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MORNING CALL 2/25

|Includes: ADSK, AMSG, APA, APC, BBY, CHTR, CPB, Salesforce.com, Inc. (CRM), CVC, CXO, DRII, EOG, ESV, GPS, IBM, IMAX, INTU, IRM, KHC, KSS, LB, LQ, MBUU, MHK, MNST, NFX, PDCO, PWR, RATE, RH, RIG, RLYP, RRC, SWN, UHS, ZION

MORNING CALL

Thursday, February 25th, 2016

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OVERNIGHT MARKETS AND NEWS

March E-mini S&Ps (ESH16 +0.14%) are little changed, up +0.13%. Crude oil prices are down -0.47%, which has drug energy producers and service companies lower with Transocean Ltd. and Kinder Morgan both down at last 1.2% in pre-market trading. Also, a -6.41% plunge in China's Shanghai Composite to a 1-week low undercut stocks after a surge in money-market rates indicated tighter liquidity as China's overnight repurchase rate climbed 14 bp to 2.11%, the largest increase in almost 3 weeks. European stocks are up +1.81% after the Eurozone Jan CPI was revised lower, which bolsters the case for the ECB to expand stimulus when it meets next month. Asian stocks settled mixed: Japan +1.41%, Hong Kong -1.58%, China -6.41%, Taiwan +1.00%, Australia +0.13%, Singapore -0.63%, South Korea +0.20%, India -0.49%. U.S Treasury Secretary Lew said that G-20 finance ministers won't deliver an "emergency response" to the recent market turmoil when they meet in Shanghai for a 2-day meeting Friday and Saturday as we aren't in a crisis environment.

The dollar index (DXY00 -0.15%) is down -0.05%. EUR/USD (^EURUSD) is up +0.15%. USD/JPY (^USDJPY) is up +0.20%.

Mar T-note prices (ZNH16 +0.07%) are up +3 ticks.

St. Louis Fed President Bullard said there's "too much talk about negative interest rates" and that he doesn't see recession risk rising in the U.S. He added, that the U.S Jan CPI report was "hot" and that he expects inflation expectations to stabilize.

The Eurozone Jan CPI was revised downward to +0.3% y/y from the originally reported +0.4% y/y. The Jan core CPI was left unchanged at +1.0% y/y.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) Atlanta Fed President Dennis Lockhart's opening remarks at the Atlanta Fed's 2016 Banking Outlook Conference, (2) weekly initial unemployment claims (expected +8,000 to 270,000, previous -7,000 to 262,000) and continuing claims (expected -20,000 to 2.253 million, previous +30,000 to 2.273 million), (3) Jan durable goods orders (expected +2.7% and +0.3% ex transportation, Dec -5.0% and -1.0% ex transportation), (4) Dec FHFA house price index (expected +0.5% m/m, Nov +0.5% m/m), (5) Feb Kansas City Fed manufacturing activity (expected +3 to -6, Jan unch at-9), (6) San Francisco Fed President John Williams' speech at NYU Stern Business School, and (7) the Treasury's auction of $28 billion of 7-year T-notes.

There are 19 of the S&P 500 companies that report earnings today with notable reports including: Best Buy (consensus $1.39), Kohl's (1.55), Gap (0.57), Kraft (0.58), Monster Beverage (0.82), Patterson Cos (0.67), Apache (-0.49), Autodesk (0.12), Intuit (0.19).

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week include: IHS Energy CERAWeek Conference on Tue-Thu, Cantor Fitzgerald Internet & Technology Conference on Thu, Gabelli & Company Pump, Valve and Water Systems Symposium on Thu.

OVERNIGHT U.S. STOCK MOVERS

Salesforce.com (CRM -0.60%) jumped over 9% in pre-market trading after it said it sees Q1 adjusted EPS of 23 cents-24 cents, above consensus of 21 cents, and raised guidance on fiscal 2017 adjusted EPS to 99 cents-$1.01, higher than consensus of 99 cents.

Best Buy (BBY +1.78%) dropped over 3% in pre-market trading after it said it sees Q1 ajusted EPS of 31 cents-35 cents, below consensus of 39 cents.

Charter Communications (CHTR +0.80%) was upgraded to 'Overweight' from 'Neutral' at JPMorgan Chase with a 12-month price target of $210.

Kohl's (KSS +1.16%) reported Q4 EPS of $1.58, higher than consensus of $1.55.

Bankrate (RATE +2.51%) was downgraded to 'Hold' from 'Buy' at Topeka Capital Markets.

Imax Corporation (IMAX +2.39%) fell over 7% in after-hours trading after it reported Q4 EPS of 39 cents, below consensus of 42 cents.

La Quinta Holdings (LQ +1.88%) lost over 3% in after-hours trading after it said it sees 2016 pro forma adjusted Ebitda of $367 million-$384 million versus $394 million y/y.

Relypsa (RLYP -2.39%) slumped over 10% in after-hours trading after it reported a Q4 adjusted EPS loss of -$1.40, a wider loss than consensus of -$1.35.

AmSurg (AMSG -0.01%) climbed nearly 5% in after-hours trading after it reported Q4 adjusted EPS of $1.07, higher than consensus of $1.04.

Restoration Hardware (RH +1.29%) plunged over 20% in pre-market trading after it reported preliminary Q4 adjusted EPS of 99 cents, well below consensus of $1.40.

Andarko Petroleum (APC +2.58%) rose nearly 7% in after-hours trading after it sold its Springfield Pipeline LLC to Western Gas Partners for $750 million.

Malibu Boats (MBUU +2.41%) was rated a new 'Buy' at B. Riley with a 12-month price target of $22.

Diamond Resorts International (DRII -1.60%) jumped 17% in after-hours trading after it said it hired Centerview Partners to explore a wide range of strategic options to maximize shareholder value.

MARKET COMMENTS

Mar E-mini S&Ps (ESH16 +0.14%) this morning are up +2.50 points (+0.13%). Wednesday's closes: S&P 500 +0.44%, Dow Jones +0.32%, Nasdaq +0.92%. The S&P 500 on Wednesday recovered from a 1-week low and closed higher on a rebound in crude oil that boosted energy producer stocks and on Richmond Fed President Lacker's comment that there is "no evidence" that a U.S. recession is imminent. Stocks were undercut by the -9.2% decline in U.S. Jan new home sales to 494,000 (weaker than expectations of -4.4% to 520,000) and the unexpected -3.4 point decline in the U.S. Feb Markit services PMI to a 2-1/3 year low of 49.8 (weaker than expectations of +0.3 to 53.5).

Mar 10-year T-notes (ZNH16 +0.07%) this morning are up +3 ticks. Wednesday's closes: TYH6 +2.00, FVH6 +1.25. Mar T-notes on Wednesday climbed to a 1-week high and closed higher on U.S. economic concerns after the weak Jan new home sales and Feb Markit services PMI reports.

The dollar index (DXY00 -0.15%) this morning is down -0.044 (-0.05%). EUR/USD (^EURUSD) is up +0.0016 (+0.15%). USD/JPY (^USDJPY) is up +0.22 (+0.20%). Wednesday's closes: Dollar Index -0.023 (-0.02%), EUR/USD -0.0007 (-0.06%), USD/JPY +0.08 (+0.07%). The dollar index on Wednesday fell back from a 3-week high and closed lower on the weaker-than-expected U.S. Jan new home sales and Feb Markit services PMI reports. The dollar was also undercut by strength in the energy-exporting currencies of Canada and Russia after crude oil erased early declines and closed higher. The dollar index found underlying support from Richmond Fed President Lacker's comment that there is "no evidence" that a U.S. recession is imminent, which "bolsters the case for raising the federal funds rate target."

Apr WTI crude (CLJ16 -0.25%) this morning is down -15 cents (-0.47%) and Apr gasoline (RBJ16 -0.39%) is down -0.0104 (-0.82%). Wednesday's closes: CLJ6 +0.28 (+0.88%), RBJ6 +0.0561 (+4.60%). Apr crude oil and gasoline on Wednesday closed higher on the -0.4% decline in U.S. crude oil production in the week of Feb 19 to a 4-month low of 9.102 million bpd and the -2.2 million bbl drop in EIA gasoline stockpiles (vs expectations of -1.0 million bbls). Crude oil prices were undercut by the +3.5 million bbl increase in EIA crude inventories to a record high of 507.6 million bbl and by the +333,000 bbl increase in crude supplies at Cushing, OK, delivery point of WTI futures, to a record high 65.066 million bbl.

GLOBAL EVENT CALENDAR02/25/2016

US 0815 ET Atlanta Fed President Dennis Lockhart delivers welcoming and opening remarks at the Atlanta Feds 2016 Banking Outlook Conference.
  0830 ET Weekly initial unemployment claims expected +8,000 to 270,000, previous -7,000 to 262,000. Weekly continuing claims expected -20,000 to 2.253 million, previous +30,000 to 2.273 million.
  0830 ET Jan durable goods orders expected +2.7% and +0.3% ex transportation, Dec -5.0% and -1.0% ex transportation. Jan capital goods new orders ex-aircraft & parts expected +1.0%, Dec -4.3%.
  0830 ET USDA weekly Export Sales.
  0900 ET Dec FHFA house price index expected +0.5% m/m, Nov +0.5% m/m.
  1100 ET Feb Kansas City Fed manufacturing activity expected +3 to -6, Jan unch at -9.
  1200 ET San Francisco Fed President John Williams speaks at NYU Stern Business School.
  1300 ET Treasury auctions $28 billion of 7-year T-notes.
GER 0200 ET Revised German Jan CPI (EU harmonized), previous -1.0% m/m and +0.4% y/y.
  0200 ET German Mar GfK consumer confidence expected -0.1 to 9.3, Feb 9.4.
EUR 0400 ET Eurozone Jan M3 money supply expected +4.7% y/y, Dec +4.7% y/y.
  0500 ET Revised Eurozone Jan CPI, previous +0.2% y/y. Revised Jan core CPI, previous +1.0% y/y
UK 0430 ET Revised UK Q4 GDP, previous +0.5% q/q and +1.9% y/y.
  0430 ET UK Dec index of services expected +0.3% m/m and +0.7% 3-mo/3-mo, Nov +0.2% m/m and +0.6% 3-mo/3-mo.
  0430 ET UK Q4 total business investment expected +0.9% q/q and +6.4% y/y, Q3 +2.2% q/q and +5.8% y/y.
  1905 ET UK Feb GfK consumer confidence expected -1 to 3, Jan 4.
JPN 1830 ET Japan Jan national CPI expected unch y/y, Dec +0.2% y/y. Jan national CPI ex-fresh food expected unch y/y, Dec +0.1% y/y. Jan national CPI ex food & energy expected +0.7% y/y, Dec +0.8% y/y.
  1830 ET Japan Feb Tokyo CPI expected -0.3% y/y, Jan -0.3% y/y. Feb Tokyo CPI ex-fresh food expected -0.2% y/y, Jan -0.1% y/y. Feb Tokyo CPI ex food & energy expected +0.4% y/y, Jan +0.4% y/y.
CHI 2030 ET China Jan property prices.

U.S. STOCK CALENDAR02/25/2016

Company Ticker Time Event Description Period Estimate
Campbell Soup Co CPB US Bef-mkt Q2 2016 Earnings Release Q2 2016 0.87
Cablevision Systems Corp CVC US Bef-mkt Q4 2015 Earnings Release Q4 2015 0.168
Ensco PLC ESV US Bef-mkt Q4 2015 Earnings Release Q4 2015 0.726
Patterson Cos Inc PDCO US Bef-mkt Q3 2016 Earnings Release Q3 2016 0.667
Iron Mountain Inc IRM US Bef-mkt Q4 2015 Earnings Release Q4 2015 0.558
Quanta Services Inc PWR US Bef-mkt Q4 2015 Earnings Release Q4 2015 0.284
Best Buy Co Inc BBY US 7:00 Q4 2016 Earnings Release Q4 2016 1.393
Kohl's Corp KSS US 7:00 Q4 2016 Earnings Release Q4 2016 1.553
Apache Corp APA US 8:00 Q4 2015 Earnings Release Q4 2015 -0.489
Best Buy Co Inc BBY US 8:00 Q4 2016 Earnings Call Q4 2016  
Campbell Soup Co CPB US 8:30 Q2 2016 Earnings Call Q2 2016  
International Business Machines Corp IBM US 8:30 Investor Meeting Y 2016  
Kohl's Corp KSS US 8:30 Q4 2016 Earnings Call Q4 2016  
Iron Mountain Inc IRM US 8:30 Q4 2015 Earnings Call Q4 2015  
L Brands Inc LB US 9:00 Q4 2016 Earnings Call Q4 2016  
Transocean Ltd RIG US 9:00 Q4 2015 Earnings Call Q4 2015  
Quanta Services Inc PWR US 9:30 Q4 2015 Earnings Call Q4 2015  
Concho Resources Inc CXO US 9:30 Q4 2015 Earnings Call Q4 2015  
Patterson Cos Inc PDCO US 10:00 Q3 2016 Earnings Call Q3 2016  
Zions Bancorporation ZION US 10:30 Investor Meeting Y 2016  
Ensco PLC ESV US 11:00 Q4 2015 Earnings Call Q4 2015  
Newfield Exploration Co NFX US 11:00 Q4 2015 Earnings Call Q4 2015  
Apache Corp APA US 14:00 Q4 2015 Earnings Call Q4 2015  
Gap Inc/The GPS US 16:15 Q4 2016 Earnings Release Q4 2016 0.568
Intuit Inc INTU US 16:30 Q2 2016 Earnings Call Q2 2016  
Gap Inc/The GPS US 17:00 Q4 2016 Earnings Call Q4 2016  
Autodesk Inc ADSK US 17:00 Q4 2016 Earnings Call Q4 2016  
Kraft Heinz Co/The KHC US 17:00 Q4 2015 Earnings Call Q4 2015  
Monster Beverage Corp MNST US 17:00 Q4 2015 Earnings Call Q4 2015  
EOG Resources Inc EOG US Aft-mkt Q4 2015 Earnings Release Q4 2015 -0.316
Southwestern Energy Co SWN US Aft-mkt Q4 2015 Earnings Release Q4 2015 -0.041
Universal Health Services Inc UHS US Aft-mkt Q4 2015 Earnings Release Q4 2015 1.739
Autodesk Inc ADSK US Aft-mkt Q4 2016 Earnings Release Q4 2016 0.116
Range Resources Corp RRC US Aft-mkt Q4 2015 Earnings Release Q4 2015 0.088
Mohawk Industries Inc MHK US Aft-mkt Q4 2015 Earnings Release Q4 2015 2.728
Intuit Inc INTU US Aft-mkt Q2 2016 Earnings Release Q2 2016 0.191
Kraft Heinz Co/The KHC US Aft-mkt Q4 2015 Earnings Release Q4 2015 0.58
Monster Beverage Corp MNST US Aft-mkt Q4 2015 Earnings Release Q4 2015 0.818