David Moenning's Daily State of the Markets: 12/01
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Still Going
Good morning and a happy Friday to all. Thursday�s market could have very easily turned into a repeat of Monday�s rout as there was an abundance of negative factors lined up that seemed to favor the bears. Our furry friends had oil prices rising for the fifth straight day, the dollar continuing to fall (did we mention this is inflationary?), a Chicago Business Barometer below 50 � which indicates a contraction in business activity, Wal-Mart�s disappointing sales projections, a higher-than expected Core PCE (a measure of inflation), and sharply rising Claims for Unemployment.
Under normal circumstance, the bears could be seen licking their chops over the idea that energy prices and inflation expectations were on the rise while the economy appeared to be slowing down more than was expected. However, the bulls appeared to shrug it off and like the Energizer Bunny were �still going� at the close.
Many times the final numbers don�t tell the whole story of a session. Case in point: If one simply looked at the yesterday�s drop of 5 points on the Dow, the gain of 1 point on the S&P, and the flat-line result on the NASDAQ, it would be easy to conclude that it was a dull day without much activity. But in reality, nothing could be farther from the truth.
Once again, the bears had an opening. And once again, they were unable to do anything with it. Thus, we will have to conclude that it is either the calendar that is keeping a bid under the market, or that the bulls are just too strong these days. And in all likelihood, it�s a lot of the former and a little of the latter that is keeping the bulls in business.
With the economic data remaining at the center of the market�s universe these days and most reports showing that the economy is indeed slowing, we will have to admit that the Fed appears to have played their hand beautifully when they stopped raising rates. And as long as the slowdown doesn�t gain too much momentum, then the negative reports will continue to be a modest positive for stocks.
However, we should take note that the boys in the bond pits are beginning to get a little worried about the economy. Yesterday, the yield on the 10-year closed down at 4.46%, which was the lowest close since January and below the all-important 4.5% level. Word is that a weekly close below 4.5% is an indication that bond traders are concerned about the economy slowing enough to qualify as a recession and more importantly, that the Fed needs to cut rates. Thus, this is something that bears watching today.
Turning to this morning, things are fairly quiet in the early going. We don�t have any economic data before the bell, but we will get the all-important ISM report on the health of the manufacturing sector at 10:00 am.
Running through the rest of the pre-game indicators, with the exception of Hong Kong, the major overseas markets are all modestly higher. Gold futures are lower this morning and are quoted at $650.50 right now. Crude futures are falling this morning after a five-day rally and the latest quote shows the December contract off $0.72 to $62.41. Interest rates are moving up a smidge as the battle over a weekly close above or below 6.50% is raging. The 2-year is currently quoted at 4.63% while the 10-yr is trading with a yield of 4.48% right now. And finally, with an hour before the bell, stock futures in the U.S. are doing very little. The Dow futures are currently ahead by 8 points, the S&Ps are flirting with breakeven, and the NASDAQ looks to be about a point below of fair value at the moment.
Stocks �In Play� This Morning:
Claires Stores (CLE) � Reportedly will put company up for sale
Florida Rock (FRK) � Downgraded at BB&T
Chevron (CVX) � Upgraded at Bear Stearns
Triad Hospitals (TRI) � Downgraded at Bear Stearns
Federated Dept Stores (FD) � Downgraded at Citigroup
Flextronics (FLEX) � Removed from Conviction Buy list at Goldman Sachs
Target (TGT) � Added to Conviction Buy list at Goldman Sachs
Wal-Mart (WMT) � Removed from Conviction Buy list at Goldman Sachs
Revlon (REV) � Downgraded at Goldman Sachs
Heinz (HNZ) � Upgraded at JP Morgan
Ericsson (ERIC) � JP Morgan starts with Overweight
Sonus Networks (SONS) � Upgraded at Lehman
Boeing (BA) � Added to Focus 1 list at Merrill Lynch
Carnival Corp (CCL) � Downgraded at Merrill Lynch
National Semi (NSM) � Upgraded at Piper Jaffray
Verisign (VRSN) � Downgraded at Susquehanna
Anheuser Busch (BUD) � Upgraded at UBS
Cardinal Health (CAH) � Upgraded at UBS
Long positions in stocks mentioned: BSC, GS, MER, LEH
** 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 and a happy Friday to all. Thursday�s market could have very easily turned into a repeat of Monday�s rout as there was an abundance of negative factors lined up that seemed to favor the bears. Our furry friends had oil prices rising for the fifth straight day, the dollar continuing to fall (did we mention this is inflationary?), a Chicago Business Barometer below 50 � which indicates a contraction in business activity, Wal-Mart�s disappointing sales projections, a higher-than expected Core PCE (a measure of inflation), and sharply rising Claims for Unemployment.
Under normal circumstance, the bears could be seen licking their chops over the idea that energy prices and inflation expectations were on the rise while the economy appeared to be slowing down more than was expected. However, the bulls appeared to shrug it off and like the Energizer Bunny were �still going� at the close.
Many times the final numbers don�t tell the whole story of a session. Case in point: If one simply looked at the yesterday�s drop of 5 points on the Dow, the gain of 1 point on the S&P, and the flat-line result on the NASDAQ, it would be easy to conclude that it was a dull day without much activity. But in reality, nothing could be farther from the truth.
Once again, the bears had an opening. And once again, they were unable to do anything with it. Thus, we will have to conclude that it is either the calendar that is keeping a bid under the market, or that the bulls are just too strong these days. And in all likelihood, it�s a lot of the former and a little of the latter that is keeping the bulls in business.
With the economic data remaining at the center of the market�s universe these days and most reports showing that the economy is indeed slowing, we will have to admit that the Fed appears to have played their hand beautifully when they stopped raising rates. And as long as the slowdown doesn�t gain too much momentum, then the negative reports will continue to be a modest positive for stocks.
However, we should take note that the boys in the bond pits are beginning to get a little worried about the economy. Yesterday, the yield on the 10-year closed down at 4.46%, which was the lowest close since January and below the all-important 4.5% level. Word is that a weekly close below 4.5% is an indication that bond traders are concerned about the economy slowing enough to qualify as a recession and more importantly, that the Fed needs to cut rates. Thus, this is something that bears watching today.
Turning to this morning, things are fairly quiet in the early going. We don�t have any economic data before the bell, but we will get the all-important ISM report on the health of the manufacturing sector at 10:00 am.
Running through the rest of the pre-game indicators, with the exception of Hong Kong, the major overseas markets are all modestly higher. Gold futures are lower this morning and are quoted at $650.50 right now. Crude futures are falling this morning after a five-day rally and the latest quote shows the December contract off $0.72 to $62.41. Interest rates are moving up a smidge as the battle over a weekly close above or below 6.50% is raging. The 2-year is currently quoted at 4.63% while the 10-yr is trading with a yield of 4.48% right now. And finally, with an hour before the bell, stock futures in the U.S. are doing very little. The Dow futures are currently ahead by 8 points, the S&Ps are flirting with breakeven, and the NASDAQ looks to be about a point below of fair value at the moment.
Stocks �In Play� This Morning:
Claires Stores (CLE) � Reportedly will put company up for sale
Florida Rock (FRK) � Downgraded at BB&T
Chevron (CVX) � Upgraded at Bear Stearns
Triad Hospitals (TRI) � Downgraded at Bear Stearns
Federated Dept Stores (FD) � Downgraded at Citigroup
Flextronics (FLEX) � Removed from Conviction Buy list at Goldman Sachs
Target (TGT) � Added to Conviction Buy list at Goldman Sachs
Wal-Mart (WMT) � Removed from Conviction Buy list at Goldman Sachs
Revlon (REV) � Downgraded at Goldman Sachs
Heinz (HNZ) � Upgraded at JP Morgan
Ericsson (ERIC) � JP Morgan starts with Overweight
Sonus Networks (SONS) � Upgraded at Lehman
Boeing (BA) � Added to Focus 1 list at Merrill Lynch
Carnival Corp (CCL) � Downgraded at Merrill Lynch
National Semi (NSM) � Upgraded at Piper Jaffray
Verisign (VRSN) � Downgraded at Susquehanna
Anheuser Busch (BUD) � Upgraded at UBS
Cardinal Health (CAH) � Upgraded at UBS
Long positions in stocks mentioned: BSC, GS, MER, LEH
** 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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