David Moenning's Daily State of the Markets: 04/28


More News related to Special Reports

More News related to Special Reports
April 28, 2008 10:24 AM EDT

Mixed Messages


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

With the major indices still sitting right at the top of the trading range and yet, so far at least, unable to break out, traders really are forced to pick a side when putting new money to work right now. On the one hand, stocks are overbought and bumping into what appears to be fairly significant resistance. But, on the other hand, the big bad bears have been unable to do much of anything with the bad news that’s been available lately.

So, I guess it comes down to a question of what you put your faith in right now. For example, do you focus on the earnings reports from the likes of American Express (AXP), which, while hardly robust, continued a trend of financial reports that weren’t nearly as bad as expected?


Or do you take your lead from Microsoft (MSFT), where weak sales of Windows kept the outlook for the coming quarter a bit on the punk side?


Or, would it be wise to take a cue from the economic data, which for the most part, hasn’t been as crummy as had been projected. Yet, one look at the University of Michigan’s Consumer Confidence number makes you want to head for the hills as the reading hit a 23-year low on Friday.


Or, maybe we should broaden our view here a bit. Since the days of single earnings reports moving the entire market to any great degree are long gone, perhaps we should focus on the overall message from this quarter’s parade. But, as you might have guessed from the theme of this morning’s missive, this approach also offers mixed messages. With a little over one-half of the S&P 500 having reported earnings, the scorecard shows that earnings are down by about 20%. But, when you take out the disastrous numbers from the financials, earnings have actually increased by about 8%.


At the same time, let’s not forget that the Fed is meeting this week. Needless to say, Mr. Bernanke and friends have some significant decisions to make regarding interest rates. Cutting to the chase, the consensus calls for a 25 basis point reduction in rates and perhaps some hint that the rate cutting campaign may be nearing an end.


So what are investors to do right now? It is probably best to stay with the big-picture message which indicates that we have a much improved environment over what we saw in the first quarter. Yet, at the same time, a sagging economy, rising commodity costs, a plunging dollar, debt levels that are off the chart, problems in the housing and credit markets, and an overspent consumer seem to argue that the upside might have some limits.


Turning to this morning, we don’t have any economic data to review before the opening bell and the earnings parade is a bit light. However, there is never a dull moment in this game as is oil pushing toward $120 on a strike in Scotland and ongoing difficulties in Nigeria. In addition, Mars and Warren Buffett’s Berkshire Hathaway (BRK.A) are teaming up to buy Wrigley (WWY), which has given the futures a small boost.


Running through the rest of the pre-game indicators; the foreign markets are modestly higher across the board. Crude futures are moving up again with the latest quote showing oil higher by $0.61 to $119.13.The yield on the 10-yr is currently trading at 3.87% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to cautiously higher open. The Dow futures are currently ahead by about 10 points; the S&P’s are up about 3 points, while the NASDAQ looks to be about 2 points above fair value at the moment.


Stocks “In Play” This Morning:

Today’s Earnings Before the Bell:
BE Aerospace (BEAV) – Reported $0.53 vs. $0.51
Humana (HUM) – Reported $0.47 vs. $0.45
Loews Corp (LTR) – Reported $1.05 vs. $1.14
Sysco (SYY) – Reported $0.40 vs. $0.39
Verizon (VZ) – Reported $0.61 vs. $0.61

News, Upgrades/Downgrades/Brokerage Research:

Ericsson (ERIC) – Downgraded at Bank of America, Upgraded at Goldman
Credit Suisse (CS) – Upgraded at Bear Stearns, Goldman
Continental Airlines (CAL) – Downgraded at Credit Suisse
American Intl Group (AIG) – Downgraded at Credit Suisse
Visa (V) – Initiated Buy at Goldman, Hold at Citi, Neutral at Merrill, Equal Weight at Morgan Stanley, Neutral at Piper Jaffray, Buy at UBS


Potash (POT) – Removed from Conviction Buy at Goldman
Big Lots (BIG) – Upgraded at JP Morgan
Goodyear Tire (GT) – Downgraded at JP Morgan
Kohls (KSS) – Downgraded at RW Baird
Motorola (MOT) – Downgraded at Thomas Weisel

Mr. Moenning holds Long positions in stocks mentioned: BIG, MSFT

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: DMoenning@HeritageCapitalManagement.com

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