Closing Recap

Monday, June 22, 15

Index

Up/Down

Last

DJ Industrials

104.10

0.58%

18,120

S&P 500

12.90

0.61%

2,122

Nasdaq

36.97

0.72%

5,153

Russell 2000

7.65

0.59%

1,292

Equity Market Recap

Equities broadly higher on expectations that Greece and its lenders will reach a reform deal,
potentially saving the country from default. European markets jumped over 3.8% on the prospect
that key meetings will yield a solution to Greeces debt crisis. Eurozone leaders met for an
emergency summit in Brussels Monday today (plenty of headlines out but no resolution yet).
Given the optimism on Greece, M&A news, and better housing data, there were new records set
intraday for the Nasdaq Composite, Nasdaq Biotech, Russell 2000, S&P SmallCap 600, and S&P
Midcap 400. The S&P 500 index gained for a fourth day in five, with Energy, Financials, Health
Care leading/Utilities, Materials lagging
Other reasons for market strength, as M&A news lifts sentiment as well: ETE confirms $48 bln
bid for WMB (which rejected offer), HME acquired by Lone Star funds in $7.6 bln deal; and in
Healthcare, CI rejected $184 per share bid from ANTM, while WSJ reported AET made offer for
HUM (details all below). Existing Home sales data also came in better than economist estimates
(The NAR said the median price of an existing home rose 7.9% from May 2014 to $228,700, near
all-time high peaks), lifted builders and product makers
European markets jumped across the board, France/German/Spanish markets post their biggest
gains since 2012 on optimism that a deal between Greece and its creditors is close, and as deals
activity intensified. Greek banks jumped the most since May 2013. The Stoxx Europe 600 Index
rallied 2.3%, major averages were up over 3.8%. European policy makers expressed confidence
that an agreement with Greece was within reach after Prime Minister Alexis Tsiprass
government submitted a last-minute set of proposals. Greece is running out of cash to repay a
1.6 billion euro IMF loan due at the end of the month unless it secures new financing from
international creditors.

Economic Data
Lone piece of economic data today, May Existing-Home Sales rise 5.1% to 5.35M (above est.
5.26M), while April revised up to 5.09M from 5.04M; 5.1 months supply in May vs. 5.2 in April,
while inventory rose 3.2% to 2.29M homes; Median home price rose 7.9% YoY to $228,700

Commodities
WTI crude oil prices ended flattish, up about 7c to $59.68 per barrel, but was volatile, trading as
high as $60.30, and as low as $58.93. U.S. natural gas futures fell nearly 3%, off 8.3c to $2.733
mln btu on expectations for weaker demand in the latest weather forecast
Precious metals fell more than 1.5% as global equities jump on possible signs of progress in
Greek debt talks, which curbed safe-haven demand; gold ended lower by 1.5% to 1,184.10 an
ounce (recall hit around $1,205.50 hit last week after a dovish Federal Reserve message). The
absence of top consumer China, which was closed for holiday, also hurt gold prices

Currencies
The dollar index (DXY) was higher, reversing some earlier weakness, as currency markets are
closely watching the developments in Greece; the euro fell from an earlier high of 1.141 to trade
lower against the dollar under 1.1340; while the dollar advanced against the yen

Bond Market
Bond markets were generally weaker throughout the day, as yields extended upward to the
highs, catching up to the weakness in German Bunds on increased demand for risk. Longer dated
yields are over 10 bps higher with the 10-year hitting 2.36%; the 30-yr yield jumped to 3.15%,
while shorter-term yields popped (2-yr 0.65%, and 5-yr 1.66%). U.S. Treasuries prices tumbled on
optimism over a Greek deal and as stronger-than-expected U.S. existing home sales data
supported expectations of a September Federal Reserve rate hike

Macro

Up/Down

Last

WTI Crude

0.07

59.68

Brent

0.32

63.34

Gold

-17.80

1,184.10

EUR/USD

-0.001

1.1342

JPY/USD

0.70

123.41

10-Year Note

0.095

2.356%

Sector News Breakdown

Consumer
Retailers; MSO to be acquired by SQBG for $6.15 per share stock/cash http://goo.gl/WIHdkg ;
ZUMZ announced a stock buyback; SKX added to S&P MidCap 400 Index; retailers overall were
mixed with apparel names higher (BBBY little lower ahead of earnings this week)
Consumer Staples/Restaurants; CAG upgraded to Overweight citing an attractive risk/reward
profile following the activist stake by JANA Partners; NDLS COO resigned; DAVE downgraded to
Neutral to Dougherty; restaurants were generally higher (YUM target raised to $85 at Credit
Suisse, and cut CMG to $725); BOJA falls for 5th day after earnings (recent IPO in May)
Casino, Lodging & Leisure; in Leisure; CCL upgraded to Buy at Deutsche Bank ahead of earnings
tomorrow; casinos were lower, led by WYNN, MPEL, and MGM on SJM Holdings cautious
comments on FY GGR numbers); in equipment names, IGT initiated buy ($24 tgt) at Bank America
and SGMS with a neutral; lodging stock were generally higher
Homebuilders and product stocks rise; helped by a stronger than expected monthly existing
home sales data report (group got a lift last week on better KBH earnings); shares of builders
(LEN, TOL, DHI) and product names (OC, USG) lifted today
Autos; TSLA slides after Inside EVs reports Tesla Model 3 delayed until 2018 (also note WSJ
Heard on the Street columns titled Teslas need for cash should cow investors (Tesla later
announced that it still plans to show model 3 in 2016); NFL said close to Sponsorship Deal with
Hyundai, replacing GM

Energy
Energy stocks among top sector gainers despite a drop in oil prices, as money rotating into
Energy, Financials, Healthcare, Transports; MLP space gets a lift after WMB news (see below)
MLPs; ETE confirmed it made a $48B bid for WMB which was rejected http://goo.gl/UfutRV (ETE
said its all-stock offer of 0.9358 shares per WMB share represented a 32% premium to the stock's
closing price of $48.34. WMB said on Sunday the unsolicited proposal had prompted it to launch
a review of strategic alternatives. ETE said its offer is contingent on the termination of Williams'
pending purchase of WPZ, which gathers, processes and transports natural gas
Utilities; PPL upgraded to Buy at Jefferies as believe the stock should trade at a group average
multiple given the recent spinoff of its unregulated business and the above average rate base
growth; defensive utilities as a whole was flattish
Financials
Large Cap and regional banks gain on pop in rates, overall market strength early, hopes for
Greece resolution; shares of C, BAC, WFC and JPM rise in large cap, while FITB, RF also gain
Insurance; MET upgraded to Outperform at RBC Capital citing belief that MetLife may launch
another share repurchase, as well as its contention that the company may be better positioned
than any other publicly traded life insurer to benefit from the rise in interest rates; ALL
downgraded to Sell at Citigroup in head to head comparison vs. PGR; PGR was also upgraded to
Outperform at Raymond James
REITs; HME to be acquired by Lone Star Funds for $75.23 per share http://goo.gl/s8PM6k ; UDR
in pact to buy six communities valued at $908M (from HME deal); shares of apartment REITs
really didnt move on the announced deal (EQR, PPS, AIV, NXRT)
Healthcare
Large Cap Pharma; M&A news leads group as CI rejected ANTMs $184 per share offer (deal
valued at $53.8B w/debt) http://goo.gl/azBS0q ; also, the WSJ reported AET made a takeover
proposal to HUM in the last few days but it wasnt clear how much Aetna indicated it would pay
http://goo.gl/SGspLr ; MRK positively mentioned in Barrons over the weekend
Biotech stocks again broadly higher, as the index touches another new all-time high earlier (the
NBI Biotech Index traded above 4,000 earlier for the first time in its existence, led by gains in
large as well as small-cap names); CELG, BIIB, AMGN, GILD up 1% early
CAR-T stocks; ZIOP downgraded at BMO Capital saying CAR-T and T-Cell receptor therapy
competitors are increasing their leads; KITE and BLUE in agreement to co-develop, cocommercialize second generation T cell receptor (TCR) product candidates to treat human
papillomavirus type 16 E6 (HPV-16 E6); Oppenheimer recommends owning QURE into two 2H15
readouts: Phase I/II data for AMT-060 (FIX gene) and Phase I/II data for AMT-110
Analyst calls; RDUS cut to hold at Maxim on valuation; RXDX new overweight at Piper; DPLO
reiterated Outperform and $50 tgt at RW Baird on attractive valuation; AKBA started with a buy
and $24 tgt at JMP Securities; MLV & Co analysts raise price target to $33 on SRNE
Hospital shares active; Barrons noted HCA may rise 20% if Supreme Court upholds tax subsidies
used by participants in federally run health exchanges under Affordable Care Act, Barrons
Follow-Up column said (also watch LPNT, CYH, UHS, THC) decision could come this week
Other movers; EPZM shares jump after objective responses were seen in 9 of 15 evaluable
patients with relapsed or refractory non-Hodgkin lymphoma treated with tazemetostat (EPZ6438) in Phase 1 study; TBIO rises on reports plans to launch liquid biopsy cancer test

Industrials & Materials

Paper stocks fall after PPW cut linerboard and medium prices in the West Coast by $10 and $20 /
ton respectively, for May; Bank America lowered estimates for IP, PKG, RKT and UFS based off
Friday's grade price reductions in RISI/Pulp & Paper Week; Jefferies said financial implications to
earnings for IP, RKT, and PKG should be modest (~1%), but expects sentiment to remain negative
until inventory returns to a more normalized level; KS also downgraded to Neutral at Macquarie
Machinery; machinery stocks CHNI and AGCO both upgraded at JP Morgan; EMR said May
trailing 3-month orders growth fell 15%-20%, while Q3 sales down (-11%) vs. est. (-9.2%)
Metals & Mining; steel makers mixed after mid-quarter updates; STLD sees Q2 EPS 20c-24c vs
est. 23c as sees 2Q steel ops profitability similar to sequential 1Q results; AKS sees Q2 EPS (42c)(37c) loss vs. est. (27c) as results continued to be negatively impacted by lower carbon steel
prices; aluminum maker AA downgraded to Neutral at Sterne/CRT; gold miners were weaker on
falling prices (Macquarie recommended taking profits on ABX after YTD performance); TS
downgraded to Underperform at Bank America
Airlines were higher on lower oil, broad market bounce, and positive mention in Barrons over
the weekend saying AAL, DAL, UAL, LUV may be poised to rise 15% to 50% in the next year as
industry benefits from rising profits on factors that include cheaper fuel, less competition
Chemicals; EMN was upgraded to Buy at Nomura and boosted tgt to $98 from $85 based on
unappreciated rising cash generation; DD tgt was cut to $84 at Jefferies as shares to be rangebound near-term; AXLL holder Franklin boosted stake to 7.4% from 6% citing recent filing
Technology, Media & Telecom
Internet; NFLX tgt raised to street high $950 at BTIG; Pac Crest was positive on BABA saying while
they are lowering estimates, we remain positive on Alibaba's ability to capture an increasing
portion of China's digital economy; FB raised to Street high $120 tgt at Piper; TWTR shares were
lower most of the session (following recent CEO resignation)
Online travel; Deutsche Bank upgraded EXPE to Buy but cut PCLN to Hold as think both
companies can perform well near-term, but see more limited upside to Priceline shares given it is
operating from peak efficiency; PCLN will replace BAX in the S&P 100
Semiconductors; AMBA shares extend Friday weakness after cautious Citron comments (falls
sharply); MU downgraded to Sell at Goldman Sachs with $19 tgt ahead of earnings citing likely
decline in DRAM margins as supply increases; CY raised its bid for ISSI again to $22.25 per share
(ISSI said Friday it agreed to Uphill's raised offer of $699M, or $22) http://goo.gl/BrSsCK ; Reuters
reported that AMD is at the initial stage of reviewing whether to split itself in two or spin off a
business, reported Reuters http://goo.gl/c7dnUF (AMD denied report); NVMI upgraded to Buy at
Canaccord as believe foundry spending will pick-up, as FinFET decisions are now finally being
made; STM upgraded to Overweight at Barclays; SYNA fell after Digitimes reports AAPL is
internally developing integrated touch controller/display driver ICs for use in future iPhones
Internet security stocks mixed; UBS downgraded shares of FEYE to Neutral (but up tgt to $55) and
cut SYMC to a sell rating (tgt cut to $22), while says PANW remains best-positioned platform with
multiple drivers behind cont'd market share gains (up tgt to $206) and FTNT on improving
execution, competitive footing, and compelling financials (tgt to $49)
Hardware; FIT positive mention in Barrons saying value may be as M&A target as companys
hardware business may not survive on merits, services charges dont make money; PLCM
downgraded to Underperform at William Blair; shares of GPRO were down in sympathy with
Media & Telco; movie theater names were better after another strong showing for Jurassic
World over the weekend (over $100M), with CNK, AMC, RGC active; media names moved in
sympathy with the overall tape; media stocks at 52-week highs (DIS, TWX, CMCSA)

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