(HSBC) Orange Buy: 2016 – CEO confident of business trends

Orange

Buy: 2016 – CEO confident of business trends

* CEO confirms that Orange is on track to keep delivering strong commercial and financial KPIs;
* Talks are progressing with other players to prepare for the consolidation in the French telecom market
* We think both points could help the re-rating of Orange vs European peers; retain Buy rating, TP EUR18 unchanged

French consolidation can only happen if Orange benefits
Both Orange and Bouygues have announced (companies’ press releases, 5 January 2015) that they are discussing consolidation of the French telecom market from 4 to 3 integrated players. The CEO describes the operation as complex from a regulatory point of view but that the French competition authority might be in charge if an agreement is eventually reached with Bouygues. This would also require Iliad (ILD FP, Buy, CMP EUR224.50) and Numericable-SFR (NUM FP, Buy, CMP EUR36.85) to participate in the Bouygues Telecom assets’ carve-out. Key to shareholders, Orange’s CEO continuously repeated yesterday that the only way to reach an agreement is for it to create value to Orange shareholders. He insisted on the fact that a deal could only be structured in a way that benefits Orange, a condition he set very clearly. We deduct from the CEO comments that the initial share dilution (Orange could pay some of Bouygues telecom assets in shares and cash) would be very limited before synergies, well below the 15% Bouygues stake in Orange that was suggested in the press (JDD, 3 January 2016).

>>> What to look at today - 12th of January 2016

Dow+0.32% S&P+0.09% Nasdaq-0.12% Russell-0.41% VIX 24.30 (-10.03%)
US Market closed near flat line. Falling oil prices in the face of global growth concerns continued to weigh on the overall sentiment, short-circuiting a rebound attempt. Looking overseas, China's Shanghai Composite surrendered 5.3% despite reporting economic data that was largely in-line with analyst expectations. WTI crude had slipped 5.3% to end at $31.41/bbl. commodity-sensitive energy (-2.1%) and materials (-1.6%) claimed the bottom two rungs followed by health care (-1.2%), industrials (+0.1%) and financials (+0.4%). Looking at the flipside, consumer staples (+1.0%), consumer discretionary (+0.9%), telecom services (+0.8%), and technology (+0.6%) lead the pack. MCK fell 10.3% after the company narrowed its guidance for FY 2016, citing weaker pricing on generics in the second half of the fiscal year. Fellow drug wholesalers ABC and CAH also declined, falling 4.0% and 5.5%, respectively...IBB-3.5%...Volume were still High with more than 1bil shares. US After Hours : ELOS +9.7%, BURL +8.2%, LULU +8.0%, UCTT +6.3%, TACO +3.7%, SKUL -20.9% following earnings/guidance, APOL +19.3% (following report that Apollo Global Management (APO) nearing deal to buy Apollo Education). Asian equity markets are trading mixed amid continued volatility across asset classes. Nikkei225 is the underperformer with catchup selling after Monday holiday, while Shanghai is marginally higher after yesterday's steep decline. PBoC has set Yuan little changed again, strengthening the fix relative to the close for the 3rd straight session, but the impact of that move is now more muted. Instead, fixed income traders are increasingly focused on the Hibor rate set at a new record high yet again. Analysts contend that the PBoC is trying to disarm Yuan sellers by boosting the cost of borrowing to short the currency prohibitively expensive. The spread between onshore and offshore Yuan has since moved to flat, the narrowest since October. NDRC's Li Pumin remarked that China economy has tracked to meet 2015 GDP target of 7% and added about 13M new jobs. Alcoa kicked off the unofficial start of the US earnings season with Q4 results largely in line with expectations. For 2016 AA's initial forecast of aluminum demand growth was set at 6%, which was below the 6.5% target for 2015 affirmed in last quarter's earnings. Shares fell slightly in the extended session.

Nikkei -2.71% ( was closed yest) Hang Seng -0.82% Shanghai +0.23%

Eur$ 1.0882 CNY 6.5756 CNH 6.5851 JPY 117.37 GBP 1.4527 RUB$ 76.9260 WTI $30.57 (-2.64%)

S&P -0.35% EuroStoxx -0.26% Dax -0.18% SMI -0.09%

Macro :
- Third Avenue Sees Assets Fall 21% in Quarter as Investors Flee
- China Steps Up Yuan Defense as Soaring Offshore Rates Slam Bears
- China Forecasts Vehicle Sales to Accelerate After Tax Cut
- Alcoa’s Jekyll and Hyde Results Underscore Coming Aluminum Split
- Goldman Sachs Sees $64 Billion in Buybacks Rescuing Japan Stocks

Keep an eye on :
- ABI BB : Asahi Says It’s Considering Tie-Ups After Peroni, Grolsch Report
- AF FP : KLM, Etihad Benefit From Cooperation, KLM CEO Tells Telegraaf
- BAS GY : BASF Must Repay Belgium About EU200m in EU Tax Decision: Tijd
- BC IM : Cucinelli 2015 Net Rev. Rises 16%, Sees Double-Digit 2016 Growth
- BMPS IM : Monte Paschi Short Selling Banned Tuesday By Italy Mkt Regulator
- CAP FP : Cap Gemini to Record Estimated EU520M Non-Cash Income in 2015
- ALCLS FP : +6% in after hours in US, announced the publication of a study describing the design and development of a new CAR architecture with an integrated switch-on system that permits control over CAR T-cell functions
- CBK GY : Commerzbank to Shrink Financial Institutions Unit: Handelsblatt
- CON GY : Continental AG Says No Plan for Major Acquisition in 2016
- CNHI IM : Deere, CNH Lease Risk Seen ’Ever-Rising’: Barclays
- CSGN VX : Credit Suisse Downgraded by Moody’s, Outlook Is Stable
- DTE GY : German Telco Companies Pledge EU8b in 2016 Broadband Investments
- FAGR BB : Worldquant Expands Fagron Short Position to 1.71%
- MEO GY : Metro 1Q Sales In Line With Ests., Confirms FY Outlook
- NOVN VX : Novartis Could Spend Up to $5b on M&A, Sees Alcon Plan Jan. 27
- PAH3 GY : Porsche Expects Sales Growth to Slow After Macan Rollout
- SIKA VX : Sika Reports Accelerated 4Q Sales Growth of 8.3%
- UG FP : Peugeot Citroen 2015 Sales Rose 1.2% to 2.97 Mln Vehicles
- PFE US : Pfizer CEO Thinks Drug Pricing Is a ’Political Issue’
- RIO LN : Rio May Miss 2015 Shipping Target as BHP on Track for FY16: UBS
- SAP GY : SAP 4Q Non-IFRS Oper Profit EU2.28b, Est. EU2.26b
- SHA GY : Schaeffler Owner Says He’s Open to Additional Stock Sales
- SHP LN : Shire, Baxalta Merger Pact Has Termination Fee Up to $369.0m
- TEC FP : Technip Agrees to Buy Minority Stake in Vallourec’s Serimax
- TWX US : Icahn Says He Doesn’t Own Any Shares in Time Warner: CNBC
- VIV FP : Universal Said to Near Licensing Deal With SoundCloud: NYP
- VOW3 GY : Volkswagen’s Mueller Doesn’t See Selling Off Any Brands

>>> Europe : Brokers Upgrades & Downgrades - 12th of January 2016

>>> Up
*AAREAL BANK RAISED TO HOLD VS SELL AT BERENBERG
*AIR FRANCE-KLM RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS (Note attached)
*BANKIA RAISED FROM EQUALWEIGHT AT BARCLAYS
*BANCO POPOLARE RAISED TO BUY AT HSBC
*BARRATT RAISED TO BUY AT JEFFERIES
*BERKELEY RAISED TO BUY AT JEFFERIES
*BNP PARIBAS RAISED TO BUY VS HOLD AT SOCGEN
*BUREAU VERITAS RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
*CAIRN ENERGY RAISED TO EQUALWEIGHT VS UNDERWEIGHT AT BARCLAYS
*CUCINELLI RAISED TO BUY VS HOLD AT KEPLER CHEUVREUX
*CENTRICA RAISED TO OUTPERFORM VS NEUTRAL AT EXANE
*DANONE RAISED TO BUY VS NEUTRAL AT NOMURA
*DRAX RAISED TO HOLD VS SELL AT DEUTSCHE BANK
*EDPR RAISED TO BUY VS HOLD AT DEUTSCHE BANK
*E.ON RAISED TO BUY VS HOLD AT DEUTSCHE BANK
*FORTUM RAISED TO HOLD VS SELL AT DEUTSCHE BANK
*GALLIFORD TRY RAISED TO BUY AT JEFFERIES
*GAZPROM NEFT RAISED TO NEUTRAL VS UNDERWEIGHT AT JPMORGAN
*GEBERIT RAISED TO BUY VS HOLD AT KEPLER CHEUVREUX
*GENEL RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*JUPITER RAISED TO OUTPERFORM VS NEUTRAL AT EXANE
*LADBROKES RAISED TO NEUTRAL VS UNDERPERFORM AT CREDIT SUISSE
*LEGRAND RAISED TO BUY VS HOLD AT KEPLER CHEUVREUX
*OSRAM LICHT RAISED TO BUY VS HOLD AT HSBC
*RWE RAISED TO OVERWEIGHT VS NEUTRAL AT JPMORGAN
*SABADELL RAISED FROM EQUALWEIGHT AT BARCLAYS
*SGS RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE
*STANDARD LIFE RAISED TO BUY VS HOLD AT DEUTSCHE BANK
*ST JAMES’S PLACE CUT TO HOLD VS BUY AT DEUTSCHE BANK
*SWEDBANK RAISED TO BUY VS HOLD AT DNB
*TERNA RAISED TO BUY VS HOLD AT DEUTSCHE BANK
*WHITBREAD RAISED TO BUY VS NEUTRAL AT CITI
*WILLIAM HILL RAISED TO OUTPERFORM VS NEUTRAL AT CREDIT SUISSE

>>> Down
*ACCIONA CUT TO HOLD VS BUY AT DEUTSCHE BANK
*BHP BILLITON CUT TO UNDERWEIGHT VS EQUALWEIGHT AT BARCLAYS
*BHP BILLITON CUT TO REDUCE VS HOLD AT HSBC
*BOOKER CUT TO NEUTRAL VS BUY AT CITI
*CHARIOT OIL CUT TO HOLD VS BUY AT JEFFERIES
*EASYJET CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
*ENDESA CUT TO NEUTRAL VS OUTPERFORM AT EXANE
*INTERCONT HOTELS CUT TO NEUTRAL VS BUY AT CITI
*L’OREAL CUT TO UNDERPERFORM VS SECTORPERFORM AT RBC, PT EU145
*MEAD JOHNSON NUTRITION CUT TO NEUTRAL VS BUY AT NOMURA
*NORILSK NICKEL CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
*POPULAR CUT TO EQUALWEIGHT VS OVERWEIGHT AT BARCLAYS
*PREMIER OIL CUT TO HOLD VS BUY AT JEFFERIES
*PROXIMUS CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
*PRUDENTIAL CUT TO HOLD VS BUY AT DEUTSCHE BANK
*TALKTALK CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
*TELE2 CUT TO NEUTRAL VS OVERWEIGHT AT JPMORGAN
*TELENOR CUT TO UNDERWEIGHT VS OVERWEIGHT AT JPMORGAN
*VERBUND CUT TO NEUTRAL VS OUTPERFORM AT EXANE
*ZURICH INSURANCE CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN

>>> PT Change


>>> Initiation
*FERRAGAMO RATED NEW BUY AT CITI; PT EU27
*LUXOTTICA RATED NEW BUY AT SOCIETE GENERALE
*SCANDIC HOTELS RATED NEW EQUAL WEIGHT AT MORGAN STANLEY
*URALKALI RATED NEW EQUALWEIGHT AT BARCLAYS, PT 160 RUBLES

>>> Call
>> Stock
*DEUTSCHE TELEKOM EXITS HSBC EUROPE SUPER 10 PORTFOLIO
*ORANGE ADDED TO HSBC EUROPE SUPER 10 PORTFOLIO
*SEADRILL EXITS CONVICTION SELL LIST AT GOLDMAN; STILL SELL
>> Sector
*EUROPE OIL & GAS SECTOR CUT TO NEUTRAL VS POSITIVE AT BARCLAYS

>>> After Hours Summary: ELOS +9.7%, BURL +8.2%, LULU +8.0%,


After Hours Summary: ELOS +9.7%, BURL +8.2%, LULU +8.0%, UCTT +6.3%, TACO +3.7%, SKUL -20.9% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings:  ELOS +9.7%, BURL +8.2%, LULU +8.0%, UCTT +6.3%, TACO +3.7%

Companies trading higher in after hours in reaction to news:  APOL +19.3% (following report that Apollo Global Management (APO) nearing deal to buy Apollo Education), CLLS +6.0% (announced the publication of a study describing the design and development of a new CAR architecture with an integrated switch-on system that permits control over CAR T-cell functions), XONE +4.6% (to raise ~$13 mln in gross proceeds in a registered direct offering of common shares from its Chairman and CEO), PODD +2.3% (entered into development agreement with Eli Lilly (LLY) for OmniPod delivery of U200 concentrated insulin).

After Hours Losers:

Companies trading lower in after hours in reaction to earnings:  SKUL -20.9%, HTWR -1.4%

Companies trading lower in after hours in reaction to news:  EGO -3.9% (amended investment plans in Greece), EDR -2.4% (announced 5.5 mln common stock offering), GOOD -1.3% (filed $500 mln mixed securities shelf offering

>>> Asian Update

Asian Market Update: Hibor spikes again; Oil selloff gushing to new lows; Alcoa outlook tepid in earnings season debut


***Economic Data***
- (JP) JAPAN NOV CURRENT ACCOUNT BALANCE: ¥1.1T (17th straight surplus) V ¥0.9TE; ADJUSTED CURRENT ACCOUNT: ¥1.42T V ¥1.51TE; TRADE BALANCE: -¥272B V -¥159BE
- (JP) JAPAN DEC BANK LENDING (INCL TRUSTS) Y/Y: 2.2% V 2.3% PRIOR; BANK LENDING (EX- TRUSTS) Y/Y: 2.2% V 2.3%E; 20-month low
- (JP) JAPAN DEC CONSUMER CONFIDENCE: 42.7 V 42.5E
- (NZ) NEW ZEALAND DEC ANZ COMMODITY PRICE M/M: -1.8% V -5.6% PRIOR (2nd consecutive decline)
- (AU) AUSTRALIA NOV CREDIT CARD BALANCES: A$51.3B V A$50.6B PRIOR; CREDIT CARD PURCHASES: A$25.6B V A$24.8B PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 114.1 v 116.3 prior
- (UK) DEC BRC LFL SALES Y/Y: 0.1% V 0.5%E

***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -2.3%, S&P/ASX -0.4%, Kospi +0.3%, Shanghai Composite +0.4%, Hang Seng +0.3%, Mar S&P500 -0.2% at 1,910

***Commodities/Fixed Income***
- Feb gold +0.1% at $1,097/oz, Feb crude oil -1.5% at $30.95/brl, Mar copper +0.1% at $1.98/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 2.1 tonnes to 651.7 tonnes; 3rd straigh increase, highest since Dec 1st
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.5628 V 6.5626 PRIOR
- (CN) PBoC to inject CNY80B in 7-day reverse repos
- (HK) Offshore overnight yuan HIBOR 66.82% (fresh record high) v 13.4% yesterday

***Market Focal Points/FX***
- Asian equity markets are trading mixed amid continued volatility across asset classes. Nikkei225 is the underperformer with catchup selling after Monday holiday, while Shanghai is marginally higher after yesterday's steep decline. PBoC has set Yuan little changed again, strengthening the fix relative to the close for the 3rd straight session, but the impact of that move is now more muted. Instead, fixed income traders are increasingly focused on the Hibor rate set at a new record high yet again. Analysts contend that the PBoC is trying to disarm Yuan sellers by boosting the cost of borrowing to short the currency prohibitively expensive. The spread between onshore and offshore Yuan has since moved to flat, the narrowest since October. In USD majors, USD/JPY is down about 60pips from the highs below 117.50, AUD/USD down about 30pips from the highs near 0.6970, and EUR/USD is in a 40pip range above 1.0840. EM commodity currencies were pressured lower again - USD/MXN rose to 17.94 and USD/ZAR up about 0.5% at 16.85. Electronic trade in commodities also continues to punish oil, with Feb WTI sliding over 2% from the highs to $30.60.

- Among notable speakers, NDRC's Li Pumin remarked that China economy has tracked to meet 2015 GDP target of 7% and added about 13M new jobs. China's financial sector saw more strain however, with reports of 2015 non-performing loans (NPLs) having doubled in 2015 vs 2014. China auto sector did get some welcome news however, with PCA reporting Dec sales rising 17% and 2015 sales up 8.5%.

- In Japan, Nikkei reported PM Abe anticipates FY16/17 tax revenue to be ¥21T higher than in FY11/12, targeting more spending to deal with population decline and bolstering govt finances while also offering some tax breaks. Fin Min Aso again indicated that Japan corporate fundamentals are not bad, but external risks need monitoring. Going into the spring negotiations period, Nikkei reported that Toyota Motor's labor union is set to request ¥3K rise in monthly base wages, which is only about half requested last year.

- Alcoa kicked off the unofficial start of the US earnings season with Q4 results largely in line with expectations. For 2016 AA's initial forecast of aluminum demand growth was set at 6%, which was below the 6.5% target for 2015 affirmed in last quarter's earnings. Shares fell slightly in the extended session.

***Equities***
US equities / ADRs:
- APOL: Reportedly Apollo Global in talks to buy Apollo Education Group in deal valued at around $1B - press; +22.3% afterhours
- ELOS: Guides Q4 R$78-79M v $74.7Me; +9.7% afterhours
- LULU: Guides Q4 higher $0.78-0.80 v $0.79e, R$690-695M v $680Me ($0.75-0.78, R$670-685M prior guidance); cites successful holiday season; +8.5% afterhours
- BURL: Narrows Q4 guidance $1.44-1.46 v $1.49e (prior $1.44-1.48), Rev +3.7% (prior 3.7-4.7%) SSS to be approximately flat (prior flat to +1%); +8.3% afterhours
- TWX: Investor Icahn reportedly building a stake; May result in a "shake-up" of company - financial press; +4.2% afterhours
- MSCC: To be added to S&P400 index, replacing ATW which moves down to the S&P600 index; +1.8% afterhours
- SAP.DE: Reports prelim Q4 non-IFRS Op profit €2.28B v €2.26Be; non-IFRS Total Rev €6.35B v €6.04Be; prelim FY15 non-IFRS op profit €6.35B; +0.7% afterhours
- AA: Reports Q4 $0.04 v $0.03e, R$5.25B v $5.22Be; -0.8% afterhours
- HAIN: Guides Q2 $0.53-0.56 v $0.57e, R$740-760M v $771Me; Lowers FY16 to $1.95-2.10 v $2.12e, R$2.90-3.04B v $2.97Be; -1.1% afterhours
- SKUL: Lowers Q4 to $0.25-0.27 v $0.37e, Rev to flat y/y (prior $0.38-0.40, Rev +5-7%); Guides FY16 Rev mid-high single digit growth; -22.9% afterhours

Key movers in Asia
- WHC.AU: Reports H1 ROM coal production 9.3M tonnes, +63% y/y; Coal sales 4.9M tonnes, +67% y/y; -5.3%
- WPL.AU -2.2%, STO.AU -3.7%, QAN +2.0% on lower oil prices; BPT.AU biggest decliner in Australia energy, down 11% after CEO change
- Aeon 8267.JP -9.4% (9-month results)
- Galaxy Entertainment 27.hk +2.1%, Sands China +1.4%; positive sectors comments from Morgan Stanley

WSJ : Apollo Global Management in Talks to Buy Apollo Education

Apollo Global Management in Talks to Buy Apollo Education

Deal with private-equity firm could be worth about $1 billion

Private-equity firm Apollo Global Management LLC is in advanced talks to buy struggling education company Apollo Education Group Inc., according to people familiar with the matter.

A deal between Phoenix-based Apollo Education and Apollo Global Management, a New York private-equity firm, could be worth about $1 billion, some of the people said, with one of them adding an agreement could be reached in the next few weeks. Apollo Education had been in discussions with a number of private-equity firms since late last year, but Apollo Global Management is the only one still in the running now, this person said.
It is possible, as always, in such situations that there will be no deal, and another buyout firm could re-emerge.

Apollo Education, which is unaffiliated with the buyout firm, said Monday that its board is in talks that “could potentially lead to a change of control of the company.” It didn’t name a possible buyer or give other details of the sales process.

Apollo Education, operator of the University of Phoenix, disclosed the talks as it reported its third loss in four quarters in the latest sign of stress in the for-profit college industry. In recent years, such institutions have seen enrollment slide amid scrutiny of their recruiting, career outcomes and student-loan default rates. Shares of a number of the companies, especially Apollo Education, have been battered as a result.

In October, the Defense Department said it had barred the University of Phoenix system from recruiting on military bases and prevented troops from using federal money for classes. Earlier last year, the company, which operates on-campus and online classes, disclosed probes by the U.S. Federal Trade Commission and the California Attorney General’s office into its marketing and other business practices. The company has said it intended to cooperate fully with the agencies’ requests for information.

In the fiscal quarter ended Nov. 30, Apollo Education posted a loss of $60.8 million, or 56 cents a share. Excluding restructuring charges and other items, it had a per-share profit of 29 cents, short of the 31-cents-a-share estimate of analysts polled by Thomson Reuters.

Revenue fell 18%—more than analysts had expected—to $586 million as total degree enrollment slid 22%.

Apollo Education’s shares were down 3.2% at $6.38 in afternoon trading, giving up an earlier gain of as much as 17% as news of the disappointing results appeared to outweigh the prospect of a sale of the company. That brought the stock’s loss over the past 12 months to 76% and gave the company a market value of about $700 million.

Following The Wall Street Journal’s report on the talks with Apollo Global Management, the stock shot up again after the end of regular trading.

Apollo Education, which is controlled by Chairman Peter Sperling and a trust, said that a sale could boost its strategic initiatives including an international expansion and a plan to transform the University of Phoenix and improve outcomes for its students.

The value of other companies in the for-profit education sector has been tumbling. DeVry Education Group Inc.’s stock is down about 50% over the past year, for example. Last year, a bankruptcy judge approved Corinthian Colleges Inc.’s plan to liquidate its assets. In 2014, Education Management Corp. handed ownership to creditors in an out-of-court restructuring.

Apollo Global Management, founded by veterans of junk-bond pioneer Drexel Burnham Lambert, is known for a willingness to invest in struggling industries and companies. For example, last year it pursued—though never closed—a deal for property mogul Nicholas Schorsch’s troubled real-estate empire.

>>> US Close Dow+0.32% S&P+0.09% Nasdaq-0.12% Russell-0.41%

Closing Market Summary: Indices Begin Week on a Flat Note

The stock market began the week on a flat note with the S&P 500 adding 0.1% while the tech-heavy Nasdaq (-0.1%) trailed the benchmark index. Falling oil prices in the face of global growth concerns continued to weigh on the overall sentiment, short-circuiting a rebound attempt.

Looking overseas, China's Shanghai Composite surrendered 5.3% despite reporting economic data that was largely in-line with analyst expectations. In economic data, China's December CPI increased 0.5% month-over-month (expected 0.4%), moving its year-over-year growth to an increase of 1.6%, as expected. Additionally, December's Producer Price Index fell 5.9% year-over-year versus an expectation of a 5.8% decrease. Despite the slide in Asia, investor sentiment improved once the attention shifted to Europe. However, a morning retreat in crude oil weighed on the stock market as a whole. By the end of the energy-component's pit session, WTI crude had slipped 5.3% to end at $31.41/bbl.

On the leaderboard, commodity-sensitive energy (-2.1%) and materials (-1.6%) claimed the bottom two rungs followed by health care (-1.2%), industrials (+0.1%) and financials (+0.4%). Looking at the flipside, consumer staples (+1.0%), consumer discretionary (+0.9%), telecom services (+0.8%), and technology (+0.6%) lead the pack.

The health care space underperformed the other countercyclical sectors throughout the day as drug wholesalers faced pressure. McKesson (MCK 163.55, -18.84) fell 10.3% after the company narrowed its guidance for FY 2016, citing weaker pricing on generics in the second half of the fiscal year. Fellow drug wholesalers AmerisourceBergen (ABC 94.06, -9.90) and Cardinal Health (CAH 79.27, -4.59) also declined, falling 4.0% and 5.5%, respectively. Elsewhere in the space, biotechnology demonstrated relative weakness evidenced by a 3.5% dive in the iShares Nasdaq Biotechnology ETF (IBB 291.69, -10.51).

Looking at energy, Dow components Exxon Mobil (XOM 73.69, -1.00) and Chevron (80.77, -1.36) outperformed the sector but still sustained substantial losses, with respective declines of 1.3% and 1.7%. Independent oil and gas companies were hit harder by plummeting oil prices with Anadarko Petroleum (APC 37.75, -2.81) and ConocoPhillips (COP 41.12, -2.17) sporting losses of 6.9% and 5.0%.

In Treasuries, the benchmark note moved closer to its morning low as the afternoon session progressed with the yield on the 10-yr higher by six basis points at 2.17%. 

Investor participation was above average with more than a billion shares changing hands at the NYSE floor.

No economic data was released today and tomorrow's data will be limited to the November Job Opening and Labor Turnover Survey, which will be released at 10:00 ET. 

  • Russel 2000 -8.2% YTD
  • Nasdaq -7.4% YTD
  • S&P 500 -5.9% YTD
  • Dow Jones Industrial Average -5.9% YTD

>>> Alcoa beats by $0.03, reports revs in-line; sees 2016 aluminum demand up 6%;

--> +2% after hours

Alcoa beats by $0.03, reports revs in-line; sees 2016 aluminum demand up 6%; business separation in 2H16 on track

* Reports Q4 (Dec) earnings of $0.04 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus of $0.01; revenues fell 17.8% year/year to $5.25 bln vs the $5.28 bln Capital IQ Consensus.
- Organic growth in aerospace and acquisitions increased revenue 7%, which was more than offset by a 25% revenue decline from lower alumina and aluminum prices, the impact of divested, curtailed or closed facilities, and unfavorable currency.
- The Value-Add businesses reported strong performance, while the Upstream remained profitable despite lower alumina and aluminum prices. Every segment delivered productivity gains.
- Strong productivity gains were more than offset by lower alumina and aluminum prices. In 2015, the Midwest transaction price for primary aluminum fell $657 per metric ton, or 28%, and the Alumina Price Index dropped $154 per metric ton, or 43%.
* In 2016, Alcoa expects a global aluminum deficit of 1.2 million metric tons and a global alumina deficit of 2.8 million metric tons due to global curtailments. The Company also projects record global aluminum demand in 2016 of 60.5 million metric tons, up 6% over 2015. Global aluminum demand is expected to double between 2010 and 2020; so far this decade, global demand growth is tracking ahead of this projection.
* Alcoa's plan to separate into two publicly traded cos is expected to be completed in the second half of 2016.

>>> U.S. bombs 'millions' in ISIS currency holdings


Washington (CNN)In an extremely unusual airstrike, the U.S. dropped bombs Sunday in central Mosul, Iraq, destroying a building containing huge amounts of cash ISIS was using to pay its troops and for ongoing operations, two U.S. defense officials told CNN.

The officials could not say exactly how much money was there or in what currency, but one described it as "millions."

Two 2,000-pound bombs destroyed the site quickly. But the longstanding impact may be even more significant. The officials said the U.S. plans to strike more financial targets like this one to take away ISIS's ability to function as a state-like entity.

This is a similar expansion to the target list as happened several weeks ago, when U.S. warplanes began hitting ISIS oil trucks.

The U.S. considers the Mosul strike extremely sensitive, as the building is in an area where civilians are also located, and there was a significant risk of civilian casualties.

Officials would not say how the U.S. learned of the location. But after getting intelligence about the so-called "cash collection and distribution point," U.S. aircraft and drones watched the site for days trying to determine when the fewest number of civilians would be in the area.

Because civilians were nearby during the daylight hours, and ISIS personnel were working there at night, the decision was made to strike at dawn on Sunday.

U.S. commanders had been willing to consider up to 50 civilian casualties from the airstrike due to the importance of the target. But the initial post-attack assessment indicated that perhaps five to seven people were killed.

In recent weeks, the U.S. has said it will assess all targets on a case-by-case basis and may be more willing to tolerate civilians casualties for more significant targets.