David Moenning's Daily State of the Markets:
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Indecision
Here’s a link to listen to an Audio Version of the report:�
Traders had a great deal of trouble deciding what to focus on yesterday. On the one hand, there was the never ending stream of bad news in the financials and the economy. Yet on the other hand, oil’s big decline seemed to spark some hope that we’ve seen the worst of crude’s rude rise. So, instead of making a decision, traders simply went with the flow, producing yet another roller coaster ride on Wall Street.
The day started off on a down note, with the Dow falling more than 200 points in the first 45 minutes. At issue was the ongoing pressure on the banks as well as Fannie (FNM) and Freddie (FRE) – which fell -27% and -26% respectively – a dive in the foreign markets, a PPI report sporting a year-over-year gain of 9.2% (yikes!), lower than expected retail sales numbers, a negative preannouncement from Kimberly Clark (KMB), and the announcement that GM was suspending its dividend.
Ben Bernanke also donned a bear suit yesterday morning as he told a congressional hearing that there are “significant downside risks” remaining in the economy, which is a downgrade of the Fed’s recent assessment. And then, just for fun, the Fed Chairman tossed in that upside risks to inflation have intensified. So, in short, Gentle Ben told Congress and the markets that the Fed has been painted into a corner and that the much anticipated second-half recovery might not happen.
But, with the market sinking fast and in new-low territory, it appeared that the bulls finally had caught a break. Crude oil, which had been a thorn in the side of anyone owning stock for quite some time, suddenly began to take a precipitous dive. Reasons for the intraday drop of more than $8 included rumors of hedge fund liquidations, worries over global growth, and fear that Iran may be softening its stance on the nuclear issue.
With the Dow coming all the way back and at one point sporting a gain of about 70 points, there was a great deal of talk about this being a “Turnaround Tuesday.” After all, the Dow had gone from -220 to +70 and it did appear that there was capitulation in the air.
However, indecision reigned supreme in the final hour as the carnage in the banking sector reminded traders that until we see an end to the writedowns and capital raises, the market will continue to have problems.
Turning to this morning, we’ve got some good news for a change from the banking sector as Wells Fargo (WFC) not only beat the street’s earnings expectations by $0.02, they also raised their dividend - Imagine that.
On the economic front, June’s CPI came with a gain of +1.1%, which was the biggest gain since 1982 and above the estimates for an increase of +0.7%. Then when you strip out food and energy, the so-called Core CPI increased by +0.3%, which was again above expectations for a rise of +0.2%. On a year-over-year basis, the numbers are getting downright ugly here. The headline CPI has now increased by 5.0% over the past year, while the Core Rate is up 2.4%.
Running through the rest of the pre-game indicators; the major foreign markets are mixed by region with Asia up slightly and Europe down. Crude futures are down again this morning with the latest quote showing oil trading at $137.53. Interest rates are up a bit this morning with the yield on the 10-yr currently trading at 3.87%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a modestly lower open. The Dow futures are currently off by about 40 points; the S&P’s are down by about 3 points, while the NASDAQ looks to be about 2 points below fair value at the moment.
Stocks “In Play” This Morning:
Yesterday’s Earnings After the Bell:
CSX Corp (NYSE: CSX) – Reported $0.89 vs. $0.91
Intel (Nasdaq: INTC) – Reported $0.28 vs. $0.26
Today’s Earnings Before the Bell:
Abbott Labs (NYSE: ABT) – Reported $0.84 vs. $0.78
St. Jude Medical (NYSE: STJ) – Reported $0.58 vs. $0.55
Host Hotels (NYSE: HST) – Reported $0.56 vs. $0.55
Wells Fargo (NYSE: WFC) – Reported $0.53 vs. $0.51, Increases dividend
News, Upgrades/Downgrades/Brokerage Research:
Alpha Natural Resources (NYSE: ANR) – To be acquired by Cleveland-Cliffs for $128/s
Cisco Systems (Nasdaq: CSCO) – Downgraded at Credit Suisse
Ciena Corp (Nasdaq: CIEN) – Downgraded at Credit Suisse
Chicago Bridge & Iron (NYSE: CBI) – Downgraded at Goldman, JP Morgan
Nalco Holding (NYSE: NLC) – Upgraded at JP Morgan
Time Warner Telecom (Nasdaq: TWTC) – Downgraded at JP Morgan
Kimberly Clark (NYSE: KMB) – Downgraded at Lehman
EW Scripps (NYSE: SSP) – Downgraded at Lehman
Boyd Gaming (NYSE: BYD) – Downgraded at Merrill
CSX Corp (NYSE: CSX) – Upgraded at Merrill
MGM Mirage (NYSE: MGM) – Downgraded at Merrill
Eaton (NYSE: ETN) – Downgraded at Merrill
AGCO (NYSE: AG) – Upgraded at Merrill
General Motors (NYSE: GM) – Moody's reviewing debt for possible downgrade
Disclosure: Mr. Moenning and/or related firms hold long positions in: CSX
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.
David D. Moenning
Heritage Capital Management
Main: 630-250-4700
Direct: 303-670-9761
email: [email protected]
Here’s a link to listen to an Audio Version of the report:�
Traders had a great deal of trouble deciding what to focus on yesterday. On the one hand, there was the never ending stream of bad news in the financials and the economy. Yet on the other hand, oil’s big decline seemed to spark some hope that we’ve seen the worst of crude’s rude rise. So, instead of making a decision, traders simply went with the flow, producing yet another roller coaster ride on Wall Street.
The day started off on a down note, with the Dow falling more than 200 points in the first 45 minutes. At issue was the ongoing pressure on the banks as well as Fannie (FNM) and Freddie (FRE) – which fell -27% and -26% respectively – a dive in the foreign markets, a PPI report sporting a year-over-year gain of 9.2% (yikes!), lower than expected retail sales numbers, a negative preannouncement from Kimberly Clark (KMB), and the announcement that GM was suspending its dividend.
Ben Bernanke also donned a bear suit yesterday morning as he told a congressional hearing that there are “significant downside risks” remaining in the economy, which is a downgrade of the Fed’s recent assessment. And then, just for fun, the Fed Chairman tossed in that upside risks to inflation have intensified. So, in short, Gentle Ben told Congress and the markets that the Fed has been painted into a corner and that the much anticipated second-half recovery might not happen.
But, with the market sinking fast and in new-low territory, it appeared that the bulls finally had caught a break. Crude oil, which had been a thorn in the side of anyone owning stock for quite some time, suddenly began to take a precipitous dive. Reasons for the intraday drop of more than $8 included rumors of hedge fund liquidations, worries over global growth, and fear that Iran may be softening its stance on the nuclear issue.
With the Dow coming all the way back and at one point sporting a gain of about 70 points, there was a great deal of talk about this being a “Turnaround Tuesday.” After all, the Dow had gone from -220 to +70 and it did appear that there was capitulation in the air.
However, indecision reigned supreme in the final hour as the carnage in the banking sector reminded traders that until we see an end to the writedowns and capital raises, the market will continue to have problems.
Turning to this morning, we’ve got some good news for a change from the banking sector as Wells Fargo (WFC) not only beat the street’s earnings expectations by $0.02, they also raised their dividend - Imagine that.
On the economic front, June’s CPI came with a gain of +1.1%, which was the biggest gain since 1982 and above the estimates for an increase of +0.7%. Then when you strip out food and energy, the so-called Core CPI increased by +0.3%, which was again above expectations for a rise of +0.2%. On a year-over-year basis, the numbers are getting downright ugly here. The headline CPI has now increased by 5.0% over the past year, while the Core Rate is up 2.4%.
Running through the rest of the pre-game indicators; the major foreign markets are mixed by region with Asia up slightly and Europe down. Crude futures are down again this morning with the latest quote showing oil trading at $137.53. Interest rates are up a bit this morning with the yield on the 10-yr currently trading at 3.87%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a modestly lower open. The Dow futures are currently off by about 40 points; the S&P’s are down by about 3 points, while the NASDAQ looks to be about 2 points below fair value at the moment.
Stocks “In Play” This Morning:
Yesterday’s Earnings After the Bell:
CSX Corp (NYSE: CSX) – Reported $0.89 vs. $0.91
Intel (Nasdaq: INTC) – Reported $0.28 vs. $0.26
Today’s Earnings Before the Bell:
Abbott Labs (NYSE: ABT) – Reported $0.84 vs. $0.78
St. Jude Medical (NYSE: STJ) – Reported $0.58 vs. $0.55
Host Hotels (NYSE: HST) – Reported $0.56 vs. $0.55
Wells Fargo (NYSE: WFC) – Reported $0.53 vs. $0.51, Increases dividend
News, Upgrades/Downgrades/Brokerage Research:
Alpha Natural Resources (NYSE: ANR) – To be acquired by Cleveland-Cliffs for $128/s
Cisco Systems (Nasdaq: CSCO) – Downgraded at Credit Suisse
Ciena Corp (Nasdaq: CIEN) – Downgraded at Credit Suisse
Chicago Bridge & Iron (NYSE: CBI) – Downgraded at Goldman, JP Morgan
Nalco Holding (NYSE: NLC) – Upgraded at JP Morgan
Time Warner Telecom (Nasdaq: TWTC) – Downgraded at JP Morgan
Kimberly Clark (NYSE: KMB) – Downgraded at Lehman
EW Scripps (NYSE: SSP) – Downgraded at Lehman
Boyd Gaming (NYSE: BYD) – Downgraded at Merrill
CSX Corp (NYSE: CSX) – Upgraded at Merrill
MGM Mirage (NYSE: MGM) – Downgraded at Merrill
Eaton (NYSE: ETN) – Downgraded at Merrill
AGCO (NYSE: AG) – Upgraded at Merrill
General Motors (NYSE: GM) – Moody's reviewing debt for possible downgrade
Disclosure: Mr. Moenning and/or related firms hold long positions in: CSX
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.
David D. Moenning
Heritage Capital Management
Main: 630-250-4700
Direct: 303-670-9761
email: [email protected]
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