David Moenning's Daily State of the Markets: 05/08

Another Day, Another Record

Good morning. There’s nothing to this game, right? With the way have been going lately, it looks like you simply buy stocks and watch them go up every day. While I clearly say this with tongue firmly implanted in cheek, you couldn’t blame a newcomer for drawing this conclusion about the stock market. After all, the Dow set a new record high yesterday for the fifth consecutive session and the industrial index has now been up 24 of the last 27 days. And for the record, you have to go back to the 1920’s to find a more impressive stretch of winning days on the Dow.

I know that I’ve been guilty of doing some whining lately about the market’s advance. So, for those eternal optimists out there, you will be happy to know that after yesterday’s missive, I decided to swear off whining for a while. But it is interesting to note that while the headlines applauded yet another record for the Dow, the NASDAQ and Russell 2000 indices actually finished in the red yesterday. (So much for the troops following the generals.)

Also, if you keep track of such silly things as the price/volume relationship, yesterday marked the fourth straight session where we saw rising stock prices (at least on the Dow) on falling volume. Then there is the breadth of the market, which looks at advancing issues versus declining issues and up volume versus down volume – all of which, was unimpressive again yesterday. Thus, if one was inclined to find fault with the Dow’s record run, you didn’t have to look very far.

But since that sounded an awful lot like whining, I’ll try and find my way out of the bitter barn and look at the bright side. Monday’s advance was once again fueled M&A activity as the big deals just seem to keep coming. And with total assets available to Private Equity currently running at about one-third to one-half of the total value of the U.S. stock market, it’s a safe bet that the pace of the deals isn’t likely to slow for quite a while.

Part of the problem with yesterday’s advance may have stemmed from a little hesitancy on the part of investors in front of Wednesday’s Fed announcement. While no one really expects the Fed to make a move, investors do like it when Mr. Bernanke reassures them of such.

Turning to this morning, once again there is no economic data available before the bell but we will get a report on Wholesale Inventories later this morning. As for the pre-market mood, currently the U.S. is following foreign markets lower for no apparent reason.

Running through the rest of the pre-game indicators, the major foreign markets were lower across the board overnight. Gold futures are moving down this morning by $2.60 and are trading at $687.80. In the oil pits, crude futures are higher by $0.27 with the latest quote at $61.74. Interest rates are moving down this morning with the yield on the 10-year currently trading at 4.61%, which is the low end of the current range. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 37 points; the S&P’s are about 5 points below fair value, while the NASDAQ looks to be about 9 points behind fair value at the moment

Stocks "In Play" This Morning:

Yesterday’s Earnings After the Bell:

Fluor Corp (NYSE: FLR) – Reported $0.94 vs. $0.87
McKesson Corp (NYSE: MCK) – Reported $0.85 vs. $0.79
Wynn Resorts (NASDAQ: WYNN) – Reported $0.67 vs. $0.54

Today’s Earnings Before the Bell:

CVS Caremark (NYSE: CVS) – Reported $0.46 vs. $0.46
Dynegy (NYSE: DYN) – Reported $0.03 vs. $0.03
Hewitt & Associates (NYSE: HEW) – Reported $0.29 vs. $0.27
Tyco Intl (NYSE: TYC) – Reported $0.49 vs. $0.47

News, Upgrades/Downgrades/Brokerage Research:

Home Depot (NYSE: HD) – Mentioned positively at AG Edwards
Lowes (NYSE: LOW) – Mentioned positively at AG Edwards
Alcan (NYSE: AL) – Downgraded at BofA, JP Morgan
Armor Holdings (NYSE: AH) – Downgraded at Friedman Billings
Sonic Corp (NASDAQ: SONC) – Upgraded at Friedman Billings
Reuters Group (NASDAQ: RTRSY) – Downgraded at Lehman
Under Armour (NYSE: UA) – Upgraded at Morgan Stanley
Alcoa (NYSE: AA) – Upgraded at RBC Capital

Mr. Moenning holds Long positions in stocks mentioned: FLR, DYN, CVS

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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