David Moenning's Daily State of the Markets: 06/19

David Moenning's Daily State of the Markets:

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

Summer of Discontent?

Investors continued to focus on the macro picture on Wednesday, which seems to be growing more dismal with each passing day. The result was another triple digit loss for the Dow and declines of 1% for the rest of the major indices.

At issue yesterday was the lousy earnings report from FedEx (FDX) who missed badly and then reduced their outlook for the coming quarter. The problem is that FDX is viewed as a proxy for the overall health of the economy. So, with FedEx saying things are looking grim going forward; investors have taken the view that there probably isn’t much reason to be optimistic in the near term.

It also didn’t help yesterday that an analyst at the Royal Bank of Scotland (RBS) issued a report calling for a full-fledged crash in global stocks to occur in the coming months. Although this particular analyst has been singing the same song for about a year now, with prices falling on a daily basis, the use of the word "crash" definitely got some people’s attention yesterday.

The report from CarMax also reinforced that gloomy macro outlook with the company saying that sales of used cars have "weakened considerably" since Memorial Day. I guess gasoline prices in excess of $4 per gallon make it tough to move all those Suburbans, Navigators, and Expeditions on the lots. As a result, the company decided to simply stop giving guidance on their sales outlook for the rest of the year.

Then there is oil, which only knows one direction lately. Own it and you are loving life. But trying to call a top has been financial suicide this year. Sure, the move is certainly extended and the sentiment is becoming bubble-like. But with the fundamentals surrounding the supply of oil screaming “buy” and the geopolitical issues getting messier every day, it is tough to argue that prices are going to head a lot lower anytime soon.

So, with the consumer looking bummed out as well as tapped out, inflation on the rise, an economy that is anything but humming along, and central bankers everywhere talking about higher interest rates, the bear case seems to be growing in popularity right now. But, every trader worth their salt knows that markets don’t move in a straight line in either direction. So, with stocks now oversold and sentiment approaching extreme readings, we should probably start looking for some sort of a rally in the near future.

Turning to this morning, we have attacks on oil platforms occurring in Nigeria in the news and some economic data a little later this morning in the form of the Philly Fed report and the Index of Leading Economic Indicators.

Running through the rest of the pre-game indicators; the foreign markets are again a mixed bag as Asia had a rough go while Europe is only down fractionally. Crude futures are moving down a smidge with the latest quote showing oil trading off $0.21 to $136.47. Interest rates are up this morning with the yield on the 10-yr currently trading at 4.18%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a quiet open. The Dow futures are currently ahead by about 20 points; the S&P’s are up by about 2 points, while the NASDAQ looks to be about a point above fair value at the moment.

Stocks "In Play" This Morning:

Today's Earnings Before the Bell:

Circuit City (NYSE: CC) – Reported $1.00 vs. $1.08, Suspended dividend payments

News, Upgrades/Downgrades/Brokerage Research:
American Intl Group (NYSE: AIG) – Upgraded at Citi
Commercial Metals (NYSE: CMC) – Downgraded at Citi
UBS (NYSE: UBS) – Downgraded at Credit Suisse
Total (NYSE: TOT) – Upgraded at Goldman
Morgan Stanley (NYSE: MS) – Estimates reduced at Oppenheimer
Wal-Mart (NYSE: WMT) – Target and estimates increased at ThinkPanmure
Kraft Foods (NYSE: KFT) – Downgraded at UBS
Sepracor (Nasdaq: SEPR) – Upgraded at UBS
Express Scripts (Nasdaq: ESRX) – Downgraded at UBS
Medco Health Solutions (NYSE: MHS) – Downgraded at UBS

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

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: [email protected]

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