David Moenning's Daily State of the Markets 08/01
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Showdown at the Bernanke Corral
Good morning. Stocks slipped on Monday as it looks like next week�s interest rate decision will be more of a showdown between the hawks and the doves than a done deal. Friday�s weaker than expected GDP report led traders to believe that a pause was in the offing. However, comments from Fed Governors Poole and Yellen yesterday suggest that nothing is certain at this point.
St. Louis Fed President William Poole said that he is only 50-50 with regards to the August 8th rate decision. Like any good economist tends to do, Mr. Poole provided an �on the one hand� but then on the other hand� type of analysis. He noted that the rate of economic growth has clearly slowed, but that inflation has �tilted� upwards. Mr. Poole opined that the next rate hike decision will require �all of our analytical skills� and that more incoming data (such as Friday�s Jobs report?) will help shape the decision.
Ms. Yellen sounded a bit less open minded in her speech. The President of the San Francisco Fed said that �recent inflation news is disappointing� and that core inflation is outside of her comfort zone. She did concede that the core inflation is likely to decline alongside a slowing economy and that the downturn in the housing market may negatively impact consumer spending.
Why the fixation on all the Fed chatter, you ask? Aren�t there other factors affecting the market that need attention as well? While we readily admit that there are always multiple issues to be concerned with, in our humble opinion, it isn�t the direction of oil (up again yesterday) or the resolution of the conflict in the Middle East (that would definitely help) that holds the key to the next move in the stock market. No, it is the Fed decision next week that is likely to dictate the action from here.
Currently the market is walking a tightrope between an ongoing bull move and something grizzlier in nature. The thinking right now is if rates and inflation behave, then the bulls can continue to focus on earnings and there is a good chance that we could see greener pastures ahead. However, should the Fed be forced to continue marching down the measured path, then it may the bears� turn to run with the ball for a while.
Yesterday�s action reflected a certain amount of uncertainty that recent data and Fed remarks have put into the market. Although the bulls will argue that a pause in the action right now is healthy, their opponents suggest that the inability overcome the overhead resistance is a key �tell� about the state of the market right now.
Turning to this morning, the report on Personal Income and Spending isn�t going to provide much help in the Fed�s decision as all three components were reported in line with expectations. Personal Income came in with a gain of +0.6%, Spending was dead on with the consensus at +0.4%, and the PCE Core (inflation) was also in line with expectations with a rise of
+0.2%.
Running through the rest of the pre-game indicators, overseas markets are mixed with no major moves evident. Gold futures are pulling back a little this morning and are currently exchanging hands at $645.30. Oil is moving up again this morning and crude futures are currently trading higher by
$0.45 to $74.85. Interest rates are steady this morning with the 2-year is currently quoted at 4.98% while the 10-yr is trading with a yield at 4.99% right now. And finally, with about an hour before the bell, stock futures in the U.S. are a little lower. The Dow futures are currently off by 20; the S&Ps are lower by 1.20, and the NASDAQ is sporting a drop of about 6 points.
Stocks �In Play� This Morning:
Cisco (CSCO) � Upgraded at Rochdale
Chesapeake Energy (CHK) � Upgraded at Goldman Sachs
Qwest (Q) � Reported $0.06 vs. $0.05
ABN Amro (ABN) � Downgraded at Citigroup
Hydril (HYDL) � Upgraded at Citigroup
Allstate (ALL) � Downgraded at Citigroup
EMC (EMC) � Downgraded at Morgan Keegan
Manor Care (HCR) � Downgraded at Jefferies
Powerwave (PWAV) � Downgraded at RW Baird
Intl Game Tech (IGT) � Upgraded at UBS
Manpower (MAN) � Downgraded at UBS
Archer Daniels Midland (ADM) � Reported $0.62 vs. $0.52
Sirius Satellite Radio (SIRI) � Reported -$0.17 vs. -$0.15
Vonage (VG) � Reported -$1.16 vs. -$0.47
Valero (VLO) � Reported $2.98 vs. $2.95
Long positions in stocks mentioned: GS, CSCO, PWAV, CHK, Q, VLO
** 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. Stocks slipped on Monday as it looks like next week�s interest rate decision will be more of a showdown between the hawks and the doves than a done deal. Friday�s weaker than expected GDP report led traders to believe that a pause was in the offing. However, comments from Fed Governors Poole and Yellen yesterday suggest that nothing is certain at this point.
St. Louis Fed President William Poole said that he is only 50-50 with regards to the August 8th rate decision. Like any good economist tends to do, Mr. Poole provided an �on the one hand� but then on the other hand� type of analysis. He noted that the rate of economic growth has clearly slowed, but that inflation has �tilted� upwards. Mr. Poole opined that the next rate hike decision will require �all of our analytical skills� and that more incoming data (such as Friday�s Jobs report?) will help shape the decision.
Ms. Yellen sounded a bit less open minded in her speech. The President of the San Francisco Fed said that �recent inflation news is disappointing� and that core inflation is outside of her comfort zone. She did concede that the core inflation is likely to decline alongside a slowing economy and that the downturn in the housing market may negatively impact consumer spending.
Why the fixation on all the Fed chatter, you ask? Aren�t there other factors affecting the market that need attention as well? While we readily admit that there are always multiple issues to be concerned with, in our humble opinion, it isn�t the direction of oil (up again yesterday) or the resolution of the conflict in the Middle East (that would definitely help) that holds the key to the next move in the stock market. No, it is the Fed decision next week that is likely to dictate the action from here.
Currently the market is walking a tightrope between an ongoing bull move and something grizzlier in nature. The thinking right now is if rates and inflation behave, then the bulls can continue to focus on earnings and there is a good chance that we could see greener pastures ahead. However, should the Fed be forced to continue marching down the measured path, then it may the bears� turn to run with the ball for a while.
Yesterday�s action reflected a certain amount of uncertainty that recent data and Fed remarks have put into the market. Although the bulls will argue that a pause in the action right now is healthy, their opponents suggest that the inability overcome the overhead resistance is a key �tell� about the state of the market right now.
Turning to this morning, the report on Personal Income and Spending isn�t going to provide much help in the Fed�s decision as all three components were reported in line with expectations. Personal Income came in with a gain of +0.6%, Spending was dead on with the consensus at +0.4%, and the PCE Core (inflation) was also in line with expectations with a rise of
+0.2%.
Running through the rest of the pre-game indicators, overseas markets are mixed with no major moves evident. Gold futures are pulling back a little this morning and are currently exchanging hands at $645.30. Oil is moving up again this morning and crude futures are currently trading higher by
$0.45 to $74.85. Interest rates are steady this morning with the 2-year is currently quoted at 4.98% while the 10-yr is trading with a yield at 4.99% right now. And finally, with about an hour before the bell, stock futures in the U.S. are a little lower. The Dow futures are currently off by 20; the S&Ps are lower by 1.20, and the NASDAQ is sporting a drop of about 6 points.
Stocks �In Play� This Morning:
Cisco (CSCO) � Upgraded at Rochdale
Chesapeake Energy (CHK) � Upgraded at Goldman Sachs
Qwest (Q) � Reported $0.06 vs. $0.05
ABN Amro (ABN) � Downgraded at Citigroup
Hydril (HYDL) � Upgraded at Citigroup
Allstate (ALL) � Downgraded at Citigroup
EMC (EMC) � Downgraded at Morgan Keegan
Manor Care (HCR) � Downgraded at Jefferies
Powerwave (PWAV) � Downgraded at RW Baird
Intl Game Tech (IGT) � Upgraded at UBS
Manpower (MAN) � Downgraded at UBS
Archer Daniels Midland (ADM) � Reported $0.62 vs. $0.52
Sirius Satellite Radio (SIRI) � Reported -$0.17 vs. -$0.15
Vonage (VG) � Reported -$1.16 vs. -$0.47
Valero (VLO) � Reported $2.98 vs. $2.95
Long positions in stocks mentioned: GS, CSCO, PWAV, CHK, Q, VLO
** 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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