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Closing Recap

Monday, May 11, 15

Index

Up/Down

Last

DJ Industrials

-85.94

0.47%

18,105

S&P 500

-10.79

0.51%

2,105

Nasdaq

-9.98

0.20%

4,993

Russell 2000

0.92

0.07%

1,235

Equity Market Recap


U.S. stocks pulled back Monday after stalling earlier near all-time highs, just a day after rallying
the most in two months on Friday after jobs data. Federal Reserve Bank of San Francisco
President John Williams reiterated today that policy makers could raise rates at any meeting,
depending on economic data. Renewed strength in global bond yields were partially attributed
for the late day slide, as German bunds and other euro-region sovereign debt declined as China
cut interest rates (3rd time in 6-months). The next major market catalyst, tomorrows Greece
deadline to repay the IMF $837M, while earnings in the retail space grab headlines as well.
The volatility index (VIX) was very active; almost $100 million worth of options pegged to
volatility in U.S. equities changed hands in a split second today in Chicago, transactions that
together would represent more than half a normal days volume http://goo.gl/Yi5tOz

Macro Stories: China/Greece


China slashed interest rates for the third time in six months over the weekend, adding stimulus
to a slowing economy. The bank had cut rates previously in March. The bank lowered its lending
rate in November for the first time in more than two years. The one-year lending rate would be
reduced by 25 bps to 5.1%, officials said, and the one-year deposit rate to 2.25%. The news lifted
Asian equity markets, with Shanghai rising more than 3%.
Greeces deadline is Tuesday to pay 750 million euros ($837 million) to the International
Monetary Fund. Finance Minister Yanis Varoufakis said Greece plans to make the payment.
The Bank of England (BOE) left its key record low interest rate and the size of the quantitative
easing unchanged ahead of the publication of its latest quarterly update on inflation later this
week; key bank rate at 0.50% and the size of asset purchases at GBP 375 billion

Commodities
Energy futures end lower, only falling 14c to $59.25 per barrel (high $59.85low $58.75), which
follows 8 straight weeks of gains for WTI crude; Brent underperformed, falling more than WTI
after OPEC said oil prices will remain below $100 a barrel until at least 2025, according to a draft
seen by The Wall Street Journal. An excess of oil around the Atlantic may curb rallies, according
to a few analysts today

June gold prices declined -$5.90 or 0.5% to $1,183.00 an ounce as the additional easing
measures by China overnight failed to trigger any excitement in gold prices. Much confusion in
the metals markets, as investors continue to get mixed signals in regards to the timing of the
Feds view on interest rate hikes, with some betting on the summer and others thinking
tightening is some way off. The Greece situation also failed to muster gold buying, as Athens is
due to make a 750 million euro payment to the International Monetary Fund on Tuesday.

Currencies
The dollar index (DXY) was higher, up about 0.2% back to the 95 level (95.26 intraday and a low
of 94.80); the euro trended lower against the dollar at $1.1154 down from previous close of
$1.1205 (its high of day), falling for a third day on speculation European finance ministers
meeting in Brussels are far from an agreement to bail out Greece and preserve the currency
union. The euro slid from a 2 1/2-month high vs. the dollar before Greeces deadline Tuesday to
pay 750 million euros ($837 million) to the International Monetary Fund.

Bond Market
Treasuries resumed its weakness, snapping a two-day winning streak (note the yield on the 10-yr
up more than 40 bps from 1.85% level 2-weeks agoand holding) lifting yields today; European
sovereign yields closed sharply higher again, as the German Bund closed up another 6 bps to a
YTD closing high of 0.61% (traded above 0.7% last week before paring gains). Move today in
bonds came amid no real economic data; the 10-yr yield traded above 2.26% late in the session

Macro

Up/Down

Last

WTI Crude

-0.14

59.25

Brent

-0.48

64.91

Gold

-5.90

1,183.00

EUR/USD

-0.0045

1.1154

JPY/USD

0.36

120.12

10-Year Note

0.110

2.260%

Sector News Breakdown


Consumer
Retailers; CBK has retained an investment bank to explore a possible sale NY Post
http://goo.gl/600Pqa ; KSS positive mention in Barrons saying shares may rise 17%; earnings in
retail sector this week with M, RL, JCP, PLCE, KSS among names; TPX falls following
announcement that Tempur Sealys President and CEO Mark Sarvary will resign
Consumer Staples; in grocers; SFM raised to Outperform at BMO Capital, WFM cautious mention
in Barrons over the weekend, and Dutch food retailer Koninklijke Ahold NV (AH.AE) and
Belgium's Delhaize Group DEG are in talks about a possible merger according Belgian papers
http://goo.gl/kNZso1; in foods, Citi downgraded POST to neutral on developing bird flu situation,
DF Q1 eps beats by 7c and better forecast; CALM tgt and estimates raised at Sidoti as views Avian
flu break-out as an opportunity for Cal-Maine to enhance its higher-margin, egg breaking
operation; MNST was upgraded at Citigroup

Restaurants; YUM tgt raised to $109 at Bernstein despite recent appreciation, as continues to
view the risk reward as attractive; MCD cautious mention in Barrons over the weekend; SHAK
shares fall for 3rd day in last four ahead of earnings this week; AllianceBernstein discloses holding
a 12.7% stake in HABT
Casino, Lodging & Leisure; in leisure, RCL upgraded to Outperform at Wedbush on improved
booking trends (group advanced late last week on NCLH results); in lodging, HLT priced 90M spot
secondary at $29.85 per share; casino stocks were mostly lower (WYNN, MPEL, LVS)
Energy
Energy movers mostly lower; RDSA won U.S. backing to resume oil exploration in Arctic Sea; E&P
space active after merger as ROSE acquired for $2.1B in stock plus debt (of $1.8B) by NBL, with
ROSE holders to receive 0.542 shares of NBL, which has implied value of $26.62 per share
http://goo.gl/w9gAV5; SWN upgraded to Overweight at Barclays
Oil Services; Citigroup downgrading onshore RES, PTEN, WFT as well as NOV saying the fear has
been bought (up almost 25% YTD, while the offshore suppliers are up ~20% over the past 6 week)
says to take profits as believe the onshore focused service providers are most at-risk of profittaking given performance, valuation
Alternative Energy/solar; PLUG advanced on earnings early; SEDG advanced a 3rd day after
earnings beat to new all-time highs (recent IPO); solar names extend gains in tough tape (CSIQ,
SOL, JKS along with SEDG)
Utilities; SO, ED, DUK, AEP, D, PCG, NEE and EIX are 8 utilities w/8%-9%/year total return
potential over next few years Barrons reported; in earnings, AES Q1 results in-line and
reaffirmed guidance, CNP Q1 revs fell short of consensus
Sand fracking stocks sell; HCLP cut at Credit Suisse (FMSA, EMES, SLCA fall)
Financials
Large Cap banks; Citi (C) said the U.S. Justice Department declined to prosecute the bank after a
probe into rigging of the London Interbank Offered Rate http://goo.gl/QwmSNr ; JPM was
downgraded to Neutral at MKM Partners on valuation; ENV downgraded to Market Perform at
Barrington; banks little changed despite jump in yields today
Insurance; insurance stocks lagged markets, led by weakness in Dow component TRV, which has
fallen since earnings; not much news in group today
Lending/Finance; ONDK upgraded to Neutral at Sterne Agee as believe a lot of the bad news is
priced in; LC higher after CNBC highlighted the online P2P lending leader's recent lending
partnership with Citi, as well as strategic partnerships with Google, Alibaba, and BancAlliance
Brokers/Exchanges; AMTD said April client daily trades up 2% YoY and averaged 457,000
trades/day in April 2015, up 1% from March said AUM $704.5b, up 14% from April YoY; FXCM
posted Q1 eps loss of ($8.35) per share
REITs; TPG Capital agreed to buy Cushman & Wakefield Inc., the largest closely held commercialproperty brokerage, for about $2B including debt http://goo.gl/6YAdFp
Healthcare
Large Cap Pharma; ACT advanced as quarterly earnings beat as sales top views ($4.23B vs. $4.1B);
ENDP Q1 eps beat and boosted its year EPS outlook/also to buy portfolio from Aspen Holdings for
$130M; CNBCs David Faber said ESRX likely was bidder for CTRX; Barrons positive on JNJ; NVRO
advanced after FDA announced clearance of its Senza spinal cord stimulation system; GWPH
maintains 15 outlook and initiates Phase III study in LGS; LGND up on Q1 eps beat/rev beat

Biotech; for a change, not a lot of volatility in the sector, but that likely to change by the end of
the week, as Bloomberg noted most of the 5,000+ abstracts for the American Society of Clinical
Oncologys (ASCO) annual meeting will be released May 13 at 5pm ET, excluding late-breaking
data that will be saved for the meeting; MNKD was cut at JP Morgan; DYAX cut at Oppenheimer
after significant run on DX-2930
Services; a Morgan Stanley private-equity fund agreed to sell its majority stake in staffing firm
Creative Circle to ASGN for $570M http://goo.gl/VEbiQJ
Industrials & Materials
Industrials & Metals were among leaders today for overall market, after Chinas Central Bank cut
rates for the third time in 6-months overnight to help spur its economy (growing about 7%); steel
stocks jumped (X, AKS), while other industrial metal stocks were flattish (AKS + mention at Bank
America today); gold miners were mixed
AG & Machinery; CAT and JOY upgraded at RW Baird saying sees signs the worst might be over
in this cycle, investors should be early to a mining bottom.
Transports; transports were flattish overall as airlines outperformed early, and rails lagged; AAL
said April traffic fell (-0.3%), while capacity was up 1.3% YoY and total passenger load factor
81.6%, down 1.3% YoY; all in all, little going on given earnings behind group and oil prices little
changed on the day
Tankers/Shippers; TNK downgraded to Hold at Deutsche Bank saying the main risk to positive
view on crude tankers has been that the current strong market will lead to accelerated supply
growthand appears that this risk is becoming reality; the Baltic Dry Index rises 0.7% to 578
points in London biggest jump since April 16th
Aerospace & Defense; TGI upgraded to Outperform at RBC, while downgrades SPR following a
strong showing in the share price YTD
Technology, Media & Telecom
Internet; ZU jumped as BABA boosted stake to 9.3%; GDDY initiated by the street today, with 9
Buy/OP rated and 1 hold (Stifel)....highest tgt $36 (Piper) vs. lowest $29 (MS); Z upgraded to Buy
at SunTrust and $130 tgt as now believe that expectations have been lowered sufficiently that Z
can return to beat & raise type quarters; ETSY downgraded to Underperform at Wedbush ($14
tgt), neutral rated by two other analysts (MS and GS, both of which were joint book runners for
IPO); Uber said to seek $1.5B in funds at $50b valuation; AOL cut to Sell at CLSA; W Q1 narrower
eps loss as revs top views; NFLX breaks out to new all-time highs (since earnings)
Semiconductors; the semi index (SOX) with modest move today on no real news in space
Hardware/Software sector movers; WWWW upgraded to Buy at Deutsche; CRM removed from
Best ideas list at Morgan Stanley after run-up in shares; 3d stocks active after SSYS Q1 at high
end of prior view and reaffirmed outlook (recently lowered guidance), while DDD cautious
Barrons mention; MBLY Q1 eps/revs beat consensus/said had 2 significant new program wins
Networking/equipment; CSCO upgraded to Overweight at Pacific Crest on improving
fundamentals and cloud prospects, while cutting NTAP to Underweight as cloud and competition
increase execution risk
Media/Telco; CMCSA named Carlyle Group's Michael J. Cavanagh its next CFO, and senior
executive VP, replacing Michael Angelakis, who is forming a strategic company to find new
growth areas for the telecom. Comcast is putting $4B into Angelakis' company; DISH Q1 revs
missed consensus as churn increased; CHTR in in early talks with banks to arrange a debt package
of $25B-$30B as it pursues merger with TWC, WSJ reported http://goo.gl/Gly8Ig

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