David Moenning's Daily State of the Markets: 12/06
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Is the Data Just Right?
Good morning. Yesterday�s economic data was once again a mixed bag. However, with stocks continuing to rally, it is becoming obvious that the temperature of the economy is just the way Goldilocks likes it � not too hot and yet not too cold.
On the positive side of the ledger, traders in both stocks and bonds cheered the fact that Unit Labor Costs came in sharply lower than expectations. And while it might seem counterintuitive that lower earnings for workers would be a good thing, keep in mind that wage inflation is one of the things that Mr. Bernanke and company are watching closely.
In addition, the ISM Non-Manufacturing Index was surprisingly strong as the index measuring the health of 18 different industries rose 1.8 points to a reading of 58.9, which was well above the estimates for a drop to 55.5. Not only was the reading from the non-manufacturing side of the economy NOT in contraction mode, the gang at Ned Davis Research informs us that the current reading corresponds to a 4.4% annual growth rate in the economy. In short, this report should put the worries about the economy being �too cold� to bed.
The bulls also got an anecdotal boost from the CEO of luxury home builder Toll Brothers yesterday morning. While the glass-is-half-empty crowd continues to yammer on about the potential for disaster in the housing market, yesterday, Mr. Toll said that he saw some signs of a bottom in his industry. And although Toll later said that he didn�t intend to project optimism with his remarks, one look at the charts confirms that investors are now looking for a rebound in the home builders.
This batch of better-than expected news was enough for traders to brush aside worries that the economy is �moderating� too quickly and look at the bright side. The positive sentiment has put a renewed spring in bulls' step as the rally that began in July continues to march higher. The Dow finished the day with a gain of 48 points while the S&P moved up to another fresh six-year high. However, the real stars of the day were the broader market indices as the NYSE, Russell 2000, S&P Midcap and Smallcaps all finished the day at new all-time highs.
Turning to this morning, the ADP Employment change number, which is used as to gauge the government�s Employment Report scheduled for release on Friday morning, came in a bit hotter than expected. The report showed an increase of 158,000 jobs versus a consensus for an increase of 100k. This has swung the market�s emotional pendulum the other way and worries that things are getting �too hot� are emerging this morning.
Running through the rest of the pre-game indicators, the overseas markets were mixed by region as Asian markets were higher while European bourses are currently a little lower. Gold futures are lower this morning and are quoted at $640.20 right now. Crude futures are pulling back this morning and the latest quote shows the January contract off $0.30 to $62.13. Interest rates are moving higher on the ADP data this morning. The yield on the 2-year is currently quoted at 4.57% while the 10-yr is trading with a yield of 4.47% right now. And finally, with an hour before the bell, stock futures in the U.S. are pointing to a modestly lower open. The Dow futures are currently off by 15 points; the S&Ps are a couple points below breakeven, and the NASDAQ looks to be about 7 points below fair value at the moment.
Stocks �In Play� This Morning:
Yahoo (YHOO) � Reorganizing the company into 3 units
Electronic Data Systems (EDS) � Mentioned positively in Barron�s
NYSE Group (NYX) � European regulators approve merger with Euronext
Knight Capital (NITE) � BofA starts with Buy rating
Crown Castle (CCI) � Upgraded at Bear Stearns
American Tower (AMT) � Target increased at Bear Stearns
SBA Communications (SBAC) � Target increased at Bear Stearns
Panera Bread (PNRA) � Reduces guidance for Q4
HSBC Holdings (HBC) � Downgraded at Citigroup
Barnes & Noble (BKS) � Upgraded at Credit Suisse
General Electric (GE) � Added to Conviction Buy list at Goldman Sachs
Novellus (NVLS) � Downgraded at Goldman Sachs
Burlington Northern (BNI) � Downgraded at Merrill Lynch
Textron (TXT) � Downgraded at Prudential
Macrovision (MVSN) � Raymond James starts with Strong Buy
Long positions in stocks mentioned: BSC, GS, MER, NITE, NVLS
** 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. Yesterday�s economic data was once again a mixed bag. However, with stocks continuing to rally, it is becoming obvious that the temperature of the economy is just the way Goldilocks likes it � not too hot and yet not too cold.
On the positive side of the ledger, traders in both stocks and bonds cheered the fact that Unit Labor Costs came in sharply lower than expectations. And while it might seem counterintuitive that lower earnings for workers would be a good thing, keep in mind that wage inflation is one of the things that Mr. Bernanke and company are watching closely.
In addition, the ISM Non-Manufacturing Index was surprisingly strong as the index measuring the health of 18 different industries rose 1.8 points to a reading of 58.9, which was well above the estimates for a drop to 55.5. Not only was the reading from the non-manufacturing side of the economy NOT in contraction mode, the gang at Ned Davis Research informs us that the current reading corresponds to a 4.4% annual growth rate in the economy. In short, this report should put the worries about the economy being �too cold� to bed.
The bulls also got an anecdotal boost from the CEO of luxury home builder Toll Brothers yesterday morning. While the glass-is-half-empty crowd continues to yammer on about the potential for disaster in the housing market, yesterday, Mr. Toll said that he saw some signs of a bottom in his industry. And although Toll later said that he didn�t intend to project optimism with his remarks, one look at the charts confirms that investors are now looking for a rebound in the home builders.
This batch of better-than expected news was enough for traders to brush aside worries that the economy is �moderating� too quickly and look at the bright side. The positive sentiment has put a renewed spring in bulls' step as the rally that began in July continues to march higher. The Dow finished the day with a gain of 48 points while the S&P moved up to another fresh six-year high. However, the real stars of the day were the broader market indices as the NYSE, Russell 2000, S&P Midcap and Smallcaps all finished the day at new all-time highs.
Turning to this morning, the ADP Employment change number, which is used as to gauge the government�s Employment Report scheduled for release on Friday morning, came in a bit hotter than expected. The report showed an increase of 158,000 jobs versus a consensus for an increase of 100k. This has swung the market�s emotional pendulum the other way and worries that things are getting �too hot� are emerging this morning.
Running through the rest of the pre-game indicators, the overseas markets were mixed by region as Asian markets were higher while European bourses are currently a little lower. Gold futures are lower this morning and are quoted at $640.20 right now. Crude futures are pulling back this morning and the latest quote shows the January contract off $0.30 to $62.13. Interest rates are moving higher on the ADP data this morning. The yield on the 2-year is currently quoted at 4.57% while the 10-yr is trading with a yield of 4.47% right now. And finally, with an hour before the bell, stock futures in the U.S. are pointing to a modestly lower open. The Dow futures are currently off by 15 points; the S&Ps are a couple points below breakeven, and the NASDAQ looks to be about 7 points below fair value at the moment.
Stocks �In Play� This Morning:
Yahoo (YHOO) � Reorganizing the company into 3 units
Electronic Data Systems (EDS) � Mentioned positively in Barron�s
NYSE Group (NYX) � European regulators approve merger with Euronext
Knight Capital (NITE) � BofA starts with Buy rating
Crown Castle (CCI) � Upgraded at Bear Stearns
American Tower (AMT) � Target increased at Bear Stearns
SBA Communications (SBAC) � Target increased at Bear Stearns
Panera Bread (PNRA) � Reduces guidance for Q4
HSBC Holdings (HBC) � Downgraded at Citigroup
Barnes & Noble (BKS) � Upgraded at Credit Suisse
General Electric (GE) � Added to Conviction Buy list at Goldman Sachs
Novellus (NVLS) � Downgraded at Goldman Sachs
Burlington Northern (BNI) � Downgraded at Merrill Lynch
Textron (TXT) � Downgraded at Prudential
Macrovision (MVSN) � Raymond James starts with Strong Buy
Long positions in stocks mentioned: BSC, GS, MER, NITE, NVLS
** 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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