Closing Recap 4:10PM EST

Monday, January 26, 15

Index

Up/Down

Last

DJ Industrials

6.10

0.03%

17,678

S&P 500

5.24

0.26%

2,057

Nasdaq

13.88

0.29%

4,771

Russell 2000

11.04

0.99%

1,200

Equity Market Recap

Equity markets ended little changed on one of the least volatile days of the New Year, as the
Nasdaq Composite makes it 6-consecutive days of gains ahead of a busy week of earnings!
Several stories for investors to focus on today, with all carrying weight: 1) The Greek election
surprise overnight, 2) the expected snowstorm long the Northeast, which has already shut
school, banks, road, mass transit in NY, NJ for Tuesday, 3) oil prices fall further, 4) dollar
maintains strength (11-year highs), 5) M&A activity busy today (MWV/RKTETP/RGPAXS/PRE),
6) earnings, earnings and more earnings this weekbut volumes dried up late, as traders went
home early to beat the snow!
In Greece, anti-austerity party Syriza emerging as the clear winner in Sundays Greek general
election and its leader Alexis Tsipras promising to put an end to the harsh austerity measures
agreed as part of the countrys bailout (raising fears Greece could be forced from the EuroZone).
Syriza fell two-seats short of Parliament majority; wins popular vote by 26%-28% over new Dem
In Europe/Asia; France's CAC-40 Index ended at its highest level since June 2008; S&P lowered
Russia credit rating to junk status, with a negative outlook (Russia markets down sharply)

Commodities
Energy futures end lower; WTI crude finished lower by 44c, or nearly 1% to settle at $45.15 per
barrel. Oil futures reversed lower despite the Secretary-General of OPEC saying he expected the
market to bottom out around current levels. "Now the prices are around $45-$55 and I think
maybe they reached the bottom and will see some rebound very soon," Abdullah al-Badri,
Secretary-General of OPEC said. Brent prices also ended lower
Precious metals fall, as gold ends lower by $13.20, or 1% to settle at $1,279.40 an ounce
following Greek elections. Last week, gold surged to 5-month high after the ECB announced plans
to increase stimulus to revive inflation

Currencies
The dollar index (DXY) was little changed as continues to hold around best levels since 2003
(94.77 level). The euro, which traded as low as 1.1098 overnight following Greek election results,
recovered, trading higher vs. most counterparts (1.1263 last); dollar at highs against yen

Bond Market
Bond markets were little changed, slightly weaker early (but really not much change) with no
major economic data to focus on; the yield on the 10-yr remains depressed, still in low 1.8%
range, while the 30-yr yield holds around 2.4%, though shorter term yields little more bounce
The Treasury announced it was delaying its 2-5 year bond auctions due to the weather

Economic Data
Dallas Fed Manufacturing Data reported at -4.4 vs. est. 3.5 for January; other survey measures
also reflected sluggish activity during the month as the capacity utilization index fell to 5.1, its
lowest reading in five months; shipments index plunged from 20.8 to 6, and new orders index
moved down from 2.7 to -7.7, registering its first negative reading since April 2013
The Congressional Budget Office (CBO) sees U.S. 2015 deficit at $468B vs. Aug. Estimate of
$469B; sees 2.9% GDP growth this year vs 3.4% in Aug. estimate, according to annual budget and
economic outlook; sees jobless rate avg. of 5.5% this year vs 5.9% seen in Aug.

Macro

Up/Down

Last

WTI Crude

-0.44

45.15

Brent

-0.51

48.28

Gold

-13.20

1,279.40

EUR/USD

0.0062

1.1266

JPY/USD

0.68

118.46

10-Year Note

0.01

1.825%

Sector News Breakdown

Consumer
Homebuilders were higher; DHI Q1 eps beats estimates (included items) as net sales orders up
35% to 7,370 (said backlog up 21% YoY to 7,973 homes) better than LEN/KBH comments last
week; NVR however misses Q3 EPS and revs by wider margin (builders and material stocks have
been active on earnings the last week)
Consumer Staples; the NY Post reported private equity firm TPG Capital seriously considered an
acquisition of HLF last year/is said to currently be looking at buying AVP and also though about
buying NUS http://goo.gl/KnSIsv ; POST said it would acquire privately held rival MOM Brands Co
for about $1.15 billion in cash and stock http://goo.gl/3N6ciJ
Autos; TSLA said to introduce dual-motor version of Model S in China in coming months, targets
early 2016 for release of Model X SUV, WSJ reported http://goo.gl/WKmR9s ; MNRO upgraded to
neutral at SunTrust based on its belief that tariffs are proving to be more benign than expected;
JP Morgan upgrades auto parts supplier AXL to Overweight on fuel prices and K2XX upside;
KeyBanc remains bullish on outlook for automotive retailers (raised tgts on ABG, LAD, PAG)
Gaming & Leisure; MPEL upgraded to Buy at Union Gaming (upgraded Macau casino group on
potential rally); Macau 2015 Gross Gaming Revenue est. cut to -7% from up 3% at Jefferies (LVS,
WYNN, MGM); Bank America says expect Q4 beats for PENN, BYD, PNK and in-line for GLPI
In lodging, CHSP boosts dividend, but misses the mid-point of its AFFO estimate; in leisure, toy
maker MAT guides Q4 EPS/revs below views/CEO & Chairman Stockton resigns; WWE received
an analyst upgrade
Retailers; BBBY & PIR both upgraded at Oppenheimer based on its belief that lower gas prices
and an improved U.S. employment situation should boost consumer spending (raises tgts); also
maintains Outperform ratings on HD, LOW, KMX, GME, and TIF; FDO said sales rose in December

Energy
Oil stocks were among the best performers in relatively quiet trade; not a lot in regards to
news/earnings for oil stocks today
MLP sector; ETP and RGP entered into a definitive merger agreement valued at about $18B,
including the assumption of net debt (RGP holders will receive 0.4066 of an ETP unit and 32c in
cash for each Regency unit they own http://goo.gl/avBM3C ; ENBL boosted quarterly distribution
by 2.1% to $0.30875 per unit; CPLP downgraded at Bank America; VLP boosted its Q4 cash
distribution 11% to $0.266 per unit; SEMG rises after activist hedge fund Sandler Asset asked the
pipeline operator to explore strategic alternatives including a sale http://goo.gl/NC9yU2
Utility stocks were slightly lower into the expected powerful snowstorm on the Northeast, on
fears of power outages (PEG, ED, NU, etc. lower)
Financials
Mortgage services active; shares of OCN jumped after settling with California late Friday; the firm
receives neither a suspension from doing business/nor a massive fine, paying just $2.5M and gets
more extensive State oversight of its operation in order to come to terms with California.
Separately, OCN denies any basis for default under Trust Agreements in response to Gibbs &
Bruns Jan. 23 letter, saying allegations baseless. (shares of HLSS, ASPS, AAMC, NSM move)
Insurance sector; AXS agreed to merge with PRE, combining two Bermuda-based reinsurers with
a total market value of almost $11 billion/PRE holders will own 51.6% of the new company after
the merger of equals http://goo.gl/8UBh6z
REITs; RPAI and RPT cut to hold at Deutsche Bank on valuation firm noted REITs up ~8% YTD,
significantly outperforming S&P 500; Deutsche naturally less bullish heading 4Q14 earnings,
wouldnt be surprised to see profit-taking
Banks; STT downgraded to underperform at Bernstein saying estimates need to come down given
greater exposure vs. peers to falling longer-term rates, implying P/E multiple on loftier side
(cuts target to $67) other trust banks NTRS/BK higher
Healthcare
Hospital stocks came under pressure midday after reports the Obama administration will make
historic changes to how the U.S. pays its annual $3t health-care bill, aiming to curtail a costly
habit of paying doctors and hospitals without regard to quality or effectiveness. (UHS, THC, LPNT,
CYH dropped initially) http://goo.gl/VytGyq (separately HCA joining S&P 500 Index)
Pharma; ACT agreed to buy generic-drug manufacturer Auden Mckenzie Holdings Limited for
306 million http://goo.gl/7V6m0H ; LCI guides Q2 EPS $1.18-$1.21, above est. 92c on higher
sales; BCRX gets FDA Fast Track status for its plasma kallikrein inhibitor BCX4161 for the
treatment of hereditary angioedema; MYL expanded its Hep C licensing pact with GILD
Biotech stocks a standout to the upside yet again today, as the Index trades to a new all-time
high (XBI and IBB rise); shares led by gains in INCY, REGN, SGEN, etc.
Healthcare products; RMTI said its dialysis drug (Triferic) wins an FDA OK, despite lingering
doubts after the application raised some troubling issues at the FDA, which were flagged in a
critical internal review of the therapy; LH cautious comments in Barrons
Industrials & Materials
Forest, Paper & Packaging; RKT and MWV agreed to combine in a stock-swap deal that will create
a $16B global packaging company, where MWV holders get 0.78 shares of the new company
while RKT holders will receive either one share of the combined company or cash
http://goo.gl/iBercE (shares of IP/PKG rise in reaction); Bank America cut tgts for ATR, AVY, BLL,
BMS, BRC, CCK, OI & SEE saying FX remains a bear

 Metals & Mining; CLF said it will stop paying a dividend as it tries to cut its borrowings (prior
dividend was 15c); also said it cut its net debt by more than $400M in Q4; steel stocks were
mostly higher
Machinery/Industrials; CAT Dec. rolling 3-mo. retail machine sales fall (-12%) vs Nov. (-10%) fall,
Oct. down (-9%), while North America machine sales unchanged; EMR said Dec. trailing 3-mo.
orders down (-5%) to flat vs Nov. flat to up 5% and Oct. up 5%; GE inks its largest-ever wind
turbines order in China; ROP Q4 tops estimates/while 15 EPS midpoint above views
Storm related movers; shares of GNRC, PLOW, BGG, POWR advanced ahead of the upcoming
storm along the Northeast
Chemicals; Petro Chemical stocks LYB and WLK both downgraded to neutral at Bank America to
reflect recent drop in oil price; end of an era for ethylene; DD target upped at Susquehanna to
$87 to reflect an expected acceleration in cost cutting
Distributors; sector weaker after GWW cut its FY15 EPS view to $12.60-$13.60 from $12.90$13.80 and FY15 revenue growth to 3%-7% from 5%-9% citing for-ex effect as well as the
deteriorating macroeconomic environment in Canada (MSM WSO also weaker)
Transports; rails rise despite mixed earnings from NSC Q4 revs miss views ($2.87B vs. 2.94B est.);
KSU upgraded at Raymond James (stock fell Friday on earnings); UPS receives several analyst
downgrades after lowering guidance last Friday; airline; KNX gets analyst downgrade; airlines
were mixed
Aerospace & Defense; COL upgraded to Buy at Argus, citing better positioning and margin
outlook; OSIS rises on improved outlook
Technology, Media & Telecom
Telecom sector; AT&T (T) entered into an agreement with NII Holdings, Inc. to acquire its wireless
business in Mexico for $1.875B, less the outstanding net debt http://goo.gl/WzXfx3 ; CVC said it
will offer a Wi-Fi mobile-phone service starting next month (Freewheel), making it the first U.S.
cable operator to take such a product to market http://goo.gl/GLFQU2 ; RCI analyst downgrade
Internet Security/Infrastructure; FTNT upgraded to buy at Citigroup as sees strong security
demand, high-end product success driving upside to consensus ests.; VRSN falls after Credit
Suisse downgraded to neutral
Hard disk drive makers fall after STX guides Q3 revs $3.45B, which is below estimates $3.59B
(weighed on shares of WDC & HTCH); comments on weak PC shipments also hurting shares of
HPQ, MSFT, INTC today (MSFT reports tonight)
Hardware/Software; IBM responded to rumors it was going to layoff over 100,000 employees,
calling them "ridiculous or baseless", according to a tweet from FirstAdopter; OLED jumped after
signing new license agreement with LG Display; INFA spiked after Elliott Associates said to plan to
push for sale of LBO (reports 8% stake in INFA)
Semis; NXPI dipped as OTR Global said checks indicate could lose the NFC chip to Samsung's inhouse chip; HIMX positive mention at Bank America, calling it to pick in Display ICDs (raise tgt);
MXIM rating was cut by one analyst

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