Closing Recap

Monday, July 20, 15

Index

Up/Down

Last

DJ Industrials

13.96

0.08%

18,100

S&P 500

1.61

0.08%

2,128

Nasdaq

8.72

0.17%

5,218

Russell 2000

-8.90

0.54%

1,260

Equity Market Recap

Major averages were little changed, slipping into the close, as major averages are trading at or
near fresh all-time highs, adding on to last weeks gains amid high earnings expectations (and no
fear in the market at all). Busy week of corporate results with over 450 companies reporting
(IBM, highlights tonights releases), while the Nasdaq Composite paced the gains today (after the
Nasdaq 100 surged 5.5% last week to 15-year highs). The gainers continue to be Technology,
Healthcare Discretionary, Financials and Staples, while commodity based sectors
Materials/Energy as well as defensive Utilities are lagging. The S&P 500 index advanced above its
May 21st closing record midday
Is big tech overextended with GOOGL up 29% in July, AMZN +11%, FB +10% and AAPL up 3%
(into earnings tomorrow night?). These 4 stocks AAPL ($747B), GOOGL ($468B), FB ($268B) and
AMZN ($220b) make up 31% of the market cap of the Nasdaq 100 - $1.7 trillion together CNBC
European stock markets advanced for the ninth straight session, extending their Greece-fueled
relief rally as the country looked set to repay loans to creditors. The Stoxx Europe 600 index
added 0.4% to 407.25, building on a 4.3% advance from last week. The weekly gain came as
Eurozone leaders reached an agreement with Greek Prime Minister Alexis Tsipras on tough
austerity measures needed for a third bailout package. The EU on Friday approved a bridge loan
of 7.16 billion euros ($7.77 billion) to Greece, aimed at helping Athens meet a 4.2 billion debt
payment to the ECB on Monday, as well as clear its arrears with the IMF.

Commodities
Oil prices fall; WTI crude for August delivery dropped below $50 per barrel for the first time since
April (traded low of $49.85 per barrel), but closed slightly above that level at $50.15 per, down
1.5%, or about 74c. The move lower comes amid another rout in commodity prices
Gold futures plunge to lowest levels in five-years (March 2010), while mining stocks (ABX, NEM)
fall to around decade lows; gold dropped 2.2% or -$25.10 to settle at $1,106.80 an ounce with
gold for immediate falling to $1,086.18 earlier before recovering some of those losses. Gold has
fallen out of favor as Federal Reserve Chair Janet Yellen prepares to raise U.S. interest rates this
year, strengthening the dollar and reducing demand for havens. A low inflation environment has
also decreased the asset as a hedge gold prices now down for 8 straight days!

Currencies
The dollar advanced vs. peers, weighing on sentiment for commodity prices (CRB Index was
lower, commodity index hit a 13-year low, dragged down by the slump in base metals and
energy). The dollar index (DXY) traded back above the 98 level, the first time since mid-April;
thought the euro was little changed at around 1.0831, and the yen slipped vs. the USD.
Expectations or a rate increase from the Fed in September, as well as better economic data
points over the last few weeks, have lifted the greenback.

Bond Market
Bond markets lose ground early, but pare losses and trade little changed most of the day amid
no major economic data, though Fed comments as St. Louis Fed boss Jim Bullard said the Fed
needs to get ahead of the inflation curve with a rate hike in September, and he puts the odds of
such a move at greater than 50% (Bullard is not a voter on the FOMC this year). The yield on the
10-yr was up as much as 5 bps to around 2.4% before fading.

Macro

Up/Down

Last

WTI Crude

-0.74

50.15

Brent

-0.45

56.65

Gold

-25.10

1,106.80

EUR/USD

0.0002

1.0831

JPY/USD

0.21

124.30

10-Year Note

0.023

2.371%

Sector News Breakdown

Consumer
Consumer Staples & Restaurants; CALM posted Q4 eps and revs below consensus saying sees egg
prices staying high until national laying hen flock can be replenished; PG cautious mention in
Barrons; DNKN downgraded to Underperform on valuation at CLSA; in beverages, BUD cut to
neutral at Nomura, while JPM is above consensus on both KO and DPS and said would not be
surprised if both companies delivered upside vs. their forecast
Housing & Building Products; home improvement retailers HD and LOW estimates cut to lows on
Street at Deutsche Bank citing 'weak industry data'- notes weakest trends since 1Q11; ENR shares
may be worth $45, with upside potential of $60, Barrons said; building products maker PGEM
upgraded to Buy at Deutsche Bank
Casino, Lodging & Leisure; regional gaming sector positive at Bank America saying June gross
gaming revs (GGR) (ex: Las Vegas Strip) is trending +2% on same-store basis, which would be 5th
month this year of positive same-store growth (raises ests. on PENN and BYD); WYNN positive
mention in Barrons saying shares may be worth $132; Wells Fargo cut July gaming rev ests.
Auto sector; retail auto parts company GPC declined after Q2 EPS and revs miss and cut its year
guidance for the year (AAP, AZO, ORLY mixed)
Energy
Oil names lagged as oil prices and commodity sectors were generally weaker once again; in
services, HAL Q2 eps beats by 15c on better revs as well; Wells Fargo upgraded the Large cap oil
services sector to overweight as sees signs of potentially lower oil prices for longer, growth
picking up in Middle East, and trends favoring technology (firm upgraded SLB to Outperform in
conjunction with call); BHI reports earnings tomorrow morning

 Solar sector; VSLR to be acquired by SUNE & TERP for about $2.2B including debt , or $16.50 per
share in cash and stock http://goo.gl/NjiwDK; SEDG gains after customer VSLR acquired (also sells
its inverters and power optimizers to the U.S. residential market's top two players, SCTY/Sunrun)
Coal sector; CNX sees Q2 prelim loss on lower commodity prices, sees achieving 2Q E&P, coal
production views; ACI announced a 1 for 10 reverse stock split
MLPs getting hit again today; lower oil, rising rates - hitting sector; the Alerian MLP Index (AMZ)
to fresh 52-week lows of 381 this morning; shares of LINE leading lower, but broad based
weakness CMLP, EXLP, ENLK, GMLP
Sand fracking; EMES upgraded to Neutral at RW Baird, but cut tgt to $27 from $33 (follows
weakness in group last week after cautious analyst calls HCLP, FMSA, SLCA fell)
Utilities; Macquarie said it prefers regulated utilities that dont need M&A as most impressed
with utilities offering above-average EPS/DPS growth with below-avg risks, without relying on
M&A like LNT, DTE, ES, CMS; TLN to acquire private power producer Mach Gen LLC for $1.18
billion to expand in the wholesale power markets. http://goo.gl/WN1Xb7
Financials
Large Cap banks; MS solid beat driven by strong trading results, which is unlike peers thus far
(eps beat by 6c on revs beat partially offset by higher expenses); JPM still has a shortfall of as
much as $12.5B on meeting capital rules set to be approved by the Federal Reserve on Monday.
Regional banks; FHN downgraded at Stephens due to limited upside; several analyst lower
numbers on CMA after earnings Friday; note earnings post-market in banking includes: BANR,
BBCN, BRO, BXS, RLI, WIBC, ZION
Insurance; PGR downgraded to Sell at Deutsche Bank on valuation; Macquarie upgraded
reinsurance stocks AHL, AGII and NAVG to Neutral saying with consolidation being the
predominant investment theme in the current marketplace and everyone in play we are
upgrading these names
Finance/Services; PYPL gains on first day of trading from split with EBAY (6 analyst Buy ratings)
Healthcare
Large Cap Pharma; BMY said its Opdivo study in Kidney Cancer was stopped early for
efficacy/met endpoint; HZNP guides Q2 revs to the high end of estimates and boosted year
outlook; anticipation of Alzheimer's data this week for LLY on sola & BIIB aducanumab results;
CRMD says not pursuing sale of company and starts search for new CEO
Biotech; EXEL shares surge as top-line results from a Phase 3 clinical trial, called METEOR, show
Cometriq (cabozantinib) reduced the risk of disease progression or death by 42% compared to
NVS Afinitor; BMRN said its Phase 3 Breast Cancer trial enrollment delayed to 1H16; SRPT rises
after Roth Capital says added data can keep it ahead of BioMarin; as a sector overall, Biotech
names remain at record highs (hi beat continues to lead IBB)
CAR-T/Gene therapy; CLLS initiated Buy and $50 target at Bank America; CLVS was upgraded and
added to Goldman Sachs Conviction Buy list based on pipeline progress and M&A optionality,
while the firm also upgraded FGEN to Buy
Equipment & Services; EXAS Q2 results were mixed on eps/revs; SYK applies to buy Muka Metal
Industrials & Materials
Metals & Mining; Gold miners continue to plummet as gold prices touch lowest levels in 5-years,
with sharp drop overnight, breaking below $1,100 in min flash crash; shares of GG, ABX, AUY,
NEM, AEM have been falling over the last month; materials and other mining/metals stocks
(steel, copper, aluminum, silver, iron ore) were all weaker

 Aerospace & Defense; LMT said it would buy Sikorsky Aircraft, the helicopter unit of UTX , for $9
billion, and would review the possible sale or spinoff of $6 billion in other information technology
and services businesses http://goo.gl/fqFOFq ; BA warned airlines that flying bulk shipments of
lithium batteries in the bellies of its passenger jets poses unacceptable fire hazards
Transports were mixed; airlines were mixed (lower oil helping); rail names bounce off earlier
lows, adding to gains last week as CSX/KSU earnings not as bad as feared; rental names URI and
HEES cut at Avondale; ODFL positive mention in Barrons saying shares look cheap and may rise
16%-20% to top $80 over next year
Tankers/Shippers; The Baltic Dry Index rose for a 12th straight session, now up over 90% from alltime lows in February (but 90% below its all-time high in May 2008); JP Morgan upgraded tankers
STNG and DHT to Overweight after raising its tanker forecasts for 2015 and 2016 (shares of FRO,
DSX, PRGN, EGLE, NM, SBLK, KEX, BALT have been active the last week or so)
Forest & Paper sector; Citi trimming 2Q EPS est. for select producers by an avg. of ~3% largely on
vol & FX headwinds and sees the most upside in self-help stories WRK & GPK, where they are
above consensus for 2015-16
Technology, Media & Telecom
Internet; AMZN upgraded at both Wedbush ($575 tgt) and Cowen ($565 tgt) on strong
fundamentals and significant growth opportunities; Barclays downgraded YELP to Equal Weight
and Z to Underweight from in SMid Internet sector with top ideas IACI, ATVI, and EA; EBAY
slipped after run-up Friday into split with PYPL; WIX new 52-week highs today after FBR positive
this morning, reit OP and $31 tgt; ETSY pares Fridays 30% gain after GOOGL mentioned the co as
beneficiary of changes the search giant has made
Semiconductors; SNDK upgraded to Neutral at Nomura on risk/reward; TXN upgraded to Buy at
UBS saying its model projects Q2 EPS/revs likely to beat; NEWP guided Q2 prelim EPS and sales
that fell well short of consensus estimates; INTC shares look cheap said Barrons; though the SOX
index was weaker, led by declines in MU, QRVO, CREE
Software & Hardware; GPRO and AMBA both up over 5% early ahead of GPRO earnings
tomorrow; FIT shares -6% on profit taking; UBS downgraded BRCD to Sell citing recent negative
pre-announcements from QLGC, STX, CUDA, tepid demand environment for storage OEMs EMC,
HP, NTAP, & weaker responses from recent surveys all point to an increasingly challenged
enterprise storage market; AAPL trades $132...just 8 days after came close to testing its 200 day
MA (traded lows of 119.22 on July 9th)...reports earnings tomorrow night
Media sector; few analysts take cautious route, as FOXA downgraded to Neutral at Macquarie
and tgt to $34 from $40 as finds it harder to push the stock in light of uncertainty around FY2016
earnings, potential for further investment, and a mixed view on its position in the evolving OTT
streaming landscape; Pivotal downgraded CBS and DISCA to Hold on valuation; Wells Fargo said
TWX is favorite name heading into the quarter; PSO said to weigh sales of Financial Times after
approaches/but may keep
Another day of weakness for 3d related stocks, with shares of DDD, SSYS, NJET, XONE all falling;
group weakness comes despite upgrade in space late last week from Piper (upped VJET) despite
caution after 3D printing survey

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