David Moenning's Daily State of the Markets: 5/4
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May Day
Perhaps the prominent feature to Friday’s trading session was the fact that it was May Day. Not to be confused with the distress signals the bears have been sending out lately, the holiday across the pond meant that the vast majority of markets were closed in Europe and Asia, which, in turn, meant that trading was a little thin.
This is not to say that there weren’t items worthy of note or much in the way of intraday volatility. On the contrary; we got another batch of economic data that was better-than expected, some more drama relating to the bank stress tests, a brand new bankruptcy, and the usual array of earnings reports. But through it all, traders appeared a little distracted and it wasn’t until the last five minutes of the session that the outcome was determined.
What was also interesting about Friday’s trading was the fact that the indices did not immediately react positively to the good news on the economic front as it took a while for the upside momentum to develop. At one point during the session, we began to fear that the market had become numb to economic news showing that things weren’t as bad as had been expected.
To be sure, the economic stabilization theme seems to be all the rage these days as report after report has come in above expectations. For example, on Friday we saw the final results for April’s University of Michigan’s Consumer Sentiment come in well above the consensus at 65.1 versus 61.9. Next, we saw April’s ISM Manufacturing Index come in at 40.1 versus 38.4 and March’s reading of 36.3 and then the forward-looking New Orders index jumped to 47.2 from 41.2. And finally, we got a report from the Far East showing a second straight monthly expansion in China’s manufacturing sector.
So, despite a market that has run a long way in a short period of time and by most measures should be due for a rest, stocks continued to march higher on Friday. However, one look at the calendar suggests that the bulls may decide to take a rest at some point soon as May is not a strong month from an historical standpoint. But, as we pointed out last weekend, corrections in this type of environment tend to be short and shallow.
The question at this stage of the game is when traders will expect to see actual signs of improvement in the economy. Let’s remember that we haven’t seen any data suggesting that the economy is actually getting better. Thus, sooner or later the discounting of things not getting worse will come to an end. But so far at least, that day has not arrived.
Turning to this morning, we don’t have any economic news on tap before the bell. We have gotten reports that Bank of America (BAC) will need to join Citi (C) in their quest for another $10 billion in capital should the banks not be able to pitch regulators on their view of the stress test numbers.
Running through the rest of the pre-game indicators, while Japan and London remain closed the rest of the major overseas markets are higher. Crude futures are moving down with the latest quote showing oil trading lower by $0.48 to $52.72. On the interest rate front, we’ve got the yield on the 10-yr currently at 3.16%, while the yield on the 3-month T-Bill is trading at 0.15%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a slightly higher open. The Dow futures are currently ahead by about 30 points; the S&P’s are up about 3 points, while the NASDAQ looks to be about 7 points above fair value at the moment.
Stocks “In Play” This Morning:
Today’s Earnings Before the Bell:
Discovery Communications (Nasdaq: DISCA) – Reported $0.28 vs. $0.25
Entergy (NYSE: ETR) – Reported $1.29 vs. $1.28
Estee Lauder (NYSE: EL) – Reported $0.16 vs. $0.05
Henry Schein (Nasdaq: HSIC) – Reported $0.64 vs. $0.58
Loews (NYSE: L) – Reported $1.49 vs. $0.62
Overseas Shipholding (NYSE: OSG) – Reported $1.00 vs. $1.06
Sprint Nextel (NYSE: S) – Reported $0.03 vs. -$0.04
Sohu.com (SOHU) – Reported $1.15 vs. $1.02
EW Scripps (NYSE: SSP) – Reported -$0.25 vs. -$0.13
Tyson Foods (NYSE: TSN) – Reported -$0.05 vs. -$0.07
Upgrades/Downgrades/Brokerage Research:
Burger King Holdings (NYSE: BKC) – Upgraded at BofA/Merrill
Dominion Resources (NYSE: D) – Downgraded at BofA/Merrill
Ralph Lauren (NYSE: RL) – Downgraded at BofA/Merrill
Target (NYSE: TGT) – Downgraded at BofA/Merrill
Adobe Systems (Nasdaq: ADBE) – Downgraded at Citi, UBS
Amerprise (NYSE: AMP) – Downgraded at Citi
Marathon Oil (NYSE: MRO) – Downgraded at Credit Suisse
MasterCard (NYSE: MA) – Upgraded at Deutsche Bank, Removed from Conviction Buy list at Goldman
Research in Motion (Nasdaq: RIMM) – Added to Conviction Buy list at Goldman
Joy Global (Nasdaq: JOYG) – Added to Conviction Buy list at Goldman
Liz Claiborne (NYSE: LIZ) – Added to Conviction Buy list at Goldman
Massey Energy (NYSE: MEE) – Added to Conviction Buy list at Goldman
Universal Health Services (NYSE: UHS) – Downgraded at JP Morgan
Harris Corp (NYSE: HRS) – Upgraded at JP Morgan
Sepracor (Nasdaq: SEPR) – Upgraded at JP Morgan
Intel (Nasdaq: INTC) – Upgraded at Morgan Stanley
Red Hat (NYSE: RHT) – Upgraded at UBS
Disclosure: Mr. Moenning and/or related firms hold long positions in: BAC
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.TopStockPortfolios.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.
Perhaps the prominent feature to Friday’s trading session was the fact that it was May Day. Not to be confused with the distress signals the bears have been sending out lately, the holiday across the pond meant that the vast majority of markets were closed in Europe and Asia, which, in turn, meant that trading was a little thin.
This is not to say that there weren’t items worthy of note or much in the way of intraday volatility. On the contrary; we got another batch of economic data that was better-than expected, some more drama relating to the bank stress tests, a brand new bankruptcy, and the usual array of earnings reports. But through it all, traders appeared a little distracted and it wasn’t until the last five minutes of the session that the outcome was determined.
What was also interesting about Friday’s trading was the fact that the indices did not immediately react positively to the good news on the economic front as it took a while for the upside momentum to develop. At one point during the session, we began to fear that the market had become numb to economic news showing that things weren’t as bad as had been expected.
To be sure, the economic stabilization theme seems to be all the rage these days as report after report has come in above expectations. For example, on Friday we saw the final results for April’s University of Michigan’s Consumer Sentiment come in well above the consensus at 65.1 versus 61.9. Next, we saw April’s ISM Manufacturing Index come in at 40.1 versus 38.4 and March’s reading of 36.3 and then the forward-looking New Orders index jumped to 47.2 from 41.2. And finally, we got a report from the Far East showing a second straight monthly expansion in China’s manufacturing sector.
So, despite a market that has run a long way in a short period of time and by most measures should be due for a rest, stocks continued to march higher on Friday. However, one look at the calendar suggests that the bulls may decide to take a rest at some point soon as May is not a strong month from an historical standpoint. But, as we pointed out last weekend, corrections in this type of environment tend to be short and shallow.
The question at this stage of the game is when traders will expect to see actual signs of improvement in the economy. Let’s remember that we haven’t seen any data suggesting that the economy is actually getting better. Thus, sooner or later the discounting of things not getting worse will come to an end. But so far at least, that day has not arrived.
Turning to this morning, we don’t have any economic news on tap before the bell. We have gotten reports that Bank of America (BAC) will need to join Citi (C) in their quest for another $10 billion in capital should the banks not be able to pitch regulators on their view of the stress test numbers.
Running through the rest of the pre-game indicators, while Japan and London remain closed the rest of the major overseas markets are higher. Crude futures are moving down with the latest quote showing oil trading lower by $0.48 to $52.72. On the interest rate front, we’ve got the yield on the 10-yr currently at 3.16%, while the yield on the 3-month T-Bill is trading at 0.15%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a slightly higher open. The Dow futures are currently ahead by about 30 points; the S&P’s are up about 3 points, while the NASDAQ looks to be about 7 points above fair value at the moment.
Stocks “In Play” This Morning:
Today’s Earnings Before the Bell:
Discovery Communications (Nasdaq: DISCA) – Reported $0.28 vs. $0.25
Entergy (NYSE: ETR) – Reported $1.29 vs. $1.28
Estee Lauder (NYSE: EL) – Reported $0.16 vs. $0.05
Henry Schein (Nasdaq: HSIC) – Reported $0.64 vs. $0.58
Loews (NYSE: L) – Reported $1.49 vs. $0.62
Overseas Shipholding (NYSE: OSG) – Reported $1.00 vs. $1.06
Sprint Nextel (NYSE: S) – Reported $0.03 vs. -$0.04
Sohu.com (SOHU) – Reported $1.15 vs. $1.02
EW Scripps (NYSE: SSP) – Reported -$0.25 vs. -$0.13
Tyson Foods (NYSE: TSN) – Reported -$0.05 vs. -$0.07
Upgrades/Downgrades/Brokerage Research:
Burger King Holdings (NYSE: BKC) – Upgraded at BofA/Merrill
Dominion Resources (NYSE: D) – Downgraded at BofA/Merrill
Ralph Lauren (NYSE: RL) – Downgraded at BofA/Merrill
Target (NYSE: TGT) – Downgraded at BofA/Merrill
Adobe Systems (Nasdaq: ADBE) – Downgraded at Citi, UBS
Amerprise (NYSE: AMP) – Downgraded at Citi
Marathon Oil (NYSE: MRO) – Downgraded at Credit Suisse
MasterCard (NYSE: MA) – Upgraded at Deutsche Bank, Removed from Conviction Buy list at Goldman
Research in Motion (Nasdaq: RIMM) – Added to Conviction Buy list at Goldman
Joy Global (Nasdaq: JOYG) – Added to Conviction Buy list at Goldman
Liz Claiborne (NYSE: LIZ) – Added to Conviction Buy list at Goldman
Massey Energy (NYSE: MEE) – Added to Conviction Buy list at Goldman
Universal Health Services (NYSE: UHS) – Downgraded at JP Morgan
Harris Corp (NYSE: HRS) – Upgraded at JP Morgan
Sepracor (Nasdaq: SEPR) – Upgraded at JP Morgan
Intel (Nasdaq: INTC) – Upgraded at Morgan Stanley
Red Hat (NYSE: RHT) – Upgraded at UBS
Disclosure: Mr. Moenning and/or related firms hold long positions in: BAC
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.TopStockPortfolios.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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