David Moenning's Daily State of the Markets: 12/22
Santa Stuck In Holding Pattern
The bulls came into Friday morning expecting the "Bridge to Obama" bailout of the automakers to release Santa and his reindeer from their holding pattern. And with the Dow popping 180 points or so in the early going, it appeared that the traditional Santa Claus rally had finally gotten underway.
But unfortunately, the holiday cheer didn’t last long. Standard & Poors said “bah humbug” to the banks, Treasury Secretary Paulson tried to pick a fight with Congress and before long, the major indices were back in a holding pattern hovering around the breakeven mark for the day.
To be sure, the ratings agencies have taken their share of the heat (as they should) for the subprime mess, the ensuing credit crisis, and now, the economic meltdown. And in a move that certainly raised some eyebrows, Standard & Poors downgraded a long list of banks (12 in total) on Friday including: Citigroup (C), Bank of America (BAC), JP Morgan Chase (JPM), Morgan Stanley (MS), Goldman Sachs (GS), Wells Fargo (WFC), Deutsche Bank (DB) and UBS (UBS).
S&P noted that the downgrades and revised outlooks reflect their view of the significant pressure on large financial institutions' future performance due to increasing bank industry risk and the deepening global economic slowdown. In addition, S&P didn’t rule out further downgrades if the global economic crisis worsens. However, with tongue firmly implanted in cheek, we might suggest that this report could have been issued a little sooner.
But what really put Santa's sleigh back in a holding pattern on Friday was the comment by Hank Paulson that he was thinking about asking Congress to release the second $350 billion in the TARP. Stocks sank almost instantly on the news because the last thing the bulls need right now is another round of political wrangling. And given that Democratic leaders such as Barney Frank, Harry Reid, and Nancy Pelosi have all stated that the release of the second half of the TARP funds would require significant concessions from their counterparts, no one really expects this to happen before January 20th.
In addition, the idea that Paulson would suddenly and without warning talk about getting his hands on another $350 billion raised some questions; not the least of which were: (1) Does Paulson know something we don’t? And then also along those lines: (2) Is there a new calamity brewing?
So, with new questions having been raised and a great deal of uncertainty about the future, the DJIA finished the day right beside Santa Claus in a holding pattern. However, it was certainly positive that the rest of the major indices finished with green screens, that breadth was positive, and that the indices managed to hold above the recent support zones.
Turning to this morning, there seems to be some holiday cheer going on in pre-market trading. On the news front, China cut interest rates for the fifth time since September, but Toyota’s profit warning seems to be keeping a lid on the party so far.
Running through the rest of the pre-game indicators, with the exception of Japan, the major overseas markets are down. Crude futures are up with the latest quote showing oil futures trading higher by $0.53 to $42.89. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.14%, the yield on the 3-month T-Bill is at 0.10%, and overnight LIBOR is steady at 0.11%. And finally, with about an hour before the bell, stock futures in the U.S. are now pointing to a modestly higher open. The Dow futures are currently ahead by about 40 points; the S&P’s are up about 3 points, while the NASDAQ looks to be about 1 points below fair value at the moment.
Stocks “In Play” This Morning:
News, Upgrades/Downgrades/Brokerage Research
Equity Residential (NYSE: EQR) – Downgraded at Citi
Camden Property (NYSE: CPT) – Upgraded at Citi
General Motors (NYSE: GM) – Downgraded at Credit Suisse
U.S. Steel (NYSE: X) – Downgraded at Deutsche Bank
Nucor (NYSE: NUE) – Upgraded at Deutsche Bank
Prudential (NYSE: PRU) – Downgraded at Friedman Billings Ramsey
Dollar Tree (Nasdaq: DLTR) – Downgraded, Added to Conviction Sell list at Goldman
Monsanto (NYSE: MON) – Downgraded at Goldman, Target reduced at UBS
Frontline Ltd (NYSE: FRO) – Downgraded at Jefferies
Nordic American Tanker (NYSE: NAT) – Downgraded at Jefferies, JP Morgan
Overseas Shipholding (NYSE: OSG) – Downgraded at Jefferies, Upgraded at JP Morgan
Teradyne (NYSE: TER) – Downgraded at JP Morgan
KLA Tencor (Nasdaq: KLAC) – Downgraded at JP Morgan
Lam Research (Nasdaq: LRCX) – Downgraded at JP Morgan
Applied Materials (Nasdaq: AMAT) – Downgraded, target reduced at JP Morgan
General Maritime (NYSE: GMR) – Downgraded at JP Morgan
Apple (Nasdaq: AAPL) – Estimates increased at Thomas Weisel
Agnico Eagle Mines (NYSE: AEM) – Downgraded at UBS
Barrick Gold (NYSE: ABX) – Downgraded at UBS
Goldcorp (NYSE: GG) – Downgraded at UBS
Kinross Gold (NYSE: KGC) – Downgraded at UBS
Newmont Mining (NYSE: NEM) – Downgraded at UBS
Burger King Holdings (NYSE: BKC) – Upgraded at UBS
Darden Restaurants (NYSE: DRI) – Downgraded at UBS
Hess Corp (NYSE: HES) – Upgraded at Credit Suisse
Disclosure: Mr. Moenning and/or related firms hold long positions in: MON, DLTR
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.
Create E-mail AlertRelated Categories
ContributorsStocks Mentioned
+0.25
-0.85Related Entities
- Goldman Sachs Conviction Sell List
- Credit Suisse
- Deutsche Bank
- UBS
- JPMorgan
- Goldman Sachs
- Henry Paulson
- Citi
- Morgan Stanley
- Jefferies & Co
- Bank of America
- Friedman, Billings, Ramsey
- Thomas Weisel Partners Group
- David Moenning
- Crude Oil
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
