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Index
Up/Down
Last
DJ Industrials
33.83
0.19%
17,712
S&P 500
4.80
0.23%
2,060
Nasdaq
27.86
0.57%
4,891
Russell 2000
8.40
0.68%
1,240
Economic Data
The U.S. economy (GDP) expanded at 2.2% annualized pace in Q4, led by the biggest gain in
consumer spending in eight years (data in-line with prior month view, but below est. of 2.4%).
Recall GDP rose 5% in the prior quarter. Personal consumption rose 4.4% in 4Q after rising 3.2%
prior quarter, while the GDP price index rose 0.1% in 4Q after rising 1.4% prior quarter and core
PCE q/q (key inflation metric) rose 1.1% in 4Q after rising 1.4% prior quarter
Corporate profits fell in Q4 (first time since 2008); pretax corporate profits, adjusted for
depreciation and the value of inventories, fell at a (-1.4%) annual rate in Q4, while for the full
year, adjusted profits slipped (-0.8%) to $2.09 trillion
U.S. consumer sentiment fell to 93.0 in the final March print from the University of Michigan
survey compared to February's 95.4, though is better than the 91.2 March preliminary reading.
This is the weakest since November's 88.8. The current conditions index dipped to 105.0 from
February's 106.9 (103.0 preliminary). The consumer expectations index dropped to 85.3 from
88.0 last month (83.7 preliminary).
Commodities
Oil falls on day/up for week; WTI crude ended the day at the lows, falling more than 5% to
$48.87 (intraday high was $51.38), while Brent fell more than 4% as well, but still logged a
healthy gain for the week of 4.9%. Busy news in energy complex, rising early in the week amid a
declining dollar (oil also wasnt dented after larger inventory builds were reported by the API and
DOE yet again, including record builds in Cushing), and advanced further yesterday on reports
that Saudi Arabia and allies carried out air strikes in Yemen, on Iranian-backed Houthi rebels the
past few days. However, oil futures began paring gains as investors took profits (inventory issues
clearly still remains/oil got lift this week on geopolitical concerns). Goldman Sachs said earlier it
expected the Yemen military action, but also a potential nuclear deal with Iran that could lead to
a loosening of sanctions, to have little near-term impact on oil supply. The Saudi-led operation
has not affected the oil facilities of major Gulf producers, but the fear is the conflict could spread
and further unsettle the Middle East and disrupt oil shipments.
Gold prices fell $5.00, or 0.4% to settle at $1,199.80 an ounce, snapping its 7-day winning streak
on dollar weakness, but still ended with a 1.3% gain for the week. Prices had rallied the past two
trading sessions amid the turmoil in Yemen, helping buoy safe-haven demand for the metal. The
yellow metal also benefitted from a weaker U.S. dollar following FOMC commentary last week,
as well as softer economic data (slowing economic growth fears)
Currencies
Dollar declines; after falling sharply late last week on FOMC lowered growth projections and
expectations of a push out in interest rate hikes, the dollar held relatively steady this week, but
did manage to lose some additional ground vs. counterparts. The dollar weakness has helped
propel commodity prices over the last week and a half. The dollar index (DXY) was down small
today, trading around 97.28, down from last week highs of 100.33 (more than 3%), which was a
12-year high. The euro actually lost ground this week to the dollar, ending near 1.09 level.
Bond Market
Bond markets were stronger, extending gains into Fed Chairman Yellens speech in San Francisco
late day (started at 3:45 PM ET), as the yield on the benchmark 10-yr dropped to 1.94% late day
after closing 2.01% late yesterday (traded as low as 1.89% Thursday morning). It has been
another volatile week for bonds, but yields still remain depressed, continuing to look significantly
more attractive than their European counterparts (German 10-year bunds yields around 0.25%).
Bonds pared gains late day after the Yellen comments.
Macro
Up/Down
Last
WTI Crude
-2.56
48.87
Brent
-2.78
56.41
Gold
-5.00
1,199.80
EUR/USD
0.0018
1.0902
JPY/USD
-0.10
119.08
10-Year Note
-0.064
1.946%
Financials
Large Cap banks little lower, not really doing much of anything this week; reports midday on
Reuters that the Fed is mulling life insurers plan for new capital standards; in analyst calls; BBT
was upgraded to Outperform at FBR Capital; RF was upgraded to Buy at Compass Point
Payday lenders; Macquarie downgraded WRLD to Underperform due to increased risk from
proposed and potential CFPB regulations (note weakness in Payday Lenders Thursday after one
analyst said the first read on CFPB Payday Rules is more onerous than expected and a negative
for CSH, EZPW, WRLD, FCFS)
Consumer finance/Lending; VNTV downgraded to reduce at SunTrust calling it the most
expensive merchant processor we follow on four out of five metrics in C15; LC initiated
Underperform at Portales
Healthcare
Biotech names with a nice bounce (2%), helped by BMRN (positive analyst calls), ESPR (analyst
initiation), as well as recoveries in CAR-T stocks (JUNO, KITE, BLUE), after selling pressure this
week; 2) airlines recovering as oil prices plunge as Yemen fears abate
Large Cap Pharma; JNJ is collaborating with GOOGL to develop a robotic-assisted surgical
program, but no financial terms were disclosed; Managed care HMOs were strong today, with
gains in AET, CI, UNH, ANTM (Leerink positive on ANTM, raised tgt to $180); Nikkei reported late
that Panasonic Healthcare may bid for Bayer's blood glucose meter unit http://goo.gl/v8eeZU
Biotech ; BMRN rises after several positive analyst comments as UBS target raised to $136 from
$112 and Deutsche raises to $140 from $90 (sees a potential takeout valuation of $194-$271 per
share in one year if BMN-111, DMD, and Hemophilia are positive); PTCT positive mention at Bank
America today (reit buy and $86 tgt); MDVN tgt bumped to $150 at Barclays
Specialty Pharma; OHRP plunges as its clinical trial evaluating candidate for the treatment of the
wet form of age-related macular degeneration (wet-AMD), OHR-102 failed to achieve its primary
endpoint; ALKS was downgraded to Neutral at Citi; ESPR was resumed with a buy and $130 tgt at
Citigroup; OREX rises as EMA approved Mysimba (Contrave's brand name ex-US) for the
treatment of patients with Obesity (BMI over 30)
Services; OVAS falls as Oppenheimer said there was pushback from academics on the validity
of the clinical results
Industrials & Materials
Transports; small recovery in transports today after posting more than 4% drop this week on
jump in oil (hurt airlines), profit warnings in rail space (KSU and GWR), and economic slowdown
concerns after softer economic data the past week (hit names like FDX/UPS); rails KSU -11%,
UNP -7%, CSX and NSC both -6% this week
Metals & Mining; ROLL to acquire the Sargent Aerospace & Defense business of Dover
Corporation (DOV) for $500M; SCCO canceled its $1.4B Tia Maria project amid protests in Peru,
the company's head reported citing Reuters (Minister later said official exaggerated on
project/was not cancelled); SXCP upgraded at Citigroup
Chemicals; DOW said it would separate a large part of its chlorine business and merge it with
OLN in a deal that will give Dow control of Olin; deal valued at $5 billion http://goo.gl/DELARH ;
shares of AXLL advanced on the OLN/DOW deal
Distributors: MSM and WCC downgraded to Neutral at RW Baird saying relative performance of
the group generally peaked in 1Q12, and with organic growth, pricing, and margins likely under
pressure into 2016, we believe it is too early to call a bottom; FAST to buy back up to 4M shares
AG & Machinery; BG upgraded to Buy at Goldman Sachs as believes Q4 issues will prove
transitory; machinery names (CAT) were weaker
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