David Moenning's Daily State of the Markets: 07/28
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Let's Blame Mr. Softie
Good morning. Just about the time we figured that the bulls had regained their long lost mojo, the erratic, discouraging trading behavior returned. Instead of being met with cheers, another session filled with solid earnings, this time from the oil majors, was met with ambivalence on Thursday. And unlike Wednesday�s action, this time it was the bears who claimed the moral victory.
Stocks popped higher out of the gate and things were looking pretty good for a while. Traders had been able to brush aside the mixed news from the Durable Goods report and seemed genuinely pleased to hear of Exxon Mobil�s robust earnings. But unfortunately, the enthusiasm quickly faded and stocks sank after lunch.
To what do we owe this displeasure? We could go on about the uncertainty surrounding today�s GDP report or offer the usual blather about the fear of what the Fed will do next. But with interest rates doing little on the day, that argument is wearing a little thin right now.
No, the only way to really know what ruined the bulls� fun was by watching the action very closely. The market seemed to get going to the downside immediately following an announcement from Microsoft that it would ship Vista when it was darn good and ready. And while there was no mention of any specific delay in the shipment date, you could feel the disappointment wash over the market.
While the days of a single stock moving the entire market ended with the bubble in the spring of 2000, Mr. Softie�s products still have a fairly large impact on all things tech. And with Microsoft already having played Mr. Grinch by pushing Vista�s launch date beyond this year�s holiday shopping season, traders are not interested in hearing about any further delays.
You see, with a new operating system on the horizon, PC shoppers (including yours truly) are likely to put off that purchase until the new system hits the streets. And this concept alone has had the ability to put a real dent in near-term outlook for just about anything relating to the PC.
So, if you are one of those investors that needs to have a reason for every move on Wall Street, even when the moves are small, then you can blame yesterday�s uninspiring performance on Microsoft. Oh, and higher oil prices and no end in sight for the conflict in the Middle East may have contributed as well.
Turning to this morning, we�ve got a pretty big economic report to digest. The advance (i.e. the second try) report on GDP for the 2nd quarter showed that the economy grew by just 2.5%, which is less than the projections for growth of 3.0%. In addition, the PCE Deflator, which is an index of prices and one of the Fed�s favorite measures of inflation, also came in a bit cooler than expected at 3.3%. However, this good news is offset a bit by the hotter than consensus numbers on Personal Consumption and the Employment Cost Index.
Bond yields are moving lower in response to the report as traders appear to be ahead of the Fed at the present time. The thinking is that the economy is indeed softening up, which implies that the Fed will need to stop raising rates soon. However, there are some nagging inflation concerns, so the Fed�s next move isn�t a slam dunk. And since we will hear from some Fed officials next week, we can withhold judgment for now.
Running through the rest of the pre-game indicators, overseas markets are split evenly with Asian markets showing nice gains while European markets are sporting modest declines. Gold futures are pulling back this morning and are currently exchanging hands at $625.30. Oil is also moving a little lower this morning and crude futures are currently trading off by $0.49 to $74.05. Interest rates are heading lower this morning with the 2-year is currently quoted at 5.02% while the 10-yr is trading with a yield at 5.01% right now. And finally, with about an hour before the bell, stock futures in the U.S. are a smidge higher. The Dow futures are currently ahead by 11; the S&Ps are gaining 1.20, and the NASDAQ is sporting a gain of about a point.
Stocks �In Play� This Morning:
Bear Stearns (BSC) � Mentioned positively in Business Week
General Dynamics (GD) � Downgraded at Prudential
Pacific Sunwear (PSUN) � Downgraded at Piper Jaffray
Best Buy (BBY) � Upgraded at Raymond James
Circuit City (CC) � Upgraded at Raymond James
Western Digital (WDC) � Downgraded at Bear Stearns
Massey Energy (MEE) � Downgraded at Credit Suisse, Raymond James
DaimlerChrysler (DCX) � Upgraded at Citigroup
Aetna (AET) � Upgraded at Goldman Sachs, Downgraded at BofA
Intel � Cut desktop chip prices
NCR (NCR) � Downgraded at Merrill Lynch
Cigna (CI) � Downgraded at BofA
XM Satellite Radio (XMSR) � Downgraded at CIBC
Fluor (FLR) � Mentioned positively at Citigroup
Dow Chemical (DOW) � Removed from Focus List at JP Morgan
Bristol Myers Squibb (BMY) � Downgraded at JP Morgan
Harrahs Entertainment (HET) � Downgraded at Merrill Lynch
Long positions in stocks mentioned: GS, BSC, FLR
** 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.
Good morning. Just about the time we figured that the bulls had regained their long lost mojo, the erratic, discouraging trading behavior returned. Instead of being met with cheers, another session filled with solid earnings, this time from the oil majors, was met with ambivalence on Thursday. And unlike Wednesday�s action, this time it was the bears who claimed the moral victory.
Stocks popped higher out of the gate and things were looking pretty good for a while. Traders had been able to brush aside the mixed news from the Durable Goods report and seemed genuinely pleased to hear of Exxon Mobil�s robust earnings. But unfortunately, the enthusiasm quickly faded and stocks sank after lunch.
To what do we owe this displeasure? We could go on about the uncertainty surrounding today�s GDP report or offer the usual blather about the fear of what the Fed will do next. But with interest rates doing little on the day, that argument is wearing a little thin right now.
No, the only way to really know what ruined the bulls� fun was by watching the action very closely. The market seemed to get going to the downside immediately following an announcement from Microsoft that it would ship Vista when it was darn good and ready. And while there was no mention of any specific delay in the shipment date, you could feel the disappointment wash over the market.
While the days of a single stock moving the entire market ended with the bubble in the spring of 2000, Mr. Softie�s products still have a fairly large impact on all things tech. And with Microsoft already having played Mr. Grinch by pushing Vista�s launch date beyond this year�s holiday shopping season, traders are not interested in hearing about any further delays.
You see, with a new operating system on the horizon, PC shoppers (including yours truly) are likely to put off that purchase until the new system hits the streets. And this concept alone has had the ability to put a real dent in near-term outlook for just about anything relating to the PC.
So, if you are one of those investors that needs to have a reason for every move on Wall Street, even when the moves are small, then you can blame yesterday�s uninspiring performance on Microsoft. Oh, and higher oil prices and no end in sight for the conflict in the Middle East may have contributed as well.
Turning to this morning, we�ve got a pretty big economic report to digest. The advance (i.e. the second try) report on GDP for the 2nd quarter showed that the economy grew by just 2.5%, which is less than the projections for growth of 3.0%. In addition, the PCE Deflator, which is an index of prices and one of the Fed�s favorite measures of inflation, also came in a bit cooler than expected at 3.3%. However, this good news is offset a bit by the hotter than consensus numbers on Personal Consumption and the Employment Cost Index.
Bond yields are moving lower in response to the report as traders appear to be ahead of the Fed at the present time. The thinking is that the economy is indeed softening up, which implies that the Fed will need to stop raising rates soon. However, there are some nagging inflation concerns, so the Fed�s next move isn�t a slam dunk. And since we will hear from some Fed officials next week, we can withhold judgment for now.
Running through the rest of the pre-game indicators, overseas markets are split evenly with Asian markets showing nice gains while European markets are sporting modest declines. Gold futures are pulling back this morning and are currently exchanging hands at $625.30. Oil is also moving a little lower this morning and crude futures are currently trading off by $0.49 to $74.05. Interest rates are heading lower this morning with the 2-year is currently quoted at 5.02% while the 10-yr is trading with a yield at 5.01% right now. And finally, with about an hour before the bell, stock futures in the U.S. are a smidge higher. The Dow futures are currently ahead by 11; the S&Ps are gaining 1.20, and the NASDAQ is sporting a gain of about a point.
Stocks �In Play� This Morning:
Bear Stearns (BSC) � Mentioned positively in Business Week
General Dynamics (GD) � Downgraded at Prudential
Pacific Sunwear (PSUN) � Downgraded at Piper Jaffray
Best Buy (BBY) � Upgraded at Raymond James
Circuit City (CC) � Upgraded at Raymond James
Western Digital (WDC) � Downgraded at Bear Stearns
Massey Energy (MEE) � Downgraded at Credit Suisse, Raymond James
DaimlerChrysler (DCX) � Upgraded at Citigroup
Aetna (AET) � Upgraded at Goldman Sachs, Downgraded at BofA
Intel � Cut desktop chip prices
NCR (NCR) � Downgraded at Merrill Lynch
Cigna (CI) � Downgraded at BofA
XM Satellite Radio (XMSR) � Downgraded at CIBC
Fluor (FLR) � Mentioned positively at Citigroup
Dow Chemical (DOW) � Removed from Focus List at JP Morgan
Bristol Myers Squibb (BMY) � Downgraded at JP Morgan
Harrahs Entertainment (HET) � Downgraded at Merrill Lynch
Long positions in stocks mentioned: GS, BSC, FLR
** 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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