David Moenning's Daily State of the Markets: 1/02

Ready, Set, Go!

Here's a link to listen to an Audio Version of the report:

Although the economic data wasn’t bad, the volume was light, and in reality no one really seemed to care all that much, stocks closed out a difficult year in a disappointing fashion Monday. Despite the annoyance of watching account values head south as the final results for the year were being tallied, I guess it was actually fitting that the final trading session was volatile.

Truth be told, most traders had already closed out their books sometime earlier in the week. And with the outlook for the economy, interest rates, inflation, and the election creating more than a little uncertainty for the coming year, the last-day dive actually makes some sense.

There were few drivers to the action on Monday and the data from the Existing Home Sales report wasn’t half bad. While nobody in their right mind expects to see anything positive coming from the housing market at the moment, it was modestly encouraging that existing home sales rose 0.4% in November, which was in line with the consensus estimates. More importantly, it was the first increase (yes, increase) in home sales in nine months. But, before you get too excited about the report, it should be noted that sales were down 20% on a year-over-year comparison basis, prices were off -3%, and there is currently a 10.3 month supply of homes on the market right now.

So, was there anything to take away the lightly traded New Year's Eve session? Perhaps the tell-tale sign that the year’s final trading session was controlled by profit takers was the fact that the trend of the year was turned upside down. In short, the leaders were sold off and the dogs were bought. Or more appropriately, there were profits being taken in the winners and some shorts being covered in the year’s biggest losers such as financials, real estate, and homebuilders.

But since this stuff is "so last year" and the flag is about to be dropped on a new race this morning, it's probably time to turn our attention to the New Year. While we don't have any economic data to review before the bell today, we will get a report on Construction Spending and the ISM Manufacturing data at 10:00 am. Then at 1:00, we will get the minutes from the December 11 Fed meeting. On Thursday, we'll get a peek at the ADP Employment numbers and the report on Factory Orders. And finally, on Friday, we’ll get the Big Kahuna, the December Jobs report before the bell.

Turning to this morning's pre-market action, caution seems to be the watchword right now in front of the day’s economic data. And although the bulls are trying to get their game faces on today, the early upward bias is rather minimal at the moment.

Running through the rest of the pre-game indicators; the overseas markets are mixed. Crude futures are up sharply again with the latest quote showing the February contract up by $2.03 to $98.01. Interest rates a smidge higher so far with the 10-yr trading at a yield of 4.042% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a rather flat open. The Dow futures are currently up by about 7 points; the S&Ps are about even, while the NASDAQ looks to be about 3 points above fair value at the moment.

Stocks "In Play" This Morning:

News, Upgrades/Downgrades/Brokerage Research:

Hewlett Packard (NYSE: HPQ) – Named top IT Hardware pick at Bank of America
Advanced Micro Devices (NYSE: AMD) – Downgraded at Bank of America
Intel (Nasdaq: INTC) – Downgraded at Bank of America
Analog Devices (NYSE: ADI) – Downgraded at Bank of America
Texas Instruments (NYSE: TXN) – Downgraded at Bank of America
Marriott Intl (NYSE: MAR) – Target reduced at Bear Stearns
Starwood Hotels (NYSE: HOT) – Target reduced at Bear Stearns
Starbucks (Nasdaq: SBUX) – Downgraded at Bear Stearns
Humana (NYSE: HUM) – Upgraded at CIBC
UnitedHealth Group (NYSE: UNH) – Downgraded at CIBC
Amazon.com (Nasdaq: AMZN) – Upgraded at Citi
Diamond Offshore Drilling (NYSE: DO) – Downgraded at Credit Suisse
Priceline.com (Nasdaq: PCLN) – Upgraded at JP Morgan
Norfolk Southern (NYSE: NSC) – Downgraded at JP Morgan
FedEx (NYSE: FDX) – Downgraded at JP Morgan
BJ’s Wholesale Club (NYSE: BJ) – Downgraded at JP Morgan
Baker Hughes (NYSE: BHI) – Downgraded at JP Morgan
Yahoo! (Nasdaq: YHOO) – Upgraded at Think Equity
Hess Corp (NYSE: HES) – Downgraded at UBS

Mr. Moenning holds Long positions in stocks mentioned: HES

Note: All earnings reports compared to Reuter's consensus estimates

** For More of David Moenning’s Market Analysis, Stock Portfolios, and Trading Ideas, visit: www.TopGunsTrading.com

The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management and Co-Founder of TopGunsTrading.com and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

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