David Moenning's Daily State of the Markets: 10/25
Recoveries Just Keep Coming
For the fourth day in a row, the Dow found itself down triple digits during yesterday’s session. For the fourth day in a row, the losses were in response to either crummy housing numbers or the subprime mess, or rising oil prices. And for the fourth day in a row, the bulls somehow managed to recover before the close.
To be sure, the news continues to be bad in the areas of housing, subprime, and energy. For example, the report on New Home Sales was downright ugly once you got past the rather benign headline. While the report showed that sales actually rose 4.8% in September, the prior three months were all revised lower by one of the largest amounts ever seen. And the fact that sales were down 23.3% from the year-ago levels wasn’t exactly encouraging.
Next up, oil futures had a monster day on the back of heightened supply concerns. December crude futures spiked higher by more than $3 and closed at a new record high of $90.46. But with so much focus on subprime write-downs and the fact that gasoline prices are not rising in lock step with crude right now, no one seemed to notice.
Speaking of write-downs, the bears got a hand from the rumor mill in the early going yesterday. After Merrill Lynch (MER) decided to write-off $8.4 Billion on Wednesday, the word on the street was that AIG was going to follow suit and report a monster write-down in the vicinity of $9.8 billion. But, by late afternoon, the rumor was denied and the stock, along with the market, recovered in rather short order.
The reasons for the fourth straight day of heroics from the bull camp include (1) the three IPO’s that were priced on Wednesday night went off without a hitch, (2) the commercial paper market seems to be improving, (3) there is a growing feeling that we are near the nadir of the housing correction and (4) the Fed meeting is now just 4 days away. So, with traders now obsessed with interest rates and the futures pricing in a cut of at least 25bps on Halloween, the thinking is that the Bernanke cavalry is going to ride to the rescue once again.
And speaking of rescues, it looks like Mr. Softee may be a life saver for tech this morning. After the close, Microsoft (MSFT) reported a stellar quarter and the stock was trading higher by more than 11% in the after-hours session.
Turning to this morning, we don’t have any economic data before the bell but Microsoft continues give the bulls something to crow about – at least in the early going.
Running through the rest of the pre-game indicators; the overseas markets are mostly higher this morning. Crude futures are heading higher again today with the latest quote shows the December contract up $1.27 to $91.73. Interest rates are moving higher this morning with the 10-yr trading at a yield of 4.40% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently ahead by about 80 points; the S&Ps are up by about 13 points, while the NASDAQ looks to be about 30 points ahead of fair value at the moment.
Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Allegheny Energy (NYSE: AYE) – Reported $0.67 vs. $0.68
Check Free (Nasdaq: CKFR) – Reported $0.55 vs. $0.49
Columbia Sportswear (Nasdaq: COLM) – Reported $1.72 vs. $1.59
DeVry (NYSE: DV) – Reported $0.40 vs. $0.22
Eastman Chemical (NYSE: EMN) – Reported $1.26 vs. $1.26
Foundry Networks (Nasdaq: FDRY) – Reported $0.18 vs. $0.12
Federated Investors (NYSE: FII) – Reported $0.59 vs. $0.56
Genworth Financial (NYSE: GNW) – Reported $0.76 vs. $0.77
Hartford Financial (NYSE: HIG) – Reported $3.33 vs. $2.45
KLA Tencor (Nasdaq: KLAC) – Reported $0.75 vs. $0.75
McAfee (NYSE: MFE) – Reported $0.44 vs. $0.40
Microsoft (Nasdaq: MSFT) – Reported $0.45 vs. $0.39
Wendy’s (NYSE: WEN) – Reported $0.44 vs. $0.33
MEMC Electronic Materials (NYSE: WFR) – Reported $0.81 vs. $0.80
Today’s Earnings Before the Bell:
Baker Hughes (NYSE: BHI) – Reported $1.22 vs. $1.23
Countrywide Financial (NYSE: CFC) – Reported ($2.12) vs. ($1.65)
Coventry Health Care (NYSE: CVH) – Reported $1.08 vs. $1.08
Fortune Brands (NYSE: FO) – Reported $1.35 vs. $1.29
Kimco Realty (NYSE: KIM) – Reported $0.57 vs. $0.55
Lubrizol (NYSE: LZ) – Reported $1.04 vs. $0.93
Waste Management (NYSE: WMI) – Reported $0.54 vs. $0.59
News, Upgrades/Downgrades/Brokerage Research:
Hess Corp (NYSE: HES) – Upgraded at BofA
Eli Lilly (NYSE: LLY) – Downgraded at BofA
DeVry (NYSE: DV) – Upgraded at Bear Stearns, Piper Jaffray
Diamond Offshore (NYSE: DO) – Downgraded at Calyon
Comcast (Nasdaq: CMCSA) – Downgraded at CIBC Capital
Cummins (NYSE: CMI) – Upgraded at Citi, Credit Suisse
Aetna (NYSE: AET) – Upgraded at Citi
Blue Nile (Nasdaq: NILE) – Upgraded at Citi
Alexion Pharmaceuticals (Nasdaq: ALXN) – Upgraded at Credit Suisse
Borg Warner (NYSE: BWA) – Upgraded at Deutsche Bank
General Mils (NYSE: GIS) – Upgraded at Deutsche Bank
Foundry Networks (Nasdaq: FDRY) – Upgraded at JMP Securities
Level 3 Comm (Nasdaq: LVLT) – Downgraded at JP Morgan
Columbia Sportswear (Nasdaq: COLM) – Downgraded at Merrill
Wal-Mart (NYSE: WMT) – Upgraded at Merrill
Choice Hotels (NYSE: CHH) – Downgraded at Wachovia
Mr. Moenning holds Long positions in stocks mentioned: MER, CMI, DV, BHI
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.
For the fourth day in a row, the Dow found itself down triple digits during yesterday’s session. For the fourth day in a row, the losses were in response to either crummy housing numbers or the subprime mess, or rising oil prices. And for the fourth day in a row, the bulls somehow managed to recover before the close.
To be sure, the news continues to be bad in the areas of housing, subprime, and energy. For example, the report on New Home Sales was downright ugly once you got past the rather benign headline. While the report showed that sales actually rose 4.8% in September, the prior three months were all revised lower by one of the largest amounts ever seen. And the fact that sales were down 23.3% from the year-ago levels wasn’t exactly encouraging.
Next up, oil futures had a monster day on the back of heightened supply concerns. December crude futures spiked higher by more than $3 and closed at a new record high of $90.46. But with so much focus on subprime write-downs and the fact that gasoline prices are not rising in lock step with crude right now, no one seemed to notice.
Speaking of write-downs, the bears got a hand from the rumor mill in the early going yesterday. After Merrill Lynch (MER) decided to write-off $8.4 Billion on Wednesday, the word on the street was that AIG was going to follow suit and report a monster write-down in the vicinity of $9.8 billion. But, by late afternoon, the rumor was denied and the stock, along with the market, recovered in rather short order.
The reasons for the fourth straight day of heroics from the bull camp include (1) the three IPO’s that were priced on Wednesday night went off without a hitch, (2) the commercial paper market seems to be improving, (3) there is a growing feeling that we are near the nadir of the housing correction and (4) the Fed meeting is now just 4 days away. So, with traders now obsessed with interest rates and the futures pricing in a cut of at least 25bps on Halloween, the thinking is that the Bernanke cavalry is going to ride to the rescue once again.
And speaking of rescues, it looks like Mr. Softee may be a life saver for tech this morning. After the close, Microsoft (MSFT) reported a stellar quarter and the stock was trading higher by more than 11% in the after-hours session.
Turning to this morning, we don’t have any economic data before the bell but Microsoft continues give the bulls something to crow about – at least in the early going.
Running through the rest of the pre-game indicators; the overseas markets are mostly higher this morning. Crude futures are heading higher again today with the latest quote shows the December contract up $1.27 to $91.73. Interest rates are moving higher this morning with the 10-yr trading at a yield of 4.40% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently ahead by about 80 points; the S&Ps are up by about 13 points, while the NASDAQ looks to be about 30 points ahead of fair value at the moment.
Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Allegheny Energy (NYSE: AYE) – Reported $0.67 vs. $0.68
Check Free (Nasdaq: CKFR) – Reported $0.55 vs. $0.49
Columbia Sportswear (Nasdaq: COLM) – Reported $1.72 vs. $1.59
DeVry (NYSE: DV) – Reported $0.40 vs. $0.22
Eastman Chemical (NYSE: EMN) – Reported $1.26 vs. $1.26
Foundry Networks (Nasdaq: FDRY) – Reported $0.18 vs. $0.12
Federated Investors (NYSE: FII) – Reported $0.59 vs. $0.56
Genworth Financial (NYSE: GNW) – Reported $0.76 vs. $0.77
Hartford Financial (NYSE: HIG) – Reported $3.33 vs. $2.45
KLA Tencor (Nasdaq: KLAC) – Reported $0.75 vs. $0.75
McAfee (NYSE: MFE) – Reported $0.44 vs. $0.40
Microsoft (Nasdaq: MSFT) – Reported $0.45 vs. $0.39
Wendy’s (NYSE: WEN) – Reported $0.44 vs. $0.33
MEMC Electronic Materials (NYSE: WFR) – Reported $0.81 vs. $0.80
Today’s Earnings Before the Bell:
Baker Hughes (NYSE: BHI) – Reported $1.22 vs. $1.23
Countrywide Financial (NYSE: CFC) – Reported ($2.12) vs. ($1.65)
Coventry Health Care (NYSE: CVH) – Reported $1.08 vs. $1.08
Fortune Brands (NYSE: FO) – Reported $1.35 vs. $1.29
Kimco Realty (NYSE: KIM) – Reported $0.57 vs. $0.55
Lubrizol (NYSE: LZ) – Reported $1.04 vs. $0.93
Waste Management (NYSE: WMI) – Reported $0.54 vs. $0.59
News, Upgrades/Downgrades/Brokerage Research:
Hess Corp (NYSE: HES) – Upgraded at BofA
Eli Lilly (NYSE: LLY) – Downgraded at BofA
DeVry (NYSE: DV) – Upgraded at Bear Stearns, Piper Jaffray
Diamond Offshore (NYSE: DO) – Downgraded at Calyon
Comcast (Nasdaq: CMCSA) – Downgraded at CIBC Capital
Cummins (NYSE: CMI) – Upgraded at Citi, Credit Suisse
Aetna (NYSE: AET) – Upgraded at Citi
Blue Nile (Nasdaq: NILE) – Upgraded at Citi
Alexion Pharmaceuticals (Nasdaq: ALXN) – Upgraded at Credit Suisse
Borg Warner (NYSE: BWA) – Upgraded at Deutsche Bank
General Mils (NYSE: GIS) – Upgraded at Deutsche Bank
Foundry Networks (Nasdaq: FDRY) – Upgraded at JMP Securities
Level 3 Comm (Nasdaq: LVLT) – Downgraded at JP Morgan
Columbia Sportswear (Nasdaq: COLM) – Downgraded at Merrill
Wal-Mart (NYSE: WMT) – Upgraded at Merrill
Choice Hotels (NYSE: CHH) – Downgraded at Wachovia
Mr. Moenning holds Long positions in stocks mentioned: MER, CMI, DV, BHI
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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