David Moenning's Daily State of the Markets: 2/19

February 19, 2009 10:21 AM EST

Plan Overload?

It is hard to tell whether investors were simply unimpressed by the President’s new plan to help homeowners and, in turn, the housing market, or if they are simply on plan overload at the moment. In any event, the stock market shrugged off the announcement and ended little changed. I guess the positive is that for this day at least, the Dow didn’t break down to a new low.

President Obama unveiled details of his $275 billion “Homeowner Affordability and Stability Plan” in Phoenix yesterday. The crux of plan is to try and help 7 million – 9 million people rework their mortgages so that they can avoid foreclosure. The idea again is that fewer homes in foreclosure will mean less distressed properties on the market, which means fewer fire sales – which in the end should help prices to stabilize.

However, once again, the stock market actually declined while the President was talking. The reason for this rather unpatriotic act is simple – the plan didn’t do what Wall Street was looking for. The plan is basically long on incentives to help people but short on ways to spur demand or deal with the altering of loans already packaged into pools of securities, which, if you will recall, has a little something to do with how this whole mess got started.

In short, it would appear that once again, the latest plan failed to impress. Yes, the government is doing something admirable to try and help its citizens. However, Wall Street is a cold hearted place and while the plans offered up so far by Washington are aimed at helping U.S. citizens, economists are wondering if they are going to be enough to stave off a more prolonged downturn in the economy.
It also hasn’t helped that the economic news continues to be more than a little troubling. By now, I’m sure you’re tired of hearing that the latest data was the worst since the 1970’s, the 1960’s, or even the 1930’s. However, the building permit numbers were the worst since records started being kept in 1960 and simply helped to highlight the fact that this housing problem doesn’t appear to have a quick fix. Oh, and for the record, capacity utilization in the manufacturing sector was reported yesterday at the lowest level since 1948.

Looking at the internals of the market, we see that bank stocks fell for the fourth straight session yesterday. There wasn’t any real news to spur the decline; however we will note that the talk of nationalizing at least some banks is growing louder. Even former Fed Chairman Alan Greenspan agrees that a temporary nationalization makes sense as it would “allow the government to transfer toxic assets to a bad bank without the problem of how to price them.”

Finally, the technicals of the market remain tenuous at best. As we mentioned, the bulls appear to be trying desperately to keep the Dow from breaking its November 20th low. The worry in the bull camp is that if the Dow were to break below this all-important line in the sand, the move might signal the beginning of a new leg down.

Turning to this morning, the economic data is a little surprising as January’s PPI came in with a gain of +0.8%, which was a long way from the consensus estimate for an increase of +0.3%. When you strip out food and energy, the Core Rate was reported at +0.4%, which was also higher than expectations for +0.1%. In addition, Jobless Claims for the week ending Feb 14 rose to 627K, which, once again was higher than analysts had been looking for.

Running through the rest of the pre-game indicators, the major foreign markets are fractionally mixed. Crude futures are higher with the latest quote showing oil trading up by $1.31 to $35.93. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.80%, while overnight LIBOR is at 0.29% and the yield on the 3-month T-Bill is trading at 0.30%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing slightly higher. The Dow futures are currently ahead by about 15 points; the S&P’s are up by about 2 points, while the NASDAQ looks to be about a single point above fair value at the moment.

Stocks “In Play” This Morning:

Yesterday’s Earnings After the Bell:

Analog Devices (NYSE: ADI) – Reported $0.18 vs. $0.16
Baidu (Nasdaq: BIDU) – Reported $1.31 vs. $1.42
CBS Corp (NYSE: CBS) – Reported $0.20 vs. $0.25
Hewlett Packard (NYSE: HPQ) – Reported $0.93 vs. $0.93

Kinross Gold (NYSE: KGC) – Reported $0.09 vs. $0.10
Blue Nile (Nasdaq: NILE) – Reported $0.24 vs. $0.34
Oceaneering Intl (NYSE: OII) – Reported $0.93 vs. $0.93
Priceline.com (Nasdaq: PCLN) – Reported $1.29 vs. $1.06
Whole Foods (Nasdaq: WFMI) – Reported $0.20 vs. $0.15

Today’s Earnings Before the Bell:

Amerigroup (NYSE: AGP) – Reported $0.70 vs. $0.55
CVS Caremark (NYSE: CVS) – Reported $0.65 vs. $0.65
Eldorado Gold (NYSE: EGO) – Reported $0.07 vs. $0.05
Expedia (Nasdaq: EXPE) – Reported $0.22 vs. $0.24
Hormel Foods (NYSE: HRL) – Reported $0.60 vs. $0.51
Hornbeck Offshore (NYSE: HOS) – Reported $1.31 vs. $1.05
Newmont Mining (NYSE: NEM) – Reported $0.26 vs. $0.25
Noble Energy (NYSE: NBL) – Reported $0.91 vs. $0.79
Patterson Companies (Nasdaq: PDCO) – Reported $0.45 vs. $0.44
Sprint Nextel (NYSE: S) – Reported -$0.01 vs. -$0.03
WPI Pharmaceuticals (NYSE: WPI) – Reported $0.53 vs. $0.50

Today’s Corporate News, Upgrades/Downgrades/Brokerage Research:

American Campus Communities (NYSE: ACC) – Upgraded at Bank of America Merrill
Suncor Energy (NYSE: SU) – Upgraded at Barclays
Exxon Mobil (NYSE: XOM) – Downgraded at Barclays, Bernstein
Occidental Petroleum (NYSE: OXY) – Downgraded at Bernstein
Transocean (NYSE: RIG) – Upgraded at Bernstein
Noble Corp (NYSE: NE) – Upgraded at Bernstein
Ensco Intl (NYSE: ESV) – Upgraded at Bernstein
Rowan Companies (NYSE: RDC) – Upgraded at Bernstein
Biomarin Pharmaceutical (Nasdaq: BMRN) – Downgraded at Citi, Wachovia
Granite Construction (NYSE: GVA) – Upgraded at Goldman
URS Corp (NYSE: URS) – Upgraded at Goldman
Navistar (NYSE: NAV) – Added to Conviction Buy list at Goldman
Comcast (Nasdaq: CMCSA) – Removed from Conviction Buy list at Goldman
Telephone & Data Systems (NYSE: TDS) – Downgraded at Morgan Stanley
United States Cellular (NYSE: USM) – Downgraded at Morgan Stanley
Hewlett Packard (NYSE: HPQ) – Upgraded at Thomas Weisel

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