David Moenning's Daily State of the Markets: 01/22
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Buzzing the Tower?
Good Monday morning and welcome back. The current stock market rally, which began in the middle of July last year, has been predicated on a couple of themes. First, regardless of how high oil seemed to go, earnings just kept growing at an impressive pace. And second, once the Fed stopped raising interest rates, investors celebrated the idea of a soft landing for the economy.
The bulls have successfully argued that as long as Goldilocks remained alive and well, the economy would avoid falling into recession and stocks could march merrily higher. The thinking has been that if the economy isn�t hot enough to create inflation, then the Fed might actually cut rates at some point to help stimulate growth. And on the other side of the aisle, the bears have been mumbling about the massive debt buildup in the economy and the ticking time bomb that is the housing market. Thus our furry friends contend that the economy�s landing will be much bumpier than their opponents believe.
But what if both sides have it wrong? What if, instead of a soft landing, there is no landing at all? In other words, since the recent economic data has come in stronger than expected, what about the idea of the economy just doing a fly-by and continuing to grow at a decent pace?
Friday�s economic data du jour definitely fell into the stronger than expected category. The University of Michigan reported that their initial reading for Consumer Sentiment in January jumped 6.3 points to 98.0, which was not only well above the consensus estimate of 92.0, but was the best reading in three years. And while it is easy to pin the positive reading on the recent decline in oil prices, we probably don�t need to remind everyone that the American consumer is responsible for more than two-thirds of the country�s economy.
So, when you consider that we may have seen the worst in the housing market, that the job market remains strong, that oil has pulled back more than 30%, and that the consumer is alive and shopping, there is a pretty good possibility that the economy will simply wave while buzzing the tower and just keep on going.
This argument would appear to be a positive for stocks and a modest negative for bonds. And as long as the damage in the bond market isn�t too severe and the Fed doesn�t decide to get back out on the hiking trail, then we may want to continue to give our horned heroes the benefit of the doubt.
Turning to this morning, we don�t have any economic data to review before the bell. However, we will get the December reading of the Index of Leading Economic Indicators later this morning. And after that, the economic calendar gets pretty quiet until Thursday and Friday when we�ll get more data on housing as well as a report on manufacturing by way of orders for Durable Goods.
Running through the rest of the pre-game indicators, the foreign markets were mostly higher overnight. Gold futures are a little lower this morning with the last trade off $2.30 to $634.10. In the oil pits, crude futures are doing very little so far with the latest quote showing the futures contract up $0.15 to $52.15. And it�s probably worth noting that oil is due for a bounce in here somewhere. Interest rates are little changed this morning and the 10-year is currently trading with a yield of 4.77%. And finally, with about an hour before the bell, stock futures in the U.S. are looking mixed. The Dow futures are currently off by 4 points; the S&P�s are higher by 1.60, while the NASDAQ looks to be about 3 points ahead of fair value at the moment.
Stocks �In Play� This Morning:
Cisco Systems (CSCO) � Mentioned positively in Barron�s
Swift Transportation (SWFT) � Agrees to be purchased by shareholder group
Under Armor (UA) � Mentioned cautiously in Barron�s
Eaton (ETN) � Reported $1.66 vs. $1.59
Amgen (AMGN) � Bear Stearns raised target price
ADC Telecom (ADCT) � Downgraded at Cowen
Diamond Offshore (DO) � Upgraded at Credit Suisse
AK Steel Holdings (AKS) � Upgraded at Deutsche Bank
O�Reilly Automotive (ORLY) � Upgraded at Deutsche Bank
Sara Lee (SLE) � Upgraded at JP Morgan
McKesson (MCK) � Downgraded at Morgan Stanley
Intersil (ISIL) � Downgraded at Morgan Stanley
Cardinal Health (CAH) � Upgraded at Morgan Stanley
Campbell Soup (CPB) � Upgraded at Morgan Stanley
Urban Outfitters (URBN) � Upgraded at Piper Jaffray
Molson Coors Brewing (TAP) � Downgraded at UBS
Boeing (BA) � Downgraded at Wachovia
Disclosure: Long positions is stocks mentioned: BSC, MS, CSCO, BA
** 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 Monday morning and welcome back. The current stock market rally, which began in the middle of July last year, has been predicated on a couple of themes. First, regardless of how high oil seemed to go, earnings just kept growing at an impressive pace. And second, once the Fed stopped raising interest rates, investors celebrated the idea of a soft landing for the economy.
The bulls have successfully argued that as long as Goldilocks remained alive and well, the economy would avoid falling into recession and stocks could march merrily higher. The thinking has been that if the economy isn�t hot enough to create inflation, then the Fed might actually cut rates at some point to help stimulate growth. And on the other side of the aisle, the bears have been mumbling about the massive debt buildup in the economy and the ticking time bomb that is the housing market. Thus our furry friends contend that the economy�s landing will be much bumpier than their opponents believe.
But what if both sides have it wrong? What if, instead of a soft landing, there is no landing at all? In other words, since the recent economic data has come in stronger than expected, what about the idea of the economy just doing a fly-by and continuing to grow at a decent pace?
Friday�s economic data du jour definitely fell into the stronger than expected category. The University of Michigan reported that their initial reading for Consumer Sentiment in January jumped 6.3 points to 98.0, which was not only well above the consensus estimate of 92.0, but was the best reading in three years. And while it is easy to pin the positive reading on the recent decline in oil prices, we probably don�t need to remind everyone that the American consumer is responsible for more than two-thirds of the country�s economy.
So, when you consider that we may have seen the worst in the housing market, that the job market remains strong, that oil has pulled back more than 30%, and that the consumer is alive and shopping, there is a pretty good possibility that the economy will simply wave while buzzing the tower and just keep on going.
This argument would appear to be a positive for stocks and a modest negative for bonds. And as long as the damage in the bond market isn�t too severe and the Fed doesn�t decide to get back out on the hiking trail, then we may want to continue to give our horned heroes the benefit of the doubt.
Turning to this morning, we don�t have any economic data to review before the bell. However, we will get the December reading of the Index of Leading Economic Indicators later this morning. And after that, the economic calendar gets pretty quiet until Thursday and Friday when we�ll get more data on housing as well as a report on manufacturing by way of orders for Durable Goods.
Running through the rest of the pre-game indicators, the foreign markets were mostly higher overnight. Gold futures are a little lower this morning with the last trade off $2.30 to $634.10. In the oil pits, crude futures are doing very little so far with the latest quote showing the futures contract up $0.15 to $52.15. And it�s probably worth noting that oil is due for a bounce in here somewhere. Interest rates are little changed this morning and the 10-year is currently trading with a yield of 4.77%. And finally, with about an hour before the bell, stock futures in the U.S. are looking mixed. The Dow futures are currently off by 4 points; the S&P�s are higher by 1.60, while the NASDAQ looks to be about 3 points ahead of fair value at the moment.
Stocks �In Play� This Morning:
Cisco Systems (CSCO) � Mentioned positively in Barron�s
Swift Transportation (SWFT) � Agrees to be purchased by shareholder group
Under Armor (UA) � Mentioned cautiously in Barron�s
Eaton (ETN) � Reported $1.66 vs. $1.59
Amgen (AMGN) � Bear Stearns raised target price
ADC Telecom (ADCT) � Downgraded at Cowen
Diamond Offshore (DO) � Upgraded at Credit Suisse
AK Steel Holdings (AKS) � Upgraded at Deutsche Bank
O�Reilly Automotive (ORLY) � Upgraded at Deutsche Bank
Sara Lee (SLE) � Upgraded at JP Morgan
McKesson (MCK) � Downgraded at Morgan Stanley
Intersil (ISIL) � Downgraded at Morgan Stanley
Cardinal Health (CAH) � Upgraded at Morgan Stanley
Campbell Soup (CPB) � Upgraded at Morgan Stanley
Urban Outfitters (URBN) � Upgraded at Piper Jaffray
Molson Coors Brewing (TAP) � Downgraded at UBS
Boeing (BA) � Downgraded at Wachovia
Disclosure: Long positions is stocks mentioned: BSC, MS, CSCO, BA
** 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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