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Closing Recap – 4:10PM EST

Monday, November 10, 14

Index

Up/Down

%

Last

DJ Industrials

39.81

0.23%

17,613

S&P 500

6.34

0.31%

2,038

Nasdaq

19.08

0.41%

4,651

Russell 2000

3.83

0.33%

1,177

Equity Market Recap
 Major averages start the week where they left off…higher…as the S&P 500, DJ Industrials, DJ
Transports all posted new record highs, and the NASDAQ trades to new 52-week high (still at
highest levels since 2000). There were no major economic data points, earnings pick up later this
week, and news flow generally quiet (light volumes) – with commodity prices falling (gold/oil), as
the dollar resumed its upward momentum. A few sectors stood out, with cable (TWC/CMCSA)
falling after President Obama urged the FCC for tougher Internet rules/saying high speed service
should be regulated, while Transports soared to new highs, led by airlines/rails. The Dow
Industrials posted its 5th consecutive daily gain, the Russell 2000 Index trades to 4-month highs;
S&P 4th day of gains – another “risk on” day for Wall Street (VIX falls to 12.47)
 In Asia overnight, after a date was set for an exchange link between Hong Kong and Shanghai (up
2% overnight). China said the Shanghai-Hong Kong exchange link will debut in a week, giving
foreign investors unprecedented access to its $4.2 trillion stock market. The program allowing a
net 23.5 billion yuan ($3.8 billion) of daily cross-border purchases will begin 11/17
 The Obama administration said it expects up to 9.9 million people to have coverage through the
Affordable Care Act’s insurance exchanges in 2015, millions fewer than outside experts
predicted. The exchanges, which reopen Saturday for enrollment, previously were expected to
enroll 13 million people for 2015, according to a projection by the Congressional Budget Office

Commodities
 Energy prices fall; it was another volatile session for energy prices, as WTI crude ended at $77.40
per barrel (down 1.6%) after rising just shy of $80 earlier. Another rally fizzled amid a stronger
dollar and after OPEC signaled, yet again, that it would not cut production to boost prices. Brent
crude dropped over 1% after rising as high as $84.97 a barrel. OPEC Secretary General Abdullah
al-Badri told markets not to “panic” over low oil prices at an industry conference in Abu Dhabi,
according to reports (note OPEC meeting upcoming). Oil had gotten a boost earlier from news of
renewed fighting in the Ukraine-Russia conflict and positive Chinese economic data
 The national average for gasoline prices dropped to $2.93 a gallon; natural gas prices pull back
from highs of $4.54 mln btu, to trade down -0.15 to $4.26 mln btu (had spiked from lows of $3.54
mln btu on 10/27 on cold weather forecasts)

 Gold prices fell $10, or 0.9% to $1,159.80 an ounce; news of a significant new Russian incursion
into Ukraine faded over the weekend without significant expansion. With no real notable followthrough besides intensified fighting, and no threat to the dollar, the gold downtrend resumed
(the rising dollar once again took its toll on commodity prices today)

Currencies
 The dollar bounced off overnight lows to finish higher against the yen and euro; the dollar index
(DXY) rose 0.12 to 87.763 on the day (4-year highs still), up against the yen to 114.85 (ended near
highs of day, while the euro fell -0.2%, to $1.2427 (the move higher today follows a 2% jump last
week against the yen and 0.6% vs. the euro). No major economic data points today for currencies
to trade with

Bond Market
 Slow bond market sell-off today, as yields, which opened to the downside, quietly inched higher
throughout the afternoon, with the 10-yr yield touched 2.35% (was below 2.3% early)

Macro

Up/Down

Last

WTI Crude

-1.25

77.40

Brent

-1.05

82.34

Gold

-10.00

1,159.80

EUR/USD

-0.0031

1.2422

JPY/USD

0.22

114.84

+0.046

2.356%

10-Year Note

Sector News Breakdown
Consumer
 Restaurant movers; MCD Oct Global comp store sales decline, but less than expected, with global
falling (-0.5%) vs. est. (-2.2%), while U.S., Europe and Asia comps all falling, but less than views
 Housing stocks higher; TOL Q4 revs $1.35B vs. est. $1.32B while average price of homes went up;
PHM upgraded to buy at Bank America as checks indicate order growth is at a positive inflection
point; group mostly higher, with KBH, LEN also higher
 Staples; DF Q3 eps loss smaller than views; and guides year loss better than Street forecasts;
WWAV Q4 eps/rev above views, and boosts the low end of its year eps views by 1c; BDBD
upgraded by one analyst
 Retail; U.S. Retail Softlines sector downgraded to Negative at Barclays saying weakness in the
sector is likely to persist for several years…sees significant risk to earnings estimates for specialty
apparel retailers this holiday season….cuts AEO to EW from OW; TGT upgraded to buy at Stifel;
ANF cut to neutral at Janney and Oppenheimer; JCP cautious mention in Barron’s
Energy
 Energy stocks volatile again, higher early as oil prices bounced, but again the rally failed, with
stock prices declining by day’s end; very few specific oil related news stories, more momentum
driven of late based on reaction in commodity markets (names in service, drilling, E&P and
equipment have been among the biggest laggards); CLR CEO ordered to pay $995M in divorce
 Coal stocks fell (had been up 3-days); (ACI, ANR, BTU, CNX, WLT had bounced following the
Republican victory in last week's congressional elections, raising coal industry hopes for a rollback
of the Obama administration’s plan to cut emissions from coal-fired power plants said BTU CEO
 MLP’s; Bank America noted for October 2014, the Alerian MLP Index (AMZ) underperformed the
S&P 500 by 7.0% on a total return basis, but firm expects a low-double-digit total return due to
some volatility in interest rates and commodity prices for 2014

Financials
 Another sector with now a lot of movement on news outside of a couple individual stock stories;
major banks (C, MS, JPM, GS little changed most of the day); LUK positive
 Asset managers; EV downgraded by two firms noting after the run-up in shares Friday post SEC
approval of EV's exchange traded managed funds (ETMF) structure; JNS said saw over $1B in inflows
after Gross hiring

 Mortgage services; WAC cut to neutral at Sterne Agee (tgt to $21), but Morgan Stanley said
downside risk more-than priced into shares at 0.6x book value, even with 3Q miss; SGM
downgraded at FBR Capital (also weakness in shares of AGM, TREE)
 Insurance stocks mixed (names like LNC at 52-week highs, PRU bounces after pullback last week
post earnings; GNW weakness continues as now sees added capital required to meet PMIER
$500-$700M (saw $450M-$550M)
Healthcare
 Relatively quiet overall for healthcare outside of a few select biotech stories; seeing hospitals
(UHS, CYH, THC, HCA) recovering after Friday’s pullback on reports the U.S. Supreme Court will
rule on a new challenge to the Affordable Care Act that examines whether subsidies offered
under the law are legal
 Movers on analyst calls; ICPT tgt cut to $125 at FBR Capital; XOMA downgraded at Ladenburg;
BMRN upgraded to buy with $104 tgt at Goldman Sachs; KPTI upgraded at Oppenheimer on ASH
abstract data ($53 tgt); MYGN initiated with Underweight at Morgan Stanley; TKMR falls after
Glaucus rates strong sell and $7-$10 tgt)
 Movers on news; RDHL said FDA grants QIDP Fast-Track Designation to its Phase III H. pylori Drug
RHB-105; SAGE said its drug meets primary/secondary targets in Epilepticus study; DNDN files for
Chapter 11 bankruptcy; GILD rises after MRK will not move forward with its 4-week Hep C
treatment (also lifts ACHN, RGLS, ABBV early); ARQL Tivantinib works in prostate cancer/fails
another test
Industrials & Materials
 Ag & Machinery; ag stocks were little changed despite the USDA forecasting corn at 173.4
bushels per acre below 174.2 last month and est. of about 175.2 (ending stocks 2B bushel vs. avg
~2.2B bushel); soybeans estimated at 3.958B bushels from 3.927B last month (despite the bullish
data, little movement in ag related names DE, POT, MOS on the data
 Transports reach another record higher (up more than 1% midday), led by strength in rails; NSC
upgraded to Overweight at Morgan Stanley citing potential industry consolidation that supports
attractive risk/reward, and accelerating core pricing gains; almost all of the 20 components in the
DJ Transport Index ended higher – airlines also led the way (JBLU, ALK, LUV) on monthly data
 Airlines; AAL said RPM’s rose 0.2%, total capacity was 21.8 billion available seat miles (ASMs), up
0.5% and total passenger load factor was 82.2% (all YoY); LUV said Oct PRASM up 3%-4%,
Capacity unchanged and traffic was up 4.4%
 Industrials; GWW cut to sell from hold at Deutsche Bank as pricing pressures/competition
squeeze margins; machinery/equipment names advanced with broad market rally
 Metals & Mining; Gold mining stocks back under pressure after jumping on Friday; shares of
NEM, ABX, GG, KGC, AUY among losers on the day; in steel sector, Hebei's APEC Air Quality
Control Department issued an Emergent Notice on APEC Air Quality Control Measures, requiring
suspension of 100% of steel mills and cement plants (11/7-11/11)…would reduce crude steel
output by 2mnt in total; some names rallied early on better China data, but end mixed
 Paper & Forest names; RYN falls after cutting dividend and restating earnings; Goldman Sachs
says it is building in an MLP premium into its share price targets for containerboard stocks it
covers, to reflect recent commentary from IP, RKT, and PKG

Technology, Media & Telecom
 Cable/Telco companies fell; President Obama urges FCC to enact “strongest possible rules” to
protect net neutrality (saw weakness in cable stocks TWC, CHTR, CMCSA on headlines,
companies that sell broadband services). VZ said Obama’s plan would threaten “great harm” to
Internet. Obama asked for no blocking of websites, no slowing of Internet content, and no deals
that let companies pay for faster delivery of their content
 Telecom equipment stocks fall after AT&T (T) cut 2015 capex forecast by 14% to ~$18Bb, citing
efficiencies from the better-than-expected progress of its network upgrade (shares of ADTN,
JNPR, CIEN, ALU, BSFT, ERIC weaker early) - T reiterated forecast for 2014 capex in $21b range
 Internets; BABA rises (CNBC noted now bigger than 494 of the S&P 500 names) - has set internal
target of 50b yuan (~$8.2B) for this year for sales on “Singles Day” on 11/11; says on website over
$1b in goods sold in first 20 minutes of Singles Day; BIDU jumps 4% on reports Dianxin mobile
app unit is partnering with Chinese online retailer LITB
 Software/hardware; GPRO files to sell $800M in common stock for holders; FEYE added/AKAM
removed from JPM focus list; DDD rises after earnings/guidance; GOGO Q3 eps loss wider than
forecasts on in-line revs (reaffirms year views) – stock later recovers losses on reports AT&T has
decided not to get into inflight connectivity, RunwayGirl Network says, citing co.
 Telco movers; PT rises as the daughter of Angola’s President made a $1.5B bid to acquire co
http://goo.gl/4Zlk4d; CMCM rises one earnings

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