Closing Recap 4:10PM EST

Wednesday, October 29, 14

Index Up/Down % Last
DJ Industrials -31.44 0.18% 16,974
S&P 500 -2.74 0.14% 1,982
Nasdaq -15.07 0.33% 4,549
Russell 2000 -2.06 0.18% 1,147

Equity Market Recap
Not necessarily more hawkish, but certainly appeared a bit less dovish that the outcome of
todays FOMC meeting results, which saw the end of QE3 (is it really the end of QE?), and kept
benchmark interest rates at record lows (still near 0%). The picture painted by the Fed portrayed
the U.S. economy on stronger footing than before, as Fed officials dropped the word "significant"
in describing underutilization of the labor market, a sign they are more upbeat on the jobs
outlook. The outlook and commentary certainly opens the door for the Fed to potentially raise
rates sooner than expected (range has been from mid-2015 to not at all in 15). Equities initially
lower after FOMC (Dow fell 100 points), but gained ground to the closing bell

FOMC Meeting
The FOMC said it sees further improvement in the labor market while confirming it will end an
asset-purchase program to $0 (from $15B) that has added $1.66 trillion to its balance sheet.
Some bullet points from the FOMC statement include: 1) Federal funds target rate remains
unchanged at 0.25%, 2) the Fed said it sees solid job gains with lower unemployment and that
underutilization of labor resources gradually diminishing (was a change in language), 3) Fed
repeats risks to economy, job outlook nearly balanced, 4) re inflation, Fed says lower energy
prices to hold down inflation near term, but said "the likelihood of inflation running persistently
below 2% has diminished somewhat."

Commodities
Energy prices ended higher, with a 1% move to the upside for WTI crude to $82.20 per barrel,
while Brent prices rose 1.3% to $87.12. Energy futures were higher overnight and extended gains
after the Department of Energy reported a smaller weekly build in inventories (rose 2M barrels
vs. est. near 4M build), while gasoline posted draw of -1.24M barrels and distillates a draw of -
5.29M) all bullish data points (WTI touched high of $82.88) but still down 20% from June
Gold prices (closed prior to FOMC statement) slipped $4.50 to settle at $1,224.90 an ounce,
while silver prices fell 4c to $17.26 an ounce. After the FOMC release, gold futures initially moved
lower as Fed monthly total purchases pared to $0 from $15B (but Fed also said the likelihood of
inflation running persistently below 2% has diminished somewhat.") Gold future sold off
afterward, down as much as 1.6%

Currencies
The dollar surged following the end of QE by the Fed, with the index (DXY) rising 0.56 to around
the 86.0 level (follows 2 days of modest selling); the euro fell about 1 full cent against the USD to
1.2639, while the greenback jumped against the yen (nears 109). The Fed certainly painted a
much stronger picture of the economy in this release that prior, leading to dollar strength

Bond Market
Bond prices dropped after the FOMC meeting statement expressed an improved jobs market and
generally positive outlook for the economy, as the FOMC removed its QE3 asset buying, but kept
rates at record lows; the 10-yr yield jumped as high as 2.362% before paring gains. Bond prices
had fallen earlier due to tepid demand on a $35 billion sale of five-year Treasury notes
Prior to the FOMC report; US Treasury sold $35B in 5-year notes at yield of 1.567% (above yield
prior to auction), with bid-to-cover 2.36, lowest since July 2009 (down from 2.56% prior auction)
and 47.8% awarded to indirect bidders (10.5% to direct bidders) so little demand despite higher
yields offered

Other Interesting tidbits
Investor Intelligence Poll shows writers classified as bulls by Investors Intelligence jump to 4-
week high 47.0% from 35.3%; Bears fall to 16.3% from 18.2%; 3-week low and those expecting a
correction falls to 36.7% from 30-year high 46.5% last week
Former Federal Reserve Chairman Alan Greenspan said he doesnt think the Fed can unwind
years of extraordinary stimulus without causing turmoil in financial markets
http://goo.gl/vwu3aR

Macro Up/Down Last
WTI Crude 0.78 82.20
Brent 1.09 87.12
Gold -4.50 1,224.90
EUR/USD -0.0089 1.2646
JPY/USD 0.63 108.78
10-Year Note +0.03 2.319%


Sector News Breakdown
Consumer
Retail movers; KORS downgraded to neutral at Janney saying Europe growth may not offset US
slowdown; RL Q2 EPS beats/revs miss and cuts revenue growth outlook to 5%-7% from 6%-8%
prior; PETM
Staples; HSY falls as Q3 eps/revs miss views and cuts 2014 profit/sales outlook as traffic irregular;
ABEV raised to buy at Goldman Sachs; JMBA upgraded to Outperform at Wedbush on potential
growth in profitability from current initiatives; SODA to suspend annual forecasts starting next
year; cuts forecast this year
Lodging/Leisure/Gaming; hotels up (group fell yesterday despite HOT beat/buyback) MAR saw
strong RevPAR growth of +8.8% in 3Q, while occupancy at 77.6%, while raising rates by 5%, while
H shares fall on earnings; WYNN Q3 eps beat, regular dividend increase and special dividend
announced (casinos little changed)
Housing stocks/building product stocks generally lower; MTH leads builders lower after quarterly
eps missed (other builders mixed), while building product names mostly lower after EXP earnings
(recall MLM fell yesterday on earnings)


Autos; tire makers rise as GT Q3 EPS beats by 17c and sees year eps growth at high end of 10%-
15% range (CTB moves); Fiat (FCAU) Q3 results top views and backs year rev outlook also to make
public offer for 10% of Ferrari and files to offer up to 100M of common FCAU shares
Restaurants; PNRA falls after mixed quarterly results, as Q3 comps/eps top estimates, but cut its
year and Q4 outlook (follows strong BWLD results yesterday); DIN cut to market perform by an
analyst

Energy
Energy as a whole was higher early, lifted by a few earnings reports, and on a higher move in oil
prices (for today at least)
E&P movers; APC teaming up with KKR to drill more than 500 wells across East Texas in a major
expansion (stocks that may benefit in partnership include CRK, HK, APA, CWEI with acreage in
play according to several analysts)NFX shares surged after Q3 eps beat
Energy earnings; refiner PSX Q3 eps/revs both short of consensus citing lower volumes from
maintenance activities at some PSX refineries (MPC, HFC, WNR); HES better earnings/sees 2014
production at high end of forecast
Utility movers; Utility index (UTY) touched record highs of 574.60 before paring gains; earnings in
group mostly better, with EIX and EXC beating PCG rises after analyst upgrade
Solar/alternative energy; solar co SPWR Q4 eps beat but guidance for Q4 misses midpoint of
views; BLDP falls after missing estimates and lowers guidance
Pipelines; biggest MLP IPO of the year today as SHLX opened at $32.00 after 40M share IPO
priced at $23.00; So said it would consider gas pipeline investments (also posted earnings)

Financials
Financial as a whole, little movement early, tracking moves in major averages, but there were
several individual stock stories that moved a few names/sectors
REIT movers; ARCP among biggest losers after saying accounting errors were intentionally not
corrected/replaces CFO and COO; WSH said is the insured broker for ORB exploded rocket (also
posts Q3 eps miss by 3c); AFSI falls on analyst downgrade and cautious article in Seeking Alpha;
XOOM Q4 outlook short of views and says CFO is stepping down; BBSI shares fall after taking a
big reserve charge
Lending names move, led by OCN after Height reported the company has recognized backdating
issues, is taking steps to resolve; resolution necessary as 3 state AGs have commented theyre
monitoring (says if settlement required, OCN likely to pay civil fine, make restitution payments to
harmed borrowers) - Bloomberg; shares of NSM, HLS, WAC, ASPS, AAMC move

Healthcare
Pharma/Biotech movers; GILD Q3 eps missed/revs in-line; Sovaldi sales strong at $2.8B, but
below estimates; AMGN upgraded at Nomura after earnings (touched new all-time high); SNY
ousts CEO (biotechs sell off after touching new highs yesterday GILD, VRTX, REGN weigh)
Earnings movers; AMED jumps on eps beat; ICAD jumps on guidance; USNA jumps to record
highs after Q3 beat and increased profit outlook; Managed care group mixed yesterday on AET
results, but WLP numbers top views, lead group higher
Story movers; UNIS tgt raised to $9 from $5 at Jefferies as views deal with SNY for injectables
significant; CARA up after HAL trial of IV formulation of CR845 met primary endpoint


Industrials & Materials
Metals & Mining; X shares lead steel names higher after quarterly results top views, as sales of
flat-rolled steel quadrupled shares of AKS (added to Deutsche short-term buy list), NUE, STLD
rise; VALE cut to Underperform despite significant correction in mining equities; CLF upgraded to
OP with $18 tgt at Macquarie, while Brean cut to sell with $8 tgt (gives back about half of
Tuesday gains); CCJ Q3 revs miss/cuts uranium production outlook
Industrials/Machinery; ETN the latest machine maker to post strong quarterly results as EPS
beat/revs miss; Industrial gas stocks decline after PX cut its full year forecast after seeing mixed
Q4 volumes and FX headwinds (shares of ARG, APD fell); SPW said to spin off its flow business
Aerospace; ORB falls after its Antares rocket explodes 6 seconds after lift-off/creates
uncertainties note ATK said it was conducting a thorough evaluation of any potential
implications resulting from the ORB incident, including current operating plans, long-term
strategies, and the proposed transaction to merge the company's Aerospace and Defense
businesses with Orbital (the AJ26 engine manufactured by GY unit, which also fell)
Transports give back some gains, but not before trading to new all-time highs earlier for index;
CHRW upgraded to buy at Bank America after earnings; SKYW posted earnings; package delivery
stocks FDX and UPS were weak early

Technology, Media & Telecom
Tech in general weaker, led by FB; AAPL making new all-time highs daily (trades 107.34); Semi
index pares recent gains, with SOX lower (big run over the past 2-weeks despite mixed results
earnings tonight from RFMD, CAVM); high beta stocks continue to get beaten up following
earnings; stocks up on earnings were ARW, WDC, TSS, EA, while STM, CRAY, HLIT fell
Internet FB story in tech today, beating Q3 expectations, but guidance and expense talk weighs
on shares (daily active users were 864M, up 19% YoY and mobile DAUs were 703M, up 39% YoY);
BABA initiated coverage by 14 analysts (all buy rated except 1 neutralGS); EBAY initiated
Underperform and $45 target at Morgan Stanley; AMZN initiated Overweight and $420 tgt
(added to best ideas list) at Morgan Stanley; TWTR and IBM announce data analytics partnership
Earnings movers; video gamer EA boosted its 2015 eps/sales forecast after quarter tops views on
soaring mobile use; IACI Q3 EPS/revs top views as profit surges; GRMN shares fell despite beat
and raise quarter; INVN among worst performers after Q2 eps/revs miss and guides q3 below
(downgraded by a few analysts); AZPN drops on decelerating growth (downgraded by two
analysts after earnings); ULTI down after earnings; WDC rises (qtr. beats/guidance misses)
LED space; AIXG missed Sep-14Q EPS due to very weak gross margins, which the company
blamed on sales mix, customer support activities, and write-downs (follows weak guidance from
CREE recently after quarterly results)
3D movers; HPQ unveils new 3-D capable computer called Sprout that sells for $1,899 and will be
available early next month (DDD, SSYS, XONE, VJET were active)





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