David Moenning's Daily State of the Markets: 12/09

A Billion Here And A Billion There

Although it may surprise you to learn that there is actually no evidence that Everett Dirksen ever uttered the now famous phrase, “A billion here and a billion there, and soon you’re talking about real money,” the senator from Illinois would certainly be impressed with the coin that is being tossed around the globe these days. And it’s a good thing too, because without the trillions of dollars that are being lent, spent, invested, and created in order to battle the credit crisis, there’s no telling what type of mess we’d be in.

The latest big spender to come along, President-Elect Obama, joins Messer’s Bernanke and Paulson in a concerted effort to stave off financial Armageddon. And it was the newcomer to the big-spender club’s plan to embark on the largest public-works spending package since the creation of the interstate highway system 50 years ago that allowed the bulls to enjoy another day of green screens yesterday. Well, that and the increasing chances that three little companies that go by the names of GM (GM) Ford (F) and Chrysler might get to stick around and make a few more cars after all.

With the President-Elect is looking to have a stimulus package that would upgrade roads and bridges, make the information superhighway accessible to everyone everywhere, improve schools as well as a handful of other bright ideas on his desk by January 20th, investors quickly got the idea that spending another Trillion or so just might help the economy in the future. And with every analyst worth their salt talking about how stocks bottom before the economy does, traders decided to look ahead for a change.

However, how long this forward-thinking attitude will last is anybody’s guess. But with the end of the year just a stone’s throw away (15 trading days to be exact), there is a decent chance that we could see a couple more up days before we turn the final page of the 2008 calendar.

Part of what drives our upbeat mood at the moment, despite the fact that stocks have become overbought and are due for a pullback, is the improved atmosphere we find in the stock market at the moment. Part of the change in the status of the environment has to do with the positive technical action. And a small part is something called performance anxiety.

As we’ve mentioned a time or two already, the fact that stocks not only didn’t plunge in response to Friday’s hideous jobs report but actually advanced smartly, tells us that conditions have improved. Then, since stocks had been higher in 8 of the last 10 sessions, we awoke yesterday morning to the coveted breadth-thrust buy signal, which has almost always led to good things in the past. And finally, with volume advancing on the past two days worth of rallying, the bulls are asking “what’s not to like?”

So, with old resistance now becoming new support, or so the technical analysis textbooks tell us, we will need to watch those breakout points on the charts, namely Dow 8830 and S&P 900. And given the likelihood that stocks will come back and retest these areas very soon, we’d recommend holding off on further buy orders until these levels have at least been tested.

Turning to this morning, there is no economic data to review before the bell although we will get a report on Pending Home Sales at 10:00am. On the news front, the bailout deal for the Big-3 continues to inch closer to getting done and it now appears that the Gov’t is looking to take an equity stake in the auto makers.

Running through the rest of the pre-game indicators, the major overseas markets are mostly higher. Crude futures are lower with the latest quote showing oil trading down $0.14 to $43.57 On the interest rate front, we’ve got the yield on the 10-yr currently trading at 2.73%, the yield on the 3-month T-Bill is at 0.005%, and overnight LIBOR is at 0.14%, which is down from Monday’s 0.19%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a pullback at the open. The Dow futures are currently off by about 80 points; the S&P’s are down about 6 points, while the NASDAQ looks to be about 18 points below fair value at the moment.

Stocks “In Play” This Morning:

Yesterday’s Earnings After the Bell:
National Semiconductor (NYSE: NSM) – Reported $0.25 vs. $0.23
Pep Boys (NYSE: PBY) – Reported -$0.14 vs. $0.01

Today’s Earnings Before the Bell:
AutoZone (NYSE: AZO) – Reported $2.23 vs. $2.19
Vail Resorts (NYSE: MTN) – Reported -$0.93 vs. -$0.83

News, Upgrades/Downgrades/Brokerage Research:

Texas Instruments (NYSE: TXN) – Guided Q4 EPS to $0.10 - $0.16 vs. $0.30 - $0.36
FedEx (NYSE: FDX) – Guided full year EPS $3.50 - $4.75 vs. $4.75 - $5.25
Altera Corp (Nasdaq: ALTR) – Guided Q4 sales to -9% to -12%
Broadcom (BRCM) – Guided Q4 revenue $1.05B - $1.1B vs. $1.17B - $1.23B
3M (NYSE: MMM) – Downgraded at Barclays
Banco Itau (NYSE: ITU) – Downgraded at Barclays
Roper Industries (NYSE: ROP) – Downgraded at Citi
Companhia Vale Do Rio Doce (NYSE: RIO) – Downgraded at Deutsche Bank
T. Rowe Price (Nasdaq: TROW) – Downgraded at Goldman
Nokia (NYSE: NOK) – Upgraded at Goldman
United Parcel Service (NYSE: UPS) – Downgraded at JP Morgan
Fifth Third Bancorp (Nasdaq: FITB) – Estimates reduced at Ladenburg Thalmann
FedEx (NYSE: FDX) – Downgraded at Merrill
National Semiconductor (NYSE: NSM) – Downgraded at Morgan Stanley
Deutsche Telekom (NYSE: DT) – Downgraded at Morgan Stanley
AT&T (NYSE: T) – Estimates reduced at Oppenheimer
Verizon (NYSE: VZ) – Estimates reduced at Oppenheimer
Manitowoc (NYSE: MTW) – Target reduced at UBS
Starwood Hotels (NYSE: HOT) – Downgraded at Wachovia
BlackRock (NYSE: BLK)�– Downgraded at Wachovia

Disclosure: Mr. Moenning and/or related firms hold long positions in: T, VZ

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

he 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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