David Moenning's Daily State of the Markets: 03/21

Still Lending and Spending

Good morning. Investors decided to do a little buying yesterday in front of today’s Fed announcement. It was the fourth day of gains in the last five sessions and the bulls will argue that the major indices broke out above an important resistance zone.

It was the triumvirate of big M&A news, positive Asian markets, and some modestly encouraging data on the housing market that helped push investors toward the buy button. But the bulls refrained from getting too carried away as everyone realizes that one wrong word from Mr. Bernanke this afternoon could send stocks back down in a hurry.

Once again, it was the urge to merge that got things going to the upside. Everybody knows that M&A activity is positive because it suggests that values are good in the market and that corporate boards must have an upbeat view of business and the economy. However, there is a new positive worthy of note these days that the M&A deals are bringing to light.

After all the fretting about the subprime mortgage debacle, one of the big worries has been that banks will tighten up their lending standards. This would choke off access to capital, which is the lifeblood of economic growth. This would obviously be a negative for the economy. Thus, the fact that banks are continuing to back the merger deals shows that there has been no tightening of credit, which is definitely a positive.

After moving higher in the morning, stocks settled into a rather dull range in the afternoon as no one wanted to get overly aggressive in front of today’s Fed announcement. But, the bulls were probably pleased with their handiwork as the S&P, NASDAQ, and NYSE indices all managed to close above the recent highs. Technicians will argue that such a move above key resistance bodes well for prices in the future. Of course, the bears remind us that a “breakout fake out” can occur at any time.
In looking at today’s Fed meeting, in reality, no one on the planet expects the Fed to make a move and most don’t expect much of anything new in the accompanying statement. We’ll probably hear more about a slowing economy and the nagging inflation concerns. However, investors will be listening closely for any clues as to the Fed's view of the housing market and their economic outlook for the remainder of the year.

Turning to this morning, as expected, things are fairly quiet. There is no economic data before the bell and with Japan closed for the Vernal Equinox; there is no real news on the Yen front. However, we do have some solid earnings numbers from Adobe, Oracle, and Morgan Stanley.

Running through the pre-game indicators, Hong Kong enjoyed another solid session while European bourses are doing very little this morning. Gold futures are trading up by $0.90 this morning to $660.90. In the oil pits, crude futures are higher by $0.57 with the latest quote at $59.82. Interest rates are moving up a smidge this morning, with the yield on the 10-year currently trading at 4.56%. And finally, with about an hour before the bell, stock futures in the U.S. are waffling around breakeven. The Dow futures are currently off by about 10 points; the S&P’s are unchanged, while the NASDAQ looks to be about 7 points above fair value at the moment on the back of the solid earnings reports.

Stocks "In Play" This Morning:

Adobe Systems (Nasdaq: ADBE) – Reported $0.30 vs. $0.29
Darden Restaurants (NYSE: DRI) – Reported $0.72 vs. $0.70
FedEx (NYSE: FDX) – Reported $1.35 vs. $1.33
Oracle (Nasdaq: ORCL) – Reported $0.25 vs. $0.22
Morgan Stanley (NYSE: MS) – Reported $2.40 vs. $1.88
Tiffany & Co (NYSE: TIF) – Upgraded at BofA
Sapient Corp (Nasdaq: SAPE) – Upgraded at Bear Stearns
Motorola (NYSE: MOT) – Estimates reduced at Cowen
Office Max (NYSE: OMX) – Upgraded at Goldman Sachs
Nvidia (Nasdaq: NVDA) – Upgraded at Goldman Sachs
Airtran Holdings (NYSE: AAI) – Upgraded at JP Morgan
Clorox (NYSE: CLX) – Upgraded at JP Morgan
Telefonica (NYSE: TEF) – Upgraded at Merrill Lynch
Dean Foods (NYSE: DF) – Downgraded at Prudential

Mr. Moenning holds Long positions in stocks mentioned: BSC, MER, TCO

Note: All earnings reports compared to Reuter’s consensus estimates

** 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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