David Moenning's Daily State of the Markets: Next Stop 10,000?


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August 4, 2009 10:19 AM EDT

Next Stop 10,000?

Now that the S&P 500 has eclipsed its nearest big round number (the S&P closed Monday at 1002.63) and the NASDAQ managed to breach 2000 by closing at 2008.61, the next big round number to watch for would be Dow 10,000. Of course, that’s still 713 points or 7.68% away. But the way things are going, we could be donning those old Dow 10K party hats in about a week and a half.
While it is a pretty safe bet that it was the quest to scale the latest mountain that may have influenced yesterday’s pop to the upside, we should also note that the news flow may have lent a hand. And while I am a firm believer that rehashing the news ranks right up there with watching paint dry on the excitement scale, a quick glance at yesterday’s headlines goes a long way in understanding why the bulls were able to keep on keepin’ on for yet another day.


So while I’ll apologize for the lack of creative writing skills this fine early August morning, running through the data points ought to paint a solid picture of the reasons for the ongoing advance:

- July ISM Manufacturing: The manufacturing index increased 4.1 points in July to 48.9, which was an 11-month high. This was also the biggest monthly gain in 4 years and was better than the consensus for a reading of 46.5 as well as June’s reading of 44.8.

- Construction Spending: Unexpectedly increased by +0.3% when a decline of -0.5% had been expected.

- Chinese Economic Data: The CLSA Manufacturing Index rose to a 12-month high of 52.8.

- Auto Sales: Apparently the Cash-For-Clunkers program has been a big hit with car buyers as Ford (F) reported the first monthly increase in sales since November 2007.

- Dr. Doom Speaks (Again): Nouriel Roubini says that the advanced economies of the world are showing signs of bottoming.

- Semiconductor Sales Rise: The SIA reported that global semiconductor sales increased by 3.7% June, which was the fourth straight monthly increase.

- Geithner Says No Mas: Both Secretary of State Tim Geithner and Former Fed Chairman Greenspan said over the weekend that the danger of a financial collapse is now over and Geithner predicted that the Obama administration would not need to go back to the taxpayer for more TARP money.

So there you have it; at least seven reasons for yet another romp to the upside for the bull camp. And for those of you keeping score at home, the S&P has now rallied +14.05% in the last sixteen trading days. However, it is obvious that stocks are now overbought and overdue for a pullback of some sort. And for those in the trees-do-grow-to-the-sky club, we’d like to remind everyone that the S&P still has some work to do before returning to its former glory as the S&P will need to gain 56.1% from here in order to reach the old high set on October 9, 2007. But then again, with gains of 1.5% a day…

Turning to this morning, Personal Incomes fell by -1.3% in June, which was a bit worse than the expectations for a decline of -1.0%. On the other side of the report, Personal Spending was a little higher than expected at +0.4% vs. +0.3%. And in looking at inflation on the consumer front, the PCE Deflator was in line with expectations at +0.2%. Finally, we’ll get a look at pending home sales at 10:00 am eastern.

Running through the rest of the pre-game indicators, with the exception of Japan, which was up +0.2%, the major overseas markets are lower across the board. Crude futures are moving down with the latest quote showing oil trading off by $1.26 to $70.32. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.62%, while the yield on the 3-month T-Bill is trading at 0.17%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open for a change. The Dow futures are currently off by about 40 points; the S&P’s are down by about 6 points, while the NASDAQ looks to be about 11 points below fair value at the moment.

Yesterday’s Earnings After the Bell:

Anadarko Petroleum (APC) – Reported -$0.56 vs. -$0.68
Atmel (ATML) – Reported $0.00 vs. -$0.04
Chesapeake Energy (CHK) – Reported $0.62 vs. $0.51
Centex (CTX) – Reported $0.68 vs. -$1.30
Forest Oil (FST) – Reported $0.52 vs. $0.46
Principal Financial (PFG) – Reported $0.69 vs. $0.63
Pulte Homes (PHM) – Reported -$0.74 vs. -$0.62
WMS Industries (WMS) – Reported $0.46 vs. $0.47

Today’s Earnings Before the Bell:

Archer Daniels (ADM) – Reported $0.10 vs. $0.44
Allegheny Energy (AYE) – Reported $0.41 vs. $0.41
Cameron Intl (CAM) – Reported $0.60 vs. $0.47
Church & Dwight (CHD) – Reported $0.86 vs. $0.79
CVS Caremark (CVS) – Reported $0.65 vs. $0.63
DR Horton (DHI) – Reported -$0.45 vs. -$0.22
Duke Energy (DUK) – Reported $0.26 vs. $0.26
Entergy (ETR) – Reported $1.23 vs. $1.25
Expeditors Intl (EXPD) – Reported $0.25 vs. $0.25
Frontier Communications (FTR) – Reported $0.09 vs. $0.13
Hewitt Associates (HEW) – Reported $0.71 vs. $0.60
Henry Schein (HSIC) – Reported $0.81 vs. $0.75
IntercontinentalExchange (ICE) – Reported $1.12 vs. $1.12
Louisiana-Pacific (LPX) – Reported -$0.26 vs. -$0.32
Progress Energy (PGN) – Reported $0.64 vs. $0.70
Playboy (PLA) – Reported -$0.26 vs. -$0.23
Pinnacle West (PNW) – Reported $0.77 vs. $0.89
Rowan Companies (RDC) – Reported $0.78 vs. $0.74
Spectra Energy (SE) – Reported $0.22 vs. $0.19
Simon Properties (SPG) – Reported $1.38 vs. $1.36

Upgrades/Downgrades/Brokerage Research:

HSBC Holdings (HBC) – Upgraded at BofA/Merrill, JP Morgan
Hologic (HOLX) – Downgraded at Citi
Weyerhaeuser (WY) – Downgraded at Credit Suisse
DISH Network (DISH) – Upgraded at Credit Suisse
Talbots (TLB) – Upgraded at FBR Capital
Atmel (ATML) – Downgraded at Goldman
Lamar Advertising (LAMR) – Downgraded at Goldman
WMS Industries (WMS) – Upgraded at JP Morgan
Realty Income (O) – Upgraded at UBS

Long positions in stocks mentioned: SE

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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