David Moenning’s Daily State of the Markets: 7/2
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Be Sure To Decipher the Data!
As long-time readers are well aware, I’m kind of a stickler for keeping the big-picture in focus. And as anyone who has ever clicked a buy button will attest, this can be tough at times with all the news, noise, and flashing screens distracting us during the trading day. In fact, the primary reason I pen (er, type) a daily market missive is to make darned sure that I stay focused on what is driving the market. The idea is that if we can stay in tune with the action on a daily basis, then we ought not be surprised when the big picture environment changes.
With stocks now having gone sideways for the better part of two months and the market appearing to often times have very little memory from one day to the next, I am here to say that it is VERY easy these days to lose sight of the big picture. And since it is also VERY easy to find someone these days who agrees with your view, instead of seeking agreement, the goal should be to try and avoid all the so-called expert opinions and make sure to stay objective.
Getting to the point, we are of the mind that the market remains data dependent right now. We’ve had the undoing of the Armageddon discount and we’ve also probably seen a little discounting of better days ahead for the economy. So, at this stage of the game, those of the bullish ilk need to see some actual improvement in the economy in order to justify a continuation of the “mini bull” trend.
Thus, it becomes vital to be able to decipher the data that we’re hit with on a daily basis. Yes, I understand that trudging through economic data is torture for many investors. However, at this point in the game, it is critical to be able to understand what’s actually in the reports instead of letting T.V. commentators decide what makes for the best headline.
For example, the ISM Manufacturing Composite didn’t get much air play yesterday. However the message from the data was fairly important. The headline read that the ISM composite came in at 44.8, which was slightly below the consensus for a reading of 45.0. But, if you only checked the headline (and come on, admit it; how many even looked at this headline?) you might have been led to believe that the report was a bit disappointing.
However, the 44.8% reading was the highest since last August. And more importantly, the index, which is designed to indicate the state of the manufacturing sector, remained above the key 41.2% level that has historically been consistent with an expanding economy. I could go on, but in short, the ISM said the report was “encouraging” and added that “a recovery for manufacturing is forming.”
So, if you find yourself stuck in the bitter barn and preparing for the economic disaster that has already happened – please snap out of it! The bottom line is the economy IS turning. And while the ride is likely to be bumpy, it might just pay to try to stay upbeat about the big picture over the next 6 months or so. This does NOT mean that we won’t see a correction in the near term for just about any reason. However, for now at least, we’d give the bulls the benefit of the doubt.
Turning to this morning, we’ve got the Big Kahuna of economic data now available, so let’s get right to it. The Labor Department reported that nonfarm payrolls fell by 467K in June, which was worse than the consensus estimates for a drop of 356K jobs and May’s reading of 345K. The Unemployment Rate actually came in a tenth below expectations at 9.5% but is up a tenth from May’s 9.4% rate. And then, weekly Jobless Claims were pretty much on target at 614K vs. 615K.
Running through the rest of the pre-game indicators, the major overseas markets are lower across the board. Crude futures are moving down with the latest quote showing oil trading lower by $1.56 to $67.75. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.52%, while the yield on the 3-month T-Bill is trading at 0.16%. And with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 100 points; the S&P’s are down about 10 points, while the NASDAQ looks to be about 8 points below fair value at the moment.
Finally, as a reminder, the markets are closed tomorrow, so here’s wishing everyone a safe and happy Fourth of July!
Stocks “In Play” This Morning:
Upgrades/Downgrades/Brokerage Research:
JetBlue Airways (NASDAQ: JBLU) – Downgraded at Argus Research
ADTRAN (NASDAQ: ADTN) – Upgraded at Citi
WPP Group (NYSE: WPP) – Downgraded at Citi
Tata Motors (NYSE: TTM) – Upgraded at Deutsche Bank
Sempra Energy (NYSE: SRE) – Downgraded at Deutsche Bank
Johnson Controls (NYSE: JCI) – Downgraded at Deutsche Bank
Advanced Micro (NYSE: AMD) – Estimates and target increased at Goldman
Evergreen Solar (NASDAQ: ESLR) – Upgraded at JP Morgan
SunPower (NASDAQ: SPWRA) – Upgraded at JP Morgan
First Solar (NASDAQ: FSLR) – Downgraded at JP Morgan
Continental Airlines (NYSE: CAL) – Upgraded at Morgan Stanley
Southwest Air (NYSE: LUV) – Downgraded at Morgan Stanley
Intl Paper (NYSE: IP) – Estimates increased at UBS
Dynegy (NYSE: DYN) – Downgraded at UBS
Long positions in stocks mentioned: none
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.
As long-time readers are well aware, I’m kind of a stickler for keeping the big-picture in focus. And as anyone who has ever clicked a buy button will attest, this can be tough at times with all the news, noise, and flashing screens distracting us during the trading day. In fact, the primary reason I pen (er, type) a daily market missive is to make darned sure that I stay focused on what is driving the market. The idea is that if we can stay in tune with the action on a daily basis, then we ought not be surprised when the big picture environment changes.
With stocks now having gone sideways for the better part of two months and the market appearing to often times have very little memory from one day to the next, I am here to say that it is VERY easy these days to lose sight of the big picture. And since it is also VERY easy to find someone these days who agrees with your view, instead of seeking agreement, the goal should be to try and avoid all the so-called expert opinions and make sure to stay objective.
Getting to the point, we are of the mind that the market remains data dependent right now. We’ve had the undoing of the Armageddon discount and we’ve also probably seen a little discounting of better days ahead for the economy. So, at this stage of the game, those of the bullish ilk need to see some actual improvement in the economy in order to justify a continuation of the “mini bull” trend.
Thus, it becomes vital to be able to decipher the data that we’re hit with on a daily basis. Yes, I understand that trudging through economic data is torture for many investors. However, at this point in the game, it is critical to be able to understand what’s actually in the reports instead of letting T.V. commentators decide what makes for the best headline.
For example, the ISM Manufacturing Composite didn’t get much air play yesterday. However the message from the data was fairly important. The headline read that the ISM composite came in at 44.8, which was slightly below the consensus for a reading of 45.0. But, if you only checked the headline (and come on, admit it; how many even looked at this headline?) you might have been led to believe that the report was a bit disappointing.
However, the 44.8% reading was the highest since last August. And more importantly, the index, which is designed to indicate the state of the manufacturing sector, remained above the key 41.2% level that has historically been consistent with an expanding economy. I could go on, but in short, the ISM said the report was “encouraging” and added that “a recovery for manufacturing is forming.”
So, if you find yourself stuck in the bitter barn and preparing for the economic disaster that has already happened – please snap out of it! The bottom line is the economy IS turning. And while the ride is likely to be bumpy, it might just pay to try to stay upbeat about the big picture over the next 6 months or so. This does NOT mean that we won’t see a correction in the near term for just about any reason. However, for now at least, we’d give the bulls the benefit of the doubt.
Turning to this morning, we’ve got the Big Kahuna of economic data now available, so let’s get right to it. The Labor Department reported that nonfarm payrolls fell by 467K in June, which was worse than the consensus estimates for a drop of 356K jobs and May’s reading of 345K. The Unemployment Rate actually came in a tenth below expectations at 9.5% but is up a tenth from May’s 9.4% rate. And then, weekly Jobless Claims were pretty much on target at 614K vs. 615K.
Running through the rest of the pre-game indicators, the major overseas markets are lower across the board. Crude futures are moving down with the latest quote showing oil trading lower by $1.56 to $67.75. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.52%, while the yield on the 3-month T-Bill is trading at 0.16%. And with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 100 points; the S&P’s are down about 10 points, while the NASDAQ looks to be about 8 points below fair value at the moment.
Finally, as a reminder, the markets are closed tomorrow, so here’s wishing everyone a safe and happy Fourth of July!
Stocks “In Play” This Morning:
Upgrades/Downgrades/Brokerage Research:
JetBlue Airways (NASDAQ: JBLU) – Downgraded at Argus Research
ADTRAN (NASDAQ: ADTN) – Upgraded at Citi
WPP Group (NYSE: WPP) – Downgraded at Citi
Tata Motors (NYSE: TTM) – Upgraded at Deutsche Bank
Sempra Energy (NYSE: SRE) – Downgraded at Deutsche Bank
Johnson Controls (NYSE: JCI) – Downgraded at Deutsche Bank
Advanced Micro (NYSE: AMD) – Estimates and target increased at Goldman
Evergreen Solar (NASDAQ: ESLR) – Upgraded at JP Morgan
SunPower (NASDAQ: SPWRA) – Upgraded at JP Morgan
First Solar (NASDAQ: FSLR) – Downgraded at JP Morgan
Continental Airlines (NYSE: CAL) – Upgraded at Morgan Stanley
Southwest Air (NYSE: LUV) – Downgraded at Morgan Stanley
Intl Paper (NYSE: IP) – Estimates increased at UBS
Dynegy (NYSE: DYN) – Downgraded at UBS
Long positions in stocks mentioned: none
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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