David Moenning's Daily State of the Markets: 1/29
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Is Bad News Good Again?
Yesterday was the kind of day we had become accustomed to during the good old days of 2007; where stocks melted up for no apparent reason and the bulls went home happy in the knowledge that they were firmly in control of the game. However, nowadays the market has a much more grizzly feel to it and since up days have been hard to come by, this one might have caused a little head scratching.
It certainly appeared that the bears had plenty to work with in the early going yesterday. For starters, there was a substantial selloff overseas. U.S. traders awoke to see Asian markets having lost anywhere from 4% to 7% and European bourses down more than 2%. The worry was that the global growth story was being soiled by the slowdown in the U.S. and that it would only get worse going forward.
Next, one look at the New Home Sales might have caused the casual observer to expect stocks to tank. Yes, the weak numbers were "old news," but this concept has mattered little during the recent corrective phase as bad news, old or not, has been an excuse to sell. To review, sales of new homes were down a whopping 40.7% from a year ago, which was the biggest decline since September 1981. And given that the totals for 2007 were off by 26.4%, one might have expected to see stocks nosedive on the news.
Then there was the report from Mickey D's (NYSE: MCD), which up until just recently was viewed as a glowing example of the benefits of a global business plan and a falling dollar. But, apparently, things didn’t go so well in December and the stock got tagged for a 5.6% loss on what wound up being an up day.
And finally, it would have been easy to expect some consternation in front of tomorrow’s Fed announcement. Given that the Bernanke Fed has been anything but clear in their communication, some selling might have been a natural precursor to the event.
But, all of a sudden, yesterday, the negatives apparently became positives. As a result, stocks rallied strongly in the afternoon and would up erasing Friday’s entire we-don’t-want-to-be-long-over-the-weekend plunge. About the only way to look at the action is the negatives – especially the new home sales data – could be viewed as arguments FOR another fat rate cut on Wednesday. And although things don’t look especially bright at the moment from an economic standpoint, if there is one thing that we’ve learned over the past 20 years, it is that lower interest rates make for a better economy and a stronger stock market.
Turning to this morning, we've got some economic data to review in the form of the report on Orders for Durable Goods. The report showed that orders in December came in much stronger than expected at +5.2% versus expectations for an increase of +1.6%. And when you strip out transportation, the numbers were also stronger; showing a gain of +2.6% versus 0.1%.
In short, this speaks of an economy that is a bit stronger than the general consensus is at the moment, which brings the question of what the Fed will do tomorrow back to the table.
Running through the rest of the pre-game indicators; the overseas markets followed Wall Street’s lead and are up nicely. Crude futures are rising this morning with the futures currently trading up $0.41 to $90.40. Interest rates are moving up on the stronger economic data with the 10-yr trading at a yield of 3.64% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently ahead by about 40 points; the S&Ps are up by about 6 points, while the NASDAQ looks to be about 8 points above fair value at the moment.
Stocks "In Play" This Morning:
Yesterday's Earnings After the Bell:
American Express (NYSE: AXP) – Reported $0.71 vs. $0.71
Con-Way (NYSE: CNW) – Reported $0.88 vs. $0.82
Crane (NYSE: CR) – Reported $0.77 vs. $0.72
Sandisk (Nasdaq: SNDK) – Reported $0.69 vs. $0.63
Steel Dynamics (Nasdaq: STLD) – Reported $1.00 vs. $0.98
Unum (NYSE: UNM) – Reported $0.59 vs. $0.54
Today’s Earnings Before the Bell:
Canadian Pacific (NYSE: CP) – Reported $2.21 vs. $1.15
CONSOL Energy (NYSE: CNX) – Reported $0.04 vs. $0.34
Dow Chemical (NYSE: DOW) – Reported $0.84 vs. $0.80
EMC Corp (NYSE: EMC) – Reported $0.24 vs. $0.22
Eli Lilly (NYSE: LLY) – Reported $0.90 vs. $0.89
Occidental Petroleum (NYSE: OXY) – Reported $1.74 vs. $1.63
News, Upgrades/Downgrades/Brokerage Research:
McDonalds (NYSE: MCD) – Downgraded at Bear Stearns, Mentioned positively at Citi
NYMEX Holdings (NYSE: NMX) – Downgraded at Citi
Disney (NYSE: DIS) – Downgraded at Citi
Health Management (NYSE: HMA) – Upgraded at Credit Suisse
Sandisk (Nasdaq: SNDK) – Target reduced at Deutsche Bank
Take Two Interactive (Nasdaq: TTWO) – Upgraded at Lehman
Potash (NYSE: POT) – Upgraded at Morgan Stanley
Motorola (NYSE: MOT) Nomura says co. may exit handset business
Albemarle (NYSE: ALB) – Downgraded at Oppenheimer
New York Times (NYSE: NYT) – Downgraded at Wachovia
Leap Wireless (Nasdaq: LEAP) – Downgraded at Wachovia
Mr. Moenning holds Long positions in stocks mentioned: STLD, CNX, OXY
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.
Yesterday was the kind of day we had become accustomed to during the good old days of 2007; where stocks melted up for no apparent reason and the bulls went home happy in the knowledge that they were firmly in control of the game. However, nowadays the market has a much more grizzly feel to it and since up days have been hard to come by, this one might have caused a little head scratching.
It certainly appeared that the bears had plenty to work with in the early going yesterday. For starters, there was a substantial selloff overseas. U.S. traders awoke to see Asian markets having lost anywhere from 4% to 7% and European bourses down more than 2%. The worry was that the global growth story was being soiled by the slowdown in the U.S. and that it would only get worse going forward.
Next, one look at the New Home Sales might have caused the casual observer to expect stocks to tank. Yes, the weak numbers were "old news," but this concept has mattered little during the recent corrective phase as bad news, old or not, has been an excuse to sell. To review, sales of new homes were down a whopping 40.7% from a year ago, which was the biggest decline since September 1981. And given that the totals for 2007 were off by 26.4%, one might have expected to see stocks nosedive on the news.
Then there was the report from Mickey D's (NYSE: MCD), which up until just recently was viewed as a glowing example of the benefits of a global business plan and a falling dollar. But, apparently, things didn’t go so well in December and the stock got tagged for a 5.6% loss on what wound up being an up day.
And finally, it would have been easy to expect some consternation in front of tomorrow’s Fed announcement. Given that the Bernanke Fed has been anything but clear in their communication, some selling might have been a natural precursor to the event.
But, all of a sudden, yesterday, the negatives apparently became positives. As a result, stocks rallied strongly in the afternoon and would up erasing Friday’s entire we-don’t-want-to-be-long-over-the-weekend plunge. About the only way to look at the action is the negatives – especially the new home sales data – could be viewed as arguments FOR another fat rate cut on Wednesday. And although things don’t look especially bright at the moment from an economic standpoint, if there is one thing that we’ve learned over the past 20 years, it is that lower interest rates make for a better economy and a stronger stock market.
Turning to this morning, we've got some economic data to review in the form of the report on Orders for Durable Goods. The report showed that orders in December came in much stronger than expected at +5.2% versus expectations for an increase of +1.6%. And when you strip out transportation, the numbers were also stronger; showing a gain of +2.6% versus 0.1%.
In short, this speaks of an economy that is a bit stronger than the general consensus is at the moment, which brings the question of what the Fed will do tomorrow back to the table.
Running through the rest of the pre-game indicators; the overseas markets followed Wall Street’s lead and are up nicely. Crude futures are rising this morning with the futures currently trading up $0.41 to $90.40. Interest rates are moving up on the stronger economic data with the 10-yr trading at a yield of 3.64% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently ahead by about 40 points; the S&Ps are up by about 6 points, while the NASDAQ looks to be about 8 points above fair value at the moment.
Stocks "In Play" This Morning:
Yesterday's Earnings After the Bell:
American Express (NYSE: AXP) – Reported $0.71 vs. $0.71
Con-Way (NYSE: CNW) – Reported $0.88 vs. $0.82
Crane (NYSE: CR) – Reported $0.77 vs. $0.72
Sandisk (Nasdaq: SNDK) – Reported $0.69 vs. $0.63
Steel Dynamics (Nasdaq: STLD) – Reported $1.00 vs. $0.98
Unum (NYSE: UNM) – Reported $0.59 vs. $0.54
Today’s Earnings Before the Bell:
Canadian Pacific (NYSE: CP) – Reported $2.21 vs. $1.15
CONSOL Energy (NYSE: CNX) – Reported $0.04 vs. $0.34
Dow Chemical (NYSE: DOW) – Reported $0.84 vs. $0.80
EMC Corp (NYSE: EMC) – Reported $0.24 vs. $0.22
Eli Lilly (NYSE: LLY) – Reported $0.90 vs. $0.89
Occidental Petroleum (NYSE: OXY) – Reported $1.74 vs. $1.63
News, Upgrades/Downgrades/Brokerage Research:
McDonalds (NYSE: MCD) – Downgraded at Bear Stearns, Mentioned positively at Citi
NYMEX Holdings (NYSE: NMX) – Downgraded at Citi
Disney (NYSE: DIS) – Downgraded at Citi
Health Management (NYSE: HMA) – Upgraded at Credit Suisse
Sandisk (Nasdaq: SNDK) – Target reduced at Deutsche Bank
Take Two Interactive (Nasdaq: TTWO) – Upgraded at Lehman
Potash (NYSE: POT) – Upgraded at Morgan Stanley
Motorola (NYSE: MOT) Nomura says co. may exit handset business
Albemarle (NYSE: ALB) – Downgraded at Oppenheimer
New York Times (NYSE: NYT) – Downgraded at Wachovia
Leap Wireless (Nasdaq: LEAP) – Downgraded at Wachovia
Mr. Moenning holds Long positions in stocks mentioned: STLD, CNX, OXY
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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