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Closing Recap 4:10PM EST

Wednesday, November 12, 14

Index

Up/Down

Last

DJ Industrials

-2.70

0.02%

17,612

S&P 500

-1.45

0.07%

2,038

Nasdaq

14.48

0.31%

4,675

Russell 2000

6.94

0.59%

1,186

Equity Market Recap


U.S. equity markets opened weaker, but managed to pare those losses throughout the session,
with major averages closing mixed. The modest losses by the S&P 500 and Dow Jones Industrials
snapped their 5 day and 6 day winning streaks respectively (DJ 6-day streak best of 2014). Oil
prices slumped again, with new multi-year lows, while the dollar rallied late day. Retailers rallied
despite weaker guidance from Macys (JCP reports after the close, with KSS, WMT and JWN
tomorrow), utilities biggest laggards, energy remains source of funds, and financials were mixed).
Tonight after the close, results in tech from CSCO and NTAP (major averages still trading at or
near record levels as every dip has been met with buying for 3-weeks). So with the Fed meeting
behind us (ECB/BOJ as well), the election behind us, and earnings season behind uswhats the
next potential catalyst to bring back market volatility? VIX at 13.32, down from 30 level less than
3-weeks ago
European stocks fell more than 1%, as the pound weakened after the Bank of England cut its
growth forecast. European equities were lead lower by financial names over the FX probe (bank
earnings in Italy weighed). Asia a different story, with most markets closing to the upside,
including the Shanghai Composite Index which climbed 1% to a three-year high before the start
of a trading link with Hong Kong

Commodities
Energy futures end lower (3-year lows for WTI crude); WTI crude fell about 1%, while Brent
dropped 2%, below $80 per barrel (first time since 2010); same concerns every day, with
inventory glut amid U.S. increased production, and as OPEC has not intervened by cutting
production. Front-month Brent dropped as low as $79.88 amid global supply-demand imbalance,
growing consensus OPEC is unlikely to curtail production at Nov. 27 meeting
Gold prices fell $3.90 to settle at $1,159.10 an ounce; note if gold were to close out the year
right now where it is, it would be looking at its first back-to-back yearly loss since 1997 (gold is
currently off almost 4% on the year amid a surging dollar and lack of inflation

Currencies
The dollar ended higher; the dollar index (DXY), which was flat early, spiked midday (rising to
87.89 high, up 0.32), after holding around the 87.50 level earlier; dollar traded above 116 vs. the
yen yesterday, the first time since October 2007, but has pared gains (back down to 115.60) as
now some debate on sales tax increase/early elections; the euro was little changed earlier,
faltered on the day, moving near session lows late; the British Pound fell to 14 month lows after
the BOE signaled the first rise in rates wont come until the second half of next year, surprising
currency investors who were banking on a hike in the second quarter ($1.5786)

Bond Market
Treasury markets were active early (after being closed yesterday for Veterans Day Holiday);
bonds stronger initially amid first sign of weakness in equities in more than a week, but as
equities rallied, bonds sold off, with yield on the 10-yr trading back prior (2.36%). The U.S.
Treasury auctioned $24B in 10-year notes at yield of 2.365% (in-line with level prior to auction),
with bid-to-cover at 2.52 (in-line with prior auction but down from 2.75 over last 4); indirect
bidders awarded 44.7% of auction (also in-line with prior)

Other Interesting tidbits


Europes Rosetta spacecraft today landed the first ever probe on a comet, the culmination of a
decade-long mission to the icy body thats currently between the orbits of Mars and Jupiter
http://goo.gl/Wb8suJ

Macro

Up/Down

Last

WTI Crude

-0.76

77.18

Brent

-1.63

80.04

Gold

-3.90

1,159.10

EUR/USD

-0.049

1.2426

JPY/USD

-0.17

115.61

+0.004

2.364%

10-Year Note

Sector News Breakdown


Consumer
Retailers strong despite weaker Macys results (ahead of JCP) shares of JWN, KSS, DDS rise); M
Q3 eps beat/revs fall short of views/cuts year eps view to $4.25-$4.35 from $4.40-$4.50 and
lowers comp year sales view; AEO raises Q3 eps view to 22c from prior 17c-19c (est. 18c), while
Q3 comps down (-5%), in-line; FOSL Q3 results top views/announces $1B buyback, and narrows
year outlook; Burberry Group said negative currency movements led to a drop in half-year profit,
but doesn't expect a material impact on its second-half results if levels hold
Housing stocks pare recent gains (up last 2 days on earnings/positive analyst comments); BZH
latest builder to report earnings (Q4 revs top views); DHI was cut to neutral at Sterne (follows
better results yesterday) LEN, KBH, PHM, TOL mixed
Staples sector; SJM Q2 eps misses citing volume declines in retail coffee segment/lowers year
EPS and sales outlook; PF Q3 results mostly in-line on weaker gross margins, but narrowed year
eps view; FLO Q3 in-line, but cuts forecast for year noting rivals cut prices to gain volume
Lodging/Leisure/Gaming; SEAS shares fell as Q3 eps/revs miss consensus on lower adjusted
Ebitda YoY ($209M vs. $254M) amid weak attendance; in gaming, CZR and key senior creditors
have worked out an agreement on an outline for a debt restructuring plan that includes a
prearranged bankruptcy

Energy
Energy stocks mixed, as oil prices remain depressed
Solar stocks gave up early gains; U.S. and China announced a deal on climate change yesterday,
with China committing clean energy sources, including solar energy and windmills, would account
for 20% of its total energy production by 2030 (FSLR, YGE, TSL, SPWR active today); CSIQ
reported Q3 revs/eps above consensus (but shares reversed)
Alternative energy; PLUG Q3 EPS/revs miss, which weighs on other fuel-cell stocks (FCEL, BLDP)
Utility sector underperforms, down more than 1.5% today, but note the group up over 10% the
last 3-months (and just off record highs); shares of FE, EXC, WEC, PEG all down over 2% today
Coal stocks gain on the day, led by strength in BTU (outperformer); group has been relatively
strong since the election last week, as Republican Senate seen as more coal friendly regarding
regulation; shares of ANR, ACI, CNX, WLT rose
Financials
M&A news; BBT to acquire SUSQ in a cash and stock transaction for total consideration valued at
approximately $2.5 billion, with SUSQ holders to get $13.50 per share http://goo.gl/GYxZDP
Banking stocks under pressure; Regulators in the U.S., Britain and Switzerland ordered five banks
to pay about $3.3 billion in the first wave of penalties in FX manipulation probe; UBS to pay
$800M, C $668M, JPM $662M, RBS fined about $634M and HBC $618M; BCS, which had been in
settlement talks, said it wasnt ready for a deal http://goo.gl/V20oJn
Mortgage services stocks remain in the news; ASPS falls as discontinuing Lender Placed Insurance
(LPI) brokerage line of business given uncertainties with industry-wide litigation and the
regulatory environment. (group has fallen on weakness from OCNNSM, WAC still lower)
Other stories; BBSI files form to delay 10-Q
Healthcare
ACT in talks to acquire AGN for over $60B, seeking to pay about $200 http://goo.gl/C0mqrT
Biotech stocks; ICPT falls as much as 12% (Leerink said, citing two physicians, treatment
community desperate for a drug to treat NASH, remains to be seen if ICPTs OCA has what it
takes to gain approval on an accelerated basis); overall biotech down slightly
In animal health space; ZTS late yesterday, WSJ reported Bill Ackman took 10% stake
http://goo.gl/BkEXbQ ; PAHC, rises after boosting 2015 EPS/sales forecast after Q1 results (also
up on the ZTS sympathy)
Movers on news; AMPE said primary/secondary results from Strut study available on Q115;
OREX extends gains for a third day after earnings beat; DRRX rises as says FDA may need only
one more Posidur trial; ACHN rises, as emerging hepatitis C portfolio is attracting attention as
results from clinical assets have been encouraging (Bloomberg)
Industrials & Materials
Transports little changed (just off record highs); rails rise early on CP comments as CEO said at a
conference it sees a case for rail consolidation, yet co. has moved away from merger discussions
since there wasnt receptivity to merger talks (CSX/NSC up earlier)
Airline stocks fall; group has been an outperformer, helped by better monthly industry data
points and lower energy prices; JBLU downgraded to neutral at JP Morgan today on valuation
ahead of high expectations into the airliner's investor day next Wednesday (group seeing some
profit taking with AAL, UAL, DAL lower)
Industrial movers; DHR upgraded at FBR Capital to buy; ROK Q4 mixed report (better eps/revs
light); CAT reaffirmed guidance at sell-side conference; GWW
Chemicals/coatings; DOW adds $5B to share buyback and increases dividend by 5c to 42c; LYB
authorizes interim dividend of 70c; AXTA 50M share IPO priced at $19.50 per share

Technology, Media & Telecom


Internet; TWTR bounced after holding its first analyst day today; YHOO to acquire programmatic
video ad platform Brightroll for $640M http://goo.gl/5RU9Ae; separately, Reuters reported at
least two top-10 YHOO shareholders are making a direct plea to AOL CEO Tim Armstrong to
explore a merger and run the combined company http://goo.gl/nfG0MN ; BABA (traded new
record high), GRPN (8-month high); GOOGLs YouTube unveiled music streaming service
Telecom/networkers; group was under pressure recently on comments by AT&T saying it was
cutting cap-ex today T said it may suspend some fiber projects until there is more net neutrality
clarity (ADTN falls); AMX fell after AT&T the company doesn't need to acquire AMX assets in
order to be successful in Mexico http://goo.gl/Vi9m2D
Media/cable; Bernstein downgraded shares of VIAB (reports earnings tomorrow) and DISCA to
market perform; in cable, group gets little bounce after two-days of selling pressure regarding
net neutrality
Semiconductors; MLNX delayed its 10-Q filing and will restate financials for 2011-13 amid
accounting errors; NVDA fell after Samsung Electronics accused the co of infringing on a few of
its chip-related patents and for making false claims about the Tegra; SWKS announces $300M
share buyback
Movers on earnings; ADT Q4 eps/revs both top consensus; CSCO and NTAP to report earnings
after the close; DGII said revenue margin will be impacted by fire, for at least the 1st quarter

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