach annualized cost savings of $300M by
year-end, $100M more than its goal (CAR also active); ALV Q2 sales and operating margins beat
expectations, sending shares higher; TSLA held conference call on update to Model S
Energy
Energy complex among biggest losers, as commodity complex as a whole remains under siege; Oil
services get better strong earnings beat from SLB on better than expected margins across the
board, but did warn of 5%-6% sequential decline for Q3 revsbut says may represent bottom
(first of major services to report earnings); the BHI weekly rig count showed a decrease of 6 rigs
to 857, while total oil rigs fell 7 to 638 (after two weeks of increases)
MLPs; ETE confirmed it signed a confidentiality pact with WMB for ratio 0.9358 for each WMB
share; GEL 9M share Secondary priced at $43.77; ARLP falls again with coal weakness, while HCLP
falls on frac sand margin weakness; the Alerian MLP Index tests 52-week lows reached yesterday
of about 388 level (52-week high 540.01 on 8/29) on weaker oil, and rising rate fears (dividend
paying sector)
Other movers on news; NOV downgraded to Sell at UBS; COP boosted dividend slightly and said ;
to cut future deepwater capex w/ most significant reductions in operated Gulf of Mexico
program; APA upgraded to Buy at Citi
Oil drillers remain weak; group led lower by ESV after COP terminates contract for its DS-9
Deepwater drillship; NE July fleet status update sees $155k dayrate for Noble Regina Allen jackup
in Netherlands with estimated late June start and early Sept. expiration (down from prior 233k
day rate); shares of RIG, SDRL, DO remain soft
Frac sand names pummeled again with lower oil as EMES, HCLP, SLCA, FMSA all lower; recall
HCLP cut at Jefferies Thursday saying margin pressure for sand providers greater than expected
in 2Q, rest of 2015 due to vol. reduction, rounds of price cuts, unfavorable mix shifts, cost
inefficiencies in production and rail
Coals/Alternative energy; CLD said it sees bigger than expected Q2 loss due to a decline in
shipments; coal industry remain under pressure on waning China demand, shift in US to natural
gas from coal
Financials
Regional banks mostly lower; CMA earnings missed due largely to a 13c miss on provision as a
result of an increase in classified energy loans; STI quarterly results beat as NIM slightly higher to
2.86% from 2.83% on flat loan growth; other movers on earnings ASB, MBFI, FHN
Regional banks leveraged to Texas/Energy under pressure today; shares of ZION, BOKF, HBHC,
IBKC, CFR, TCBI) after CMA missed and cited energy as one of main culprits; large cap banks hold
up well after generally better to in-line earnings this week (though NIM figures not coming in as
strong as Street would like given bounce in yields)

Healthcare
Healthcare/Large Cap Pharma; AGN was downgraded at RBC on fewer catalysts and less
confidence in near-term P&L upside, while upgrading ENDP to top pick on what they see as an
attractive set-up that comes with still generally low sentiment; VRX to buy Egyptian drugmaker
Amoun for about $800M http://goo.gl/fOL0TO ; AXON rises ahead of Phase 2 data on RVT-101 as
add-on treatment for Alzheimers disease at AAIC on July 22nd
Biotech sector slow early, ramping to highs late day after another stellar week that saw new alltime highs after another proposed deal in sector this week (CELG offered to buy RCPT in $7.2B
deal on Wednesday); OPHT shares up 12% today, above $69 per share (recall on July 7th, Cowen
picked up coverage with an Outperform and $80 tgt)
Services/devices; ANGO fell on lower guidance, while MDRX Q2 guidance above views, sending
the health record software company higher; ACHI downgraded by Cowen after health-care
organization, Ascension Health made take-under offer at $2.70 per share
Secondaries; once again, healthcare related stocks taking advantage of rising stock prices to raise
cash; NRX 1.5M share Secondary priced at $5.00, RDHL 2.46M share Secondary priced at $16.25,
TROV 4M share Spot Secondary priced at $8.75
Industrials & Materials
Industrial & Machinery; HON reported quarterly earnings rose 9.4%, and organic sales up 3%, but
revenues were down 4.5% all YoY, while boosting low end of year eps view; GE reported in-line
quarterly results; distributor GWW mixed earnings, but guided year lower
Transports strong despite mixed earnings, as falling oil prices supports group; KSU leads after the
rails Q2 eps beat/revs missed and said first few weeks from July suggest the positive trend may
be continuing; trucker JBHT Q2 EPS missed by 2c on lights revs and lowers year rev outlook to
0%-2% from prior 9%-12% (comps WERN, SWFT, KNX active); airlines rise early (JBLU, LUV, UAL)
after oil prices plunge
Metals & Mining; gold miners continue to get pounded, with shares of ABX, CDE, GG, NEM, AEM
all falling with gold prices again (many 52-week lows in group; PKX said it will put on hold a $12B
project to build a steel plant in India as part of a restructuring; copper and steel stocks also come
under pressure amid commodity sell-off
Chemicals; CYT Q2 eps missed consensus estimates by 5c due to a slower aerospace ramp and
European headwinds in Industrial Materials; CE with mixed report as earnings beat, but revs fall
short and boosted year to-bottom line by 10c; shares of DOW, DD, LYB, HUN all fell; in ag
chemical stocks, CF shares jumped after reports and Dutch fertilizer industry peer OCI are in
advanced talks about a merger and a deal could be reached as early as this month, the WSJ
reported http://goo.gl/AJfkXM
Waste services; KeyBanc takes a more constructive view on industry, on beliefs that relative
valuation appears more and core fundamentals should continue to improve; upgrades WCN to
Overweight and raise tgt on Overweight-rated CWST from $6 to $7
Tankers/Shippers; The Baltic Dry Index (BDI) rose another 3.9% to 1,048 overnight, its 11th
straight gain, and now up more than 90% from all-time lows in February (but 90% below its alltime high in May 2008); Jefferies boosts estimates for the crude oil tankers as the sector
continues to surprise to the upside. Spot charter rates are stronger than anticipated heading into
2H15 while OPEC is producing more crude oil than believed capable; DRYS, PRGN, DSX, FREE,
EGLE, NM, NMM, SBLK, KEX, SB, SINO, BALT, SHIP, DCIX related names

Technology, Media & Telecom

Internet; GOOGL reported solid earnings with inline revs (better when taking FX into account)
and better operating margins as site clicks were stronger although CPCs missed estimates
(GOOG strength led shares of FB, AMZN, LNKD, higher) follows surge in high beta Thursday
after NFLX results received favorably; Chinese Internet also up with GOOGL/and China market
strength overnight (BIDU, BABA, SINA, YOKU, SOHU, NTES)
Semiconductors; SOX index falls again in another volatile week, that saw INTC rise on earnings,
only to pare gains, equipment stocks fell (LRCX, KLAC, TER, AMAT) after INTC cut year cap-ex by
$1B, and TSM lowered guidance which hit ASML); earnings next week for several other names
(SWKS); AMD weak report/guidance overnight; FCS bounces after miss yesterday
Software & Hardware; SWI Q1 rev miss ($119M vs. $123M) & license rev miss ($39M vs. $44M)
and cut guidance; SLH lowered its year eps to $2.84-$3.08 vs. $3.26 estimate and revs as well;
Barclays had software preview as downgraded TNGO to Underweight, raise tgt/ests. on DATA,
QLIK, N, FLTX and ELLI, constructive on VMW and SAP; like CYBR on sell-off, but cautious on CA
Media/Telco movers; CVC downgraded at Jefferies citing recent appreciation in shares; OOMA
5M share IPO priced at $13.00; VIAB remains weak (estimates cut this week at Morgan citing
declining kid network ratings)
Interactive/video games; June video game sales at retail increased 18% YoY, as reported by NPD
last evening; Bank America upped tgts for ATVI to $30, EA to $74 & TTWO to $37 saying industry
software sales rebound to up 21% on strong Batman launch; also raised GME tgt to $56
Internet Security; new stock opened for trading today, as Rapid7 (RPD) 6.45M share IPO priced at
$16.00 (opened at $26.75), above its $13.00-$15.00 range; shares of CYBR, PANW, CUDA, FEYE,
CHKP, PFPT active
Comm Equipment/Services; RKUS upgraded to Buy at SunTrust citing positive channel checks
(raise tgt to $14); ERIC said North American carrier spending has bottomed (possibly good for
exposed names like JNPR, CSCO , GLW as well as optical players CIEN, FNSR, JDSU); TESS rises
after earnings/guidance

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