>>> US Close Dow+0.60% S&P+0.41% Nasdaq+0.38% Russell-0.73%

Closing Market Summary: Crude Oil Leads Stocks Higher

The stock market began the trading week on a higher note, but not before showing some late morning volatility. The S&P 500 climbed 0.5% after briefly dipping below the 2,000 mark while the Nasdaq Composite (+0.4%) underperformed slightly.

Equity indices slumped out of the gate with cyclical sectors fueling the early weakness. That selling was congruent with a retreat in the oil market, but a reversal in crude futures helped halt the slide in equities. The stock market spent the afternoon near its flat line, rallying to a fresh high during the final 15 minutes of the session.

Crude oil was in focus throughout the day as the energy component probed the $34.60/bbl area in overnight action before rallying to end the day higher by 2.0% at $36.34/bbl. The late morning reversal underpinned the energy sector (+0.8%), which rebounded from last week's 6.6% dive.

The energy sector climbed into the green with relative ease, but the same could not be said for most of the remaining cyclical groups. The technology sector (+0.6%) was an exception as the top-weighted group climbed ahead of the broader market during the afternoon after showing relative weakness at the start. That early weakness could be traced back to the shares of Apple (AAPL 112.48, -0.70) as the tech giant struggled after Morgan Stanley lowered its iPhone sales forecast. Apple settled lower by 0.6% after being down more than 2.0% in the early going.

The uptick in the tech sector masked relative weakness among high-beta chipmakers. Accordingly, the PHLX Semiconductor Index settled lower by 0.7% with most of its components ending in the red.

Staying on the high-beta theme, transport stocks also struggled while biotechnology benefited from the late afternoon strength. The Dow Jones Transportation Average surrendered 0.5%, widening its December loss to 7.6%, while the iShares Nasdaq Biotechnology ETF (IBB 320.84, +0.95) gained 0.3%.

On the corporate front, Jarden (JAH 54.09, +1.41) spiked 2.7% after agreeing to be acquired by Newell Rubbermaid (NWL 42.15, -3.13) for $60/share in cash and stock.

The oil-driven rebound off late morning lows masked continued weakness in the corporate bond space. High-yield remained weak with iShares iBoxx $ High Yield Corporate ETF (HYG 78.83, -0.69) falling 0.9%, while investment grade debt also faced some pressure, evidenced by a 0.7% decline in iShares Investment Grade Corp Bond ETF (LQD 114.35, -0.85).

Treasuries retreated throughout the day, ending on their lows with the 10-yr yield rising ten basis points to 2.23%.

Today's participation was ahead of average as more than a billion shares changed hands at the NYSE floor.

Tomorrow, November CPI (consensus 0.0%) and December Empire Manufacturing Index (expected -5.9) will be reported at 8:30 ET while December NAHB Housing Market Index (consensus 63) will cross the wires at 10:00 ET.

  • Nasdaq Composite +4.6% YTD
  • S&P 500 -1.8% YTD
  • Dow Jones Industrial Average -2.6% YTD
  • Russell 2000 -7.4% YTD

>>> All The World's Debt (And Yield)


Define irony: a world in which the past 7 years have been characterized by an unprecedented "search for yield." Well, now that junk debt is finally dumping, and yields are suging (over 8% blended average at last check) virtually nobody wants any of this so highly yielding junk.
The good news is that out of the approximately $35 trillion in US, European And British debt (excluding Japan and China) there is still about $34 trillion in low yield assets which investors can rush into. Perhaps the question then is not when does junk normalize, but how long before first IG and then Govts suffer the same fate as junk bonds have over the past few weeks.

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: N/A.

M&A news: TSL +9% (receives preliminary non-binding proposal to be acquired by CEO and Shanghai Xingsheng Equity Investment & Management for $11.60 per ADS), ATML +5.2% (receives unsolicited proposal to be acquired $9.00 per share), JAH +4.9% (to be acquired by Newell Rubbermaid (NWL) for $60.00/share), MU +1.5% (acquires remaining interest in Inotera Memories of Taiwan; expected to be immediately accretive to EPS)

Select generic pharma names showing strength: MYL +1.4%, PRGO +0.9%, TEVA +0.3%

Other news: IMNP +53% (reports new data regarding tetravalent IgG1-like bi-specific antibodies), BPMX +10.2% (may be related to upcoming investor presentation), CBLI +6.2% (announces the publication of a study in Oncotarget demonstrating the ability of entolimod to suppress liver metastases in a preclinical model of uveal melanoma), MNGA +4.4% (cont strength), UDF +3.6% (issues supplemental statement responding to apparent 'short and distort' attack), BLRX +3.1% (files a regulatory submission to commence a Phase 2 trial for BL-8040 for mobilization and collection of bone marrow stem cells), CTIC +2.7% (receives $10 mln milestone payment for TRISENOX from Teva (TEVA)), JKS +1.7% (TSL peer)

Analyst comments: PBYI +2.6% (upgraded to Buy from Neutral at Citigroup), MAT +2% (upgraded to Outperform from Market Perform at BMO Capital)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: NX -0.7%, .

M&A news: NWL -5.2% (Jarden to be acquired by Newell Rubbermaid (NWL) for $60.00/share), PBY -0.9% (Pep Boys and Bridgestone (BRDCY) amended terms to merger agreement from $15.00 per share to $15.50 per share in cash)

Select metals/mining stocks trading lower: HMY -9.9%, AU -7.2%, MT -3.3%, BP -2.2%, BBL -2.2%, SLV -2%, ABX -1.5%, SLW -1.4%, FCX -1.4%, GDX -1.1%, GG -0.9%

Select oil/gas related names showing early weakness: SDRL -7.9%, BHI -4.9%, SWN -3.6%, CHK -3.1%, RDS.A -2.2%, RIG -2.1%, PBR -2%

Other news: ATRA -36.7% (announces that its Phase 2 proof-of-concept clinical trial for PINTA 745 did not meet its primary endpoint), BIND -11.3% (reports that the NSCLC Cohort of the Phase 2 INSITE 1 trial will advance to the second stage; the KRAS mutant NSCLC arm will not advance to the second stage), PSTI -9.2% (still checking), ECA -4.8% (decreases annualized 2016 dividend by $0.26/share to $0.06/share), SYT -3.8% (still checking), SYT -3.8% (may be related to no announcement of M&A deal over the weekend)

Analyst comments: GPRO -5.3% (downgraded to Underweight from Equal-Weight at Morgan Stanley), GTE -5% (downgraded to Neutral from Buy at Citigroup), AAPL -1.7% (hearing Morgan Stanley substantially lowering iPhone estimates), HRL -1.6% (downgraded to Hold at Deutsche Bank), DD -1.5% (downgraded to Hold from Buy at Jefferies), SYK -0.8% (downgraded to Underperform from Market Perform at BMO Capital)

>>> Telecom Italia : Sole24Ore Artcile --> Could see some unwinding of TITR/TIT

Sole24Ore reports that given Vivendi’s declaration to abstain at the shareholders meeting concerning the vote on the conversion of savings shares it’s unlikely that the motion will be passed and that arbitrage funds (if motion not approved) will likely close out positions en masse. Reported also that Co. BoD issued a press release noting Vivendi’s position and reiterated that the conversion plans were in the interests of all shareholders.
Il Corriere reports comments from Vivendi CEO Mr. De Puyfontaine who said that:  
1) Vivendi is in favor of the savings shares conversion but not under these conditions
2) Vivendi will not withdraw its request to increase the number of board members (from 13 to 17)
3) Vivendi has met with representatives of the Government and wants to develop a long term strategic investment policy for Co. Complete agreement with Gov on broadband strategy.
4) If the shareholders meeting rejects Vivendi’s requests for increasing board members Vivendi will still ask for board representation.
5) Reiterated no contact with French Telco investor Niel.