Closing Recap

Monday, June 8, 15

Index

Up/Down

Last

DJ Industrials

-82.78

0.46%

17,766

S&P 500

-13.53

0.65%

2,079

Nasdaq

-46.83

0.92%

5,021

Russell 2000

-7.34

0.58%

1,253

Equity Market Recap

Equities end lower to start the week, with trading quiet and lackluster, as summer doldrums
kicking in well before the actual doldrums take place! Since quarterly earnings concluded a few
weeks back, markets have become stagnant, trading in fairly narrow trading bands (DJIA holding
around 18K, S&P 2,100 and Nasdaq 5K), as headlines have been comprised of economic data, Fed
reactions, and Greece debt talk. It has been the same story day in day out with a few M&A stories
keeping individual stocks/sectors active. The action in the commodity market grabbed attention
early in the 1H, while the volatile moves in the bond and currency markets (more today) are the
latest macro market drivers.
The Dow Industrials slipped into negative territory for the year, and would mark its first 4-week
decline since October if it ended the week in negative territory. The NASDAQ declined, falling
more than 1% midday after AAPLs WWD conference failed to impress (a conference more for
developers than investors, but still watched), with the Composite falling near its 50 day moving
average of 5,009 (low 5,114) before recovering
Greeces creditors have proposed extending the countrys bailout until the end of March of next
year by giving the country access to EUR10.9B that had been set aside under its old bailout for
recapitalizing weak banks, but disagreements remain over the conditions attached to the
proposal, reported The WSJ http://goo.gl/0T5uT8
European markets ended lower, with Germany entering into correction territory (down -10%). It
was about 2-months ago when the DAX traded to new all-time record highs (12,374.73 level on
April 10th), but has since dropped to 11,064 level overnight. Spiking German government-bond
yields have been one of the main drivers of late as well as Greece debt repayment fears. China
posted another 2% gain overnight in Asia.

Commodities
Energy prices dropped; Oil futures finished lower, weighed by a drop in Chinese oil imports and
last weeks decision by the Organization of the Petroleum Exporting Countries to keep its
production ceiling unchanged. WTI crude fell about 1.7% to settle at $58.14 a barrel, while Brent
dropped 1% to $62.69 a barrel. Natural gas prices outperformed, the lone gainer in the energy
complex, rising nearly 4% to $2.70 mln Btu despite bearish inventory data late last week

 Gold prices ended the session higher by $5.50, or 0.5% to settle at $1,173.60 an ounce, helped
today by the weaker dollar (DXY fell more than 1%), but follows a weekly decline of nearly 2% last
week 3rd straight weekly decline (snapped 3 day losing streak)

Currencies
The dollar was weaker; falling initially on reports by Bloomberg that President Obama had said at
the G-7 summit that the "strong dollar posed a problem". However, Obama later said on TV that
he does not comment on daily currency fluctuations. In the end, it was broad weakness for the
greenback regardless, falling from 2002 highs against the yen (back under 125 level, while the
euro jumped back above 1.1250 (was as low as 1.1077 on Friday).

Bond Market
Bonds bounce back; after last weeks bond selling pressure saw yields surge to best levels since
the fall of last year, markets started the week slightly better, pushing yields lower. Fridays
pullback was fueled by a strong official jobs (while higher inflation readings/expectations in
Europe also fueled bond yields). The yield on the 10-yr fell 3 bps to under 2.37% after surging
more than 30 bps last week, its largest weekly gain in nearly two years. On the calendar this
week, a few key inflation readings (PPI and retail sales)

Macro

Up/Down

Last

WTI Crude

-0.99

58.14

Brent

-0.62

62.69

Gold

5.50

1,173.60

EUR/USD

0.0159

1.1273

JPY/USD

-1.00

124.63

10-Year Note

-0.02

2.381%

Sector News Breakdown

Consumer
Retailers; WMT (after investor day) upgraded to Strong Buy at Raymond James; in footwear, FINL
upgraded to Buy as believe there is meaningful upside to current guidance of L-MSD EPS growth
in 2015 (raise tgt to $33); SHLD posted a narrower Q1 loss after selling assets, but sales slump
continued; BKS positive mention in Barrons
Consumer Staples/Restaurants; MCD May global comp sales fell (-0.3%) vs. est. (-0.9%), with U.S.
weaker (-2.2% vs. -1.7% est.) and Europe stronger (up 2.2% vs. 0.6% est.); in tobacco, Dow Jones
reported RAI/LO deal passes final hurdle as judge gives approval
Casinos & Gaming stocks pull back after surging last week; Sterne/CRT notes according to checks,
the June GGR run rate indicates a -46% YoY monthly resultholding negatively impacted early
June results, but still, results are disappointing especially given a two week proximity to the
opening of Galaxys Phase 2 (shares of WYNN, MPEL, LVS, MGM weak) last week rally likely due
to short covering, early reads on the Galaxy opening, and GGR improvements in May. Also, Wells
Fargo cut its June gross gaming revenue est. to down 34%-38% from down 30%
In other Leisure news; IGT shares could rise to $23 or higher if merger with Italys Gtech boosts
revenue said Barrons; MTN Q3 EPS/revs/Ebitda all miss consensus views
Autos; AXL downgraded at Barclays saying with margins likely to peak in 2015 and incremental
ROIC stalling in 2016, the path to upside will become tougher (tgt cut to $25); TSLA tgt raised to
$335 at RW Baird saying upcoming catalysts will improve sentiment, boost shares; GT target and
estimates raised at JP Morgan

Energy
Movers on news; oil drillers were little changed (though RIG underperforms), while majors (XOM,
CVX, HES) underperformed in the energy complex; PQ jumped after being upgraded at Raymond
James after sold assets for $280M; after hitting 6-month highs early last week, oil prices have slid
on the dollar rebound/no surprises at OPEC last week
Utilities trying to bounce back after an awful performance last week following a surge in Bond
yields, making dividend paying/defensive stocks less attractive to equity investors (Utilities as a
whole little changed on the day)
MLPs have been sliding over the last few weeks, with the Alerian MLP Index (AMZ) moving to its
lowest levels since late March (under 420), as oil prices have slipped and companies have been
raising cash (via secondary); coal MLPs (ARLP) down with the overall sector; PAA near 52-week
lows after California oil spill news last week hit shares
Alternative Energy/Solar/Coal; WLT leads coal names lower after Bloomberg reported it is
negotiating a debt restructuring with senior lenders that may put the unprofitable coal producer
into bankruptcy as soon as this month; BLDP will supply Nantong Zehe New Energy Technology
and Guangdong Synergy Hydrogen Power Technology with fuel cell solutions in $10M deal; BTU
announced job cuts
Financials
Large Cap banks; DB a top story after changing its leadership (again), appointing John Cryan as its
new CEO, replacing Anshu Jain just two weeks after Jain was given more power to reorganize the
bank; outside of DB, group was mostly lower, paring some gains after last weeks rate/yield spike
induced gains (especially brokers/regional banks), but group remains strong
Lending sector; ONDK mentioned cautiously in Barrons saying shares may be too pricey and
too risky; LC upgraded to Overweight at Pacific Crest with a $23 price target as the firm's
checks with advertising executives indicate stable trends despite irrational pricing concerns;
Compass Point cut tgts on both LC (to $14 from $16) and ONDK (to $12 from $14) saying prices
dont reflect high likelihood of added regulatory scrutiny
Exchanges; ITG said May average daily volume in the U.S. was 182M shares, up from 144M YoY;
CBOE upgraded to Hold at Evercore
Brokers & Asset Managers; IVZ upgraded to Buy at UBS saying the current valuation provides
investors a compelling opportunity; Goldman Sachs initiates sector: Buy rated: APAM ($53 tgt),
JNS ($22 tgt), BLK ($421 tgt), AMG ($258 tgt)Sell rated: CRC, BEN; SF picks up Barclays'
Americas wealth management unit
Healthcare
Large Cap Pharma; SHPG is considering an $18.32B takeover of Actelion Ltd (ATLN.VX) Europe's
biggest biotech firm, Britain's Sunday Times newspaper reported, citing unnamed sources. An
informal approach by Shire was rebuffed several weeks ago http://goo.gl/8VERj6; ABBV
reinstated as its Top Pick in Global Pharma, added the stock to its Franchise Pick List at Jefferies
Biotech; sector as a whole little changed; in M&A news, POZN said it would acquire Tribute
Pharmaceuticals Canada Inc. for about $144M, in a deal that would shift its domicile to Ireland
and cut its tax bill (new merged co name now Aralez). As part of the transaction, a group of
investors including healthcare investment firm Deerfield Management and Canadian biotech
company QLTI will invest up to $350M in growth capital for Aralez http://goo.gl/ds5dAq
In other movers; BRLI rises despite earnings miss (agreed to acquire OPK for $1.47B last week);
FCSC and XON announce positive in vitro Pre-Clinical data for FCX-007 for RDEB; HUM said in a
regulatory filing it would not comment on speculation that it was considering a sale of the
company and will observe a "quiet period" until earnings (7/29); PTBI licensed an AAV gene
therapy for treatment of juvenile Batten disease from UNeMed;

Industrials & Materials

AG & Machinery; SYT said MON failed to convince it of the merits of a merger and is repeating
the same inadequate price with a flawed view of the execution risks http://goo.gl/NEmiZl;
machinery stocks down with the market, led by TEX and MTW
Transports plunge (DJ Transports off around 2%); global airline industry will post record 2015 net
of $29.3B vs. $16.4B a year earlier (prior view $25B), the International Air Transport Association
forecasts; Raymond James downgraded several airlines, cutting rating on AAL, DAL, UAL (adds
SAVE to favorite list) saying the U.S. airline recovery will be somewhat muted vs prior
expectations due to slower U.S. economic outlook. Over the weekend, AAL CEO voiced concern
on Sunday about the risk that capacity growth among airlines could depress profits
Metals & Mining; group mostly lower, led by weakness in FCX, and aluminum names (AA/CENX);
steels also lower: RS, STLD, NUE (group had a little run the past few weeks); gold miners were
mixed as gold prices held (but fell last week)
Tankers/Shippers; DSX tgt raised to Street high $10.50 at Deutsche Bank noting shares trade at a
30% discount to tangible book value; JP Morgan said tanker asset values have lagged the spot
market strength: but says may be on the verge of breaking higher
Technology, Media & Telecom
AAPL started its World Wide Developers conference today (runs all week); to introduce software
improvements for its computer and mobile devices at its annual developer conference for more
than 5,000 engineers in San Francisco; also announced a revamped streaming music service
(shares of P traded lower)
Internet security stocks remain strong; Obama, speaking at news conference in Germany after G7, said he cant comment on latest hacking case; said U.S. must be more aggressive, attentive on
cyber security (shares of VDSI, CYBR, PANW, FEYE, PFPT active
Chinese ADRS active after another 2% gain in Shanghai overnight; shares of SINA, JD, up early;
note overnight, Chine markets jumped as the Shanghai Index with another massive move, rising
123 points (2.36%) to close at 5,353, while the Hang Seng Index rose 56 points to 27,316; BABA
said its cloud-computing unit Aliyun was launching a new partnership with INTC/others
Semiconductors fall; Susquehanna lowered estimates on INTC and QCOM as sees downside to
PCs/Handsets (also lowered ests. for WDC/STX); ISSI said CY failed to finalize merger agreement
by deadline of June 7 despite receiving negotiated draft agreement from ISSI on Friday, June 5;
MXL rises after Soros reports 5.1% passive stake; AMBA shares up 16 of last 19 trading days
(rising from $71.835 level on 5/11 - to 1110 level today)
Software & Hardware; GLW shares may rise 40% in next 12-18 months according to Barrons;
RHT positive mention at RBC (tgt to $85) as results from 23 resellers were positive and point to
15% growth in the qtr vs revenue/billings expectations of 12%/10%; INVN analyst upgrade
Internet movers; IACI positive mention at JMP (ups tgt to $87 from $83) as sees multiple drivers
for upside to their estimates; LNKD estimates too low said Morgan Stanley; TWTR files to sell
10.43M shares of common stock for holders
Media & Telco; Dow Jones reported that VZ said not expected to enter bidding for DISH; TMUS
shares may continue to climb to $45 supported by improving financial performance said Barrons
(tgt also raised at Oppenheimer today); NEWM added to Citigroup focus list after recent sell-off
in shares

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