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StreetAccount Summary - U.S. market recap: Dow +0.19%, S&P 500 +0.24%, Nasdaq +0.57%, Russell 2000 +0.68%

Mar 27, 2015
  • Synopsis:
    • US equities closed higher Friday. Similar to yesterday, it was another quiet session with no major directional drivers. Fed Chair Yellen spoke just before the close, but her speech contained no real surprises. There seemed to be little impact from the economic calendar, with US Q4 GDP unrevised, while the Univ. of Michigan was revised a bit higher than expected. Oil prices got some attention as WTI and Brent both fell more than 4%, likely in response to some talk that the near-term impact of the Yemen conflict may be limited. Greece remained in the headlines as the government negotiated a list of reforms and there were some more rumors of possible capital controls. The dollar was slightly weaker against the euro, but mixed against the other majors. Treasuries were stronger across the curve, recovering from some of yesterday's notable weakness. The groups in focus during Wednesday's selloff, biotech and semis, both rallied today. Healthcare was the best performing sector, while energy and financials were the notable laggards.
  • Digest:
    • No major surprises from Yellen:
      • There were no real surprises from Fed Chair Yellen in a speech released fifteen minutes before the day's close. She noted that a rate hike is likely warranted later this year, but she added that the pace of policy normalization is likely to be gradual. However, she did stress that the Fed could speed up, slow, pause or even reverse the tightening cycle. She noted that the Fed does not need to see an increase in core inflation to raise rates, though she also pointed out she would be uncomfortable tightening if wage growth, core inflation or inflation expectations weaken. As with recent commentary, she also talked up traction in the labor market recovery.
    • Little impact from economic data:
      • Q4 GDP remained unchanged at 2.2% in the final revision, although the consensus was for 2.4%. Consumer spending was revised to 4.4% from the 4.2% reported last month, making it the fastest pace in nearly nine years. However, some Street economists expected a stronger revision. Inventories were a drag, lowering GDP by 0.1% after providing a 0.1% tailwind in the previous estimate. Separately, the final reading of the March Univ. of Michigan consumer sentiment index was revised up to 93 from 91.2, with the consensus expecting 92. The two components, expectations and current conditions, both showed improvement from the preliminary reading of two weeks ago. Recall that consumer confidence measures have generally been volatile so far in 2015.
    • Oil prices sell off:
      • Oil prices came under pressure with WTI settling 5% lower, while Brent was down 4.7%. Events in Yemen were again in focus, although some reaction noted that recent concerns may be overblown. Also note that global prices rallied strongly earlier in the week, with WTI up ~10% over the previous four sessions. Goldman Sachs said the near-term potential impact on production was limited and that the Bab el-Mandeb strait is a transit point rather than a chokepoint. Citi noted that there is no indication that either side in the conflict has the means or the intention of disrupting supply flows. The firm added that the recent price strength has been driven in part by a short covering rally.
    • Semis outperform, but tech lags:
      • While there has been negative sentiment surrounding semis this week, the group rallied today with the SOX +2.8%. The group made strong gains late in the session following reports from the WSJ that INTC +6.4% is in talks to acquire ALTR +28.4%. Recall that the group sold off sharply on Wednesday and underperformed yesterday as SNDK (2.4%) reduced Q1 revenue guidance and TSM (1.1%) made comments about a slowdown in demand. Tech lagged overall today, weighed down by hardware with AAPL (0.8%) and EMC (2.5%) notable decliners.
    • Biotech a standout in healthcare:
      • Biotech, which has also been under increased scrutiny lately, rallied with the BTK +2.6%. Recall that the group fell sharply Wednesday, but rebounded yesterday and extended gains today. BMRN +11.5% was among the standouts, while large-cap name CELG +0.9% also fared well. Managed care stocks were also broadly stronger. Consumer discretionary also outperformed, helped by retail, even though there was a mixed reaction to earnings from RH +4.1%, GME (1.1%) and FINL (1.3%). Industrials outperformed, helped by a rally in airlines following the decline in oil prices. UAL +4.3% and JBLU +4.1% were the standouts.
    • Notable Movers:
      • +28.5% ALTR (Altera): WSJ reported that INTC +6.4% is in talks to acquire company.
      • +14% OLN (Olin): Announced plans to merge with DOW’s +2.8% chlorine business; combined entity will have ~$7B in revenue; expects scale benefits to driver synergies of at least $200M a year.
      • +11.5% BMRN (BioMarin): Betaville blog recently reported SHPG +1% said to be weighing acquisition; noted it recently approached BioMarin about a deal.
      • +4.5% SHLM (A. Schulam): Upgraded to overweight from sector weight at KeyBanc; cited pending Citadel acquisition, improved geographic mix and favorable checks at NPE.
      • +4.1% RH (Restoration Hardware): Guided 2015 revenue ~4% below Street at midpoint; timing issues surrounding new store openings and new business launches the drag; however, many analysts defended, focusing on one of better long-term growth profiles in retail.
      • +4% OREX (Orexigen Therapeutics): Received marketing authorization from European Commission for Mysimba, company’s obesity drug.
      • +1.7% BBRY (BlackBerry): Q4 EPS better than expected at $0.04 vs ($0.03), but revenue weaker; Street upbeat on better FCF, although hardware revenues and lower units also getting some attention.
      • +1.4% YHOO (Yahoo): Announced additional $2B share repurchase program; stock also initiated overweight at Morgan Stanley.
      • -1.1% GME (Gamestop): Q4 EPS missed and company guided 2015 EPS 9% below the Street at the midpoint; lower-than-expected new software growth (largely due to bigger declines in “last gen”) a widely cited drag; FX headwinds also mentioned; downgraded at B. Riley.
      • -1.4% AEO (American Eagle Outfitters): Downgraded to sell from neutral at Goldman Sachs; noted market has got ahead of itself in terms of its view of long-term earnings power; believes company in midst of multi-year period of diminishing productivity, margins and returns.
      • -2.5% EMC (EMC): Downgraded to sector perform from outperform at Pacific Crest; noted storage field checks in a seasonally slow Q1, along with increasing appetite to consolidate, heighten near-term execution risks for company.
      • -3.5% MT (Arcelormittal): Downgraded to sell from neutral at Citi; noted revised EBITDA forecast is 15% below consensus and implies guidance cut of 10%+; added valuation stretched with stock trading at peak multiples.
      • -68.6% OHRP (Ohr Pharmaceutical): Eye treatment (for wet form of macular degeneration) OHR-102 failed to meet key goal in combination with Roche’s Lucentis in Phase II study.
    • Sector Performance (vs the S&P)
      • Outperformers: Healthcare +0.74%, Consumer Spls. +0.56%, Consumer Disc. +0.52%, Utilities +0.52%, Industrials +0.40%
      • Underperformers: Energy (0.74%), Financials (0.12%), Telecom (0.04%), Materials (0.07%), Tech +0.17%
  • Data:
    • DXY: 97.39, (0.04%)
    • €-$ +0.0016 or +0.15% to 1.0891
    • $-¥ (0.02) or (0.02%) to 119.22
    • €-¥ +0.16 or +0.12% to 129.82
    • 2-year yield (1) bps to 0.60%
    • 10-year yield (4) bps to 1.96%
    • 30-year yield (5) bps to 2.53%
    • WTI Crude (May 15): ($2.99) or (5.81%) to $48.44
    • Gold (Apr 15): ($8.40) or (0.70%) to $1196.40
    • Breadth on the NYSE was positive 1.5:1; breadth on the Nasdaq was positive 1.4:1
    • Total Exchange volume on the NYSE of 742M was 88% of the 30-day average – Exchange volume excludes regional data
    • Index performance:
      • Month-to-date: Dow (2.32%), S&P (2.07%), Nasdaq (1.46%) Russell +0.57%
      • Quarter/Year-to-date: Dow (0.62%), S&P +0.10%, Nasdaq +3.28% Russell +2.9
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