David Moenning's Daily State of the Markets: 8/27

August 27, 2008 10:01 AM EDT

Not Much Ado About Anything

Here's a link to listen to an Audio Version of the report:

Perhaps the biggest thing to understand about Tuesday’s market action is that the calendar says it is late August and as such, traders may be more focused on getting a little R&R than on where to place their next big bet in the markets. Although there were a couple of stories that demanded some attention, the day ended close to where it began and was fairly uneventful overall.

One the primary drivers of the activity, limited as it may have been, was the path of Hurricane Gustav. The storm is now projected to become a Category 4 hurricane when it hits the Gulf of Mexico and as such, caused some concern about the oil installations there and the potential for supply interruptions. Although trading in the oil and natural gas pits was not frenetic, the Gulf’s first big storm did send oil prices higher by $1.16 to $116.27.

Stocks also took some cues from the economic data yesterday although none of the releases impacted trading to any great degree. First, as one might have expected, the report on new home sales wasn’t exactly awe inspiring. Although the headline did show that sales increased by 2.4% (versus expectations for a decline of 1.9%), the absolute number of homes sold and more importantly, the prices they were sold at did not provide any incentive for stock traders to hit the buy button.

Next, it was modestly positive that Consumer Confidence reversed course and actually increased in August. The index, which is designed to illustrate the mood of the public, came in with a reading of 56.9 versus the consensus estimate for 53 and was up from 51.9 in July. Although it would be easy to say that the consumer appears to be hanging tough right now, the recent drop in gasoline prices is likely the culprit behind the improved confidence numbers.

The minutes from the latest FOMC meeting weren’t exactly earth shattering as the Fed expressed significant concern over the risks to inflation and agreed that the financial markets remain under a great deal of stress. Fed members recognized that the negative factors will likely weigh on economic growth during the next few quarters and that risk to the economy remain.

Finally, as usual, there was a fair amount of talk about troubles in the banking sector as the FDIC reported that there were 117 banks on the troubled watch list at the end of the second quarter, which was up from 90 as of the end of March.

Turning to this morning, Hurricane Gustav is scheduled to hit Louisiana sometime Monday as a Category 4 hurricane. As expected, this has oil and natural gas moving higher in the early going.

On the economic front, orders for durable goods came in much better than analysts had expected with orders jumping +1.3% in July, when expectations had been for a flat reading. When you strip out transportations, the song remains the same as orders rose by +0.7% which was significantly higher than the consensus for a drop of -0.7%. In addition, the revisions to both numbers for last month were positive. And in short, stock traders seem like what they see here.

Running through the rest of the pre-game indicators, with the exception of Hong Kong which rose on great results from China Mobile (CHL), the foreign markets are mostly lower. Crude futures are moving up so far with the latest quote showing oil trading higher by $1.88 to $118.15. Interest rates are moving upward this morning with the yield on the 10-yr currently trading at 3.82%. And finally, with about 60 minutes before the bell, stock futures in the U.S. have improved and are now pointing to a slightly higher open. The Dow futures are currently ahead by about 35 points; the S&P’s are up by about 4 points, while the NASDAQ looks to be about 6 points above fair value at the moment.


Stocks “In Play” This Morning:

Today's Earnings Before the Bell:

Dillard’s (NYSE: DDS) – Reported -$0.58 vs. -$0.54
Talbots (NYSE: TLB) – Reported -$0.34 vs. -$0.34


News, Upgrades/Downgrades/Brokerage Research:

AMR Corp (NYSE: AMR) – Downgraded at Citi
ONEOK Inc (NYSE: OKE) – Upgraded at Lehman
Goldman Sachs (NYSE: GS) – Estimates reduced at Morgan Stanley
American Axle (NYSE: AXL) – Downgraded at RW Baird
Amylin Pharmaceuticals (Nasdaq: AMLN) – Downgraded at RW Baird

Disclosure: Mr. Moenning and/or related firms hold long positions in: GS

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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• New Home Sales
• Goldman Sachs
• Citi
• Morgan Stanley
• Robert W Baird
• Federal Open Market Committee
• David Moenning
• Crude Oil

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