Closing Recap 4:05PM EST

Friday, November 21, 14

Index

Up/Down

Last

DJ Industrials

90.68

0.51%

17,809

S&P 500

10.69

0.52%

2,063

Nasdaq

11.10

0.24%

4,712

Russell 2000

3.50

0.30%

1,174

Equity Market Recap

It was another record setting day again on Wall Street, as both the S&P 500 and the Dow Jones
Industrial Average posted solid gains after China's surprise interest rate cut and remarks from
ECB President Mario Draghi on additional stimulus lifting major averages globally. Markets
ended higher for a 5th consecutive week, with CNBC noting it was the best 5-week rally in the S&P
since 2009. It was a broad sector rally given the news out of Europe and Asia, but markets faded
from the open, closing off the highs. Emerging markets jumped, led by Brazil, with its ETF (EWZ)
up as much as 7%, led by shares of PBR as stock rebounds. European markets ended strong, rising
more than 2.5% for the DAX and Cac 40

Macro Stories
Mario Draghi strengthened his stimulus pledge for the euro area by saying the European Central
Bank cant hold back. We will do what we must to raise inflation and inflation expectations as
fast as possible, as our price-stability mandate requires.
China's central bank has cut interest rates; China cut its one-year deposit rate by 0.25%, and its
one-year loan rate by 0.4% point; the People's Bank of China also said it will allow more flexibility
in deposit rates

Commodities
Energy futures rise; energy markets helped by China rate cut, but two potential market moving
catalysts in the next week are what investors are watching. The 11/24 deadline for Iran nuclear
agreement is the first, while the 11/27 OPEC meeting in Vienna remains the other. Brent ended
back above $80 mark, while WTI climbed as well. Natural gas prices fell about 5% to $4.269 mln
amid a warmer front moving in
Precious metals ended higher, with gold rising 0.6%, or $6.80 to close at $1,197.70 an ounce
(high $1,207.60 and low $1,186.10 an ounce), snapping a 2-day losing streak following Chinas
surprise move of cutting its interest rates (by 0.4% to 5.6%) for the first time in more than two
years to help spur its economy. The move gave a lift to commodity prices in general, though a
surging US dollar and additional stimulus talk by the ECB limited gains. Silver jumped 1.6% to
$16.40 an ounce (up 0.2% for week); gold ended the week higher by 1%

Currencies
The dollar surged again, (DXY up 0.68 to 88.279), scaling a high of 88.39 intraday and a low of
87.45 (note the high level in June 2010 was 88.708, if that gets taken out, next major resistance
level 90, a level not seen since 2006). The euro fell against the dollar to low of 1.2375 vs. prior
day close of 1.2539 (traded as high as 1.2568 prior to Draghi comments to offer more stimulus
given lower inflation). The euro has been under pressure since May as the ECB moved to negative
deposit rates, with its economy remaining weak while the US economy has continued to improve

Bond Market
Treasury markets slowly advanced throughout the day as equities faded from opening highs;
bond action in Europe much more interesting, as European bonds surged on the Draghi
comments, sending Spanish, Irish, Italy 10-year yields to record lows10-year yield remains in
2.30% to 2.38% range, continuing to hold (for at least 3-weeks now)

Macro

Up/Down

Last

WTI Crude

0.66

76.51

Brent

0.89

80.22

Gold

6.80

1,197.70

EUR/USD

-0.0152

1.2387

JPY/USD

-0.48

117.73

10-Year Note

-0.032

2.313%

Sector News Breakdown

Consumer
Retail movers on earnings; FL fell as sees Q4 total sales growth below comp (Q3 was better);
HIBB raised its year profit outlook after Q3 results topped views; GPS lowered its FY15 operating
margin/lowers profit forecast as sales drop; GME missed FQ3 expectations by a wide margin and
cut its outlook; ANN Q3 profit drops 27%, but top estimates; ROST Q3 eps/comp beat; DDS
downgraded by one firm, giving up some of yesterday gains
Staples; TFM Q3 eps missed/cut the top end of its year outlook (did not affect other grocers);
vitamin company NGVC jumps on earnings (upgraded by one analyst) lifted shares of GNC, VSI;
YUM authorizes $1B stock buyback
Homebuilders MDC, KBH, DHI, upgraded at Raymond James based on historical seasonal sector
strength, but still has concerns regarding relative valuations and land quality; building product
names get a lift (OC, MHK) after housing data and better reports from HD and LOW this week
Gun makers RGR and SWHC tgts cut and reiterate underweights at KeyBanc saying channel work
makes them incrementally more cautious on the firearms industry
Autos; HTZ named John Tague as President & CEO (street mixed on hire/Scott Thompson other)
Much retail talk ahead of next weeks Black Friday and Cyber Monday upcoming
Lodging & Gaming stocks recover after yesterday losses; shares of WYNN (fell yesterday on
reports of IRS probe), MGM, LVS, CZR, MPEL all rising; Lodging stocks jump, led by shares of HOT
(sold Sheraton hotel in Australia for A$463M)

Energy
The energy sector benefitting from the China rate cut overnight; lifting energy in general, while
also lifting coal stocks (OPEC meeting next week a focus for energy markets most definitely)
Refiners positive headlines after Bloomberg reported the U.S. Environmental Protection Agency
today will abandon its proposed rule setting renewable-fuel targets for 2014 (TSO, VLO,
HFC,MPC, PSX); separately in space, WNR to replace BYI in S&P MidCap 400 Index
MLPs rallied, recovering after some losses yesterday; NGLS (which was cut at Wells Fargo
yesterday), bounces; ARLP gets a lift on report the EPA plans to drop 2014 renewable fuel
quotas; GMLP, NGL lead in index; the AMZ Index rises on the day, bouncing sharply from its Oct
(and 52-week) low of around 440 level (trades 527.50 hi today)
Solar SCTY/SUNE both rise after being selected by WMT for massive solar project; various Asian
solar names up with China rally (YGE, JKS)
Financials
Financials up early, as gains faded with market, while insurance stocks lead overall, with biggest
gains in MET, LNC, GNW
Asset managers at Bernstein; BLK upgraded to Outperform saying organic growth potential is
underappreciated in valuation, while cutting BEN to Market Perform saying fundamental
momentum has waned, and key debates seem unlikely to be resolved in this environment; JNS
rises a second day after news yesterday Soros Quantum to invest $500M with Bill Gross
Healthcare
Healthcare sector very quiet; little news in space with large cap biotech mixed, Pharma generally
higher (BMY, LLY), and managed care recovers slightly from recent selling pressure (AET which
also boosted dividend and announced $1B buyback); hospitals also recovering after recent
weakness tied to immigration policy by President Obama (Leerink had suggested the group would
be hurt if the president provided amnesty to illegals)
Analyst changes; CYBX downgraded to neutral at Sterne Agee; CERN upgraded to Outperform at
Cowen; ABC downgraded at FBR on valuation; CYH upgraded to Outperform at Raymond James;
STJ upgraded to Outperform at Cowen; WX was cut at Jefferies
Industrials & Materials
Metals & Miners; group among top beneficiaries after Chinas Central bank cut rates overnight;
shares of beaten up sectors such as iron ore names (VALE, CLF, RIO), steel stocks (X, NUE, STLD),
industrial metals (AA, FCX), coal (WLT, ANR, CNX), gold miners (ABX, GG, NEM, KGC) all rise
early on hopes rate cuts will spur economy
Transports rise (just off all-time highs early before fading); FDX rises as Bernstein said it expects
to beat Q2 by 8% and raise guidance, creating s-t buying oppty; freight led group early (CNW),
while airlines lagged (JBLU)
Railcars rise; TRN upgraded to buy at Longbow as believes much of the negative news mainly
crude oil price decline and ET-Plus guard rail litigation has likely been discounted into the
shares (raises tgt to $45); note shares of GBX, ARII, RAIL higher as well
Chemicals; DOW reached pact with Third Point, agreeing to add four new independent directors,
avoiding a proxy fight; BERY Q4 EPS/revs missed views (but stock bounced)
Aerospace sector mostly better (LMT upgraded at UBS today); while WAIR falls as Q4 eps misses
est. and guides FY15 eps/revs below forecasts/CFO to retire

Technology, Media & Telecom

Some top movers on earnings; ADSK earnings top view/raises outlook; ARUN Q1 beat but
guidance weighs on shares says sees charges in Q2 (one analyst downgrade)
Software/data analytics stocks rise; SPLK shares jump after Q3 eps/revs topping views and
customer additions that set a 3Q record/software license up 41%/raises year revenue guidance
(shares of DATA, QLIK, GWRE, WDAY moving in sympathy); MSFT lagged software
Telco giants VZ and T with a rough week given the ongoing spectrum auction, as the FCC AWS-3
auction closed round 23 yesterday with bids up 4% to $29.9B (the rise in prices see as negative
for telecom carriers that are spending more than expected); seen as positive for independent
spectrum owners like DISH as well as towers AMT, CCI, SBAC
Payment security stocks; following Obamas Executive Order, Pacific Crest recommended buying
IMPV, NXPI, PANW, PAY, VNTV on payment security modernization, model implication
sensitivity analysis & EMV Overview
Analyst changes; ZBRA upgraded to Overweight at JP Morgan as now sees favorable risk/reward
Internet; strength in Chinese Internet names (on China rate cut strength in general), lifting group
(BIDU, SINA rise); YOKU awarded MVNO license in China; large cap Internet mixed today; AMZN
said to plan new streaming video service; EBAY downgraded at Evercore
Media movers; shares of LGF declined on news of the new Hunger Games film bringing in $17M
in its opening last night which is under the $25M the previous Hunger Games film; CBS agreed
to a 5-day extension of its expiring contract with DISH (with negotiations ongoing)
Semis; group up slightly but at 13-year highs; various analysts mixed after INTC analyst day (one
analyst downgrade); MRVL rallies despite October revenues well below consensus, largely on
disappointing mobile & wireless; flash names MU and SNDK both higher

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