David Moenning's Daily State of the Markets: 06/28
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Rebound Reasoning?
Good morning. Stocks rebounded yesterday afternoon, although the catalyst for the 90 point move higher was not entirely obvious. But after a week of selling and another crummy economic report yesterday morning, the bulls will take any kind of rebound they can get and care little for the reasoning behind the move.
You see, yesterday morning the market indices found themselves in a precarious position on a chart basis. While even the most ardent bulls would admit that the bears were overdue for some time with the ball, the fact that stocks were breaking down on the charts as the opening bell rang yesterday definitely caused some consternation in the bull camp.
With a Durable Goods report that was surprisingly weaker than expected and North Korea playing with their missiles again before the bell yesterday, it looked like it was going to be another rough outing for the home town heroes. Stocks opened down hard again, causing the technicians to start screaming about a "double-top" formation and the accompanying downside projections.
But, never fear my dear, because M&A is still here. And while we can\'t pin the rebound on a summer Wednesday\'s deal activity, it should be noted that there continues to be a rather robust amount of M&A activity during a time when the sky is supposed to be falling on the liquidity and interest rate fronts.
We also can\'t really suggest that stocks rallied in anticipation of today\'s Fed meeting. After all, no one expects the Fed to do anything, although most everyone is very interested in what Mr. Bernanke and Co. will have to say on the topic of the economy, inflation, and interest rates.
Maybe, just maybe, it was the sudden realization that the Fed isn\'t likely to say much of anything new that caused traders to rethink their bearish bent. Maybe traders also realized that much of the recent decline has been based on fear. Or maybe, it was just time to go the other way for a day or so.
In any event, the bulls come into today\'s session breathing a little easier and waiting on the Fed.
Turning to this morning, while we will be waiting on the Fed announcement at 2:15 this afternoon, we also have some economic data to review before the bell. The Government just announced that the final numbers for the first quarter\'s GDP growth rate was up 0.7%, which was a bit light in terms of analyst expectations.
But the more important numbers in the report have to do with personal consumption and inflation, so let\'s get to them. Personal Consumption came in at 4.2%, which again was a little lower than expectations for a reading of 4.4%. Next up, the Core PCE (a measure of inflation) came in a bit hotter than analysts had been looking for at +2.4%. And finally, the GDP Price Deflator (another inflation indicator) was reported at 4.2%, which was also 0.2% higher than expectations.
Market reaction to the news is about as expected with the inflation numbers a bit higher than analysts were looking for on a Fed Day. The bonds are currently moving lower in price and higher in yield while the stock futures have moved a bit lower, but not dramatically so.
Running through the rest of the pre-game indicators, the foreign markets are once again lower across the board. Gold futures are moving up this morning by $5.00 to $649.80. In the oil pits, crude futures are moving up by $0.64 with the latest quote at $69.60. Interest rates are up this morning with the yield on the 10-year currently trading at 5.10% level. And finally, with about an hour before the bell, stock futures in the U.S. are lower. The Dow futures are currently off by about 31 points; the S&P\'s are about 3 points underwater, while the NASDAQ looks to be about 1 point below fair value at the moment.
Stocks "In Play" This Morning:
Today\'s Earnings Before the Bell:
Family Dollar Stores (NYSE: FDO) - Reported $0.42 vs. $0.41
General Mills (NYSE: GIS) - Reported $0.62 vs. $0.63
Constellation Brands (NYSE: STZ) - Reported $0.21 vs. $0.15
News, Upgrades/Downgrades/Brokerage Research:*
Covance (NYSE: CVD) - Upgraded at Banc of America
Trump Entertainment (NASDAQ: TRMP) - Upgraded at Bear Stearns
Sprint Nextel (NYSE: S) - Downgraded at Citi
Liz Claiborne (NYSE: LIZ) - Upgraded at Credit Suisse
Capital One Financial (NYSE: COF) - Upgraded at Friedman Billings
Alcon (NYSE: ACL) - Upgraded at Goldman Sachs
Stryker Corp (NYSE: SYK) - Downgraded at Goldman Sachs
Southwest Airlines (NYSE: LUV) - Upgraded at JP Morgan
AMR Corp (NYSE: AMR) - Upgraded at JP Morgan
US Airways (NYSE: LCC) - Upgraded at JP Morgan
Continental Airlines (NYSE: CAL) - Downgraded at JP Morgan
Intel (NASDAQ: INTC) - Upgraded at Lehman Brothers
Cisco Systems (NASDAQ: CSCO) - Upgraded at Merrill Lynch
China Telecom (NYSE: CHA) - Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: GS, MER, STZ, ACL, CSCO
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.
Good morning. Stocks rebounded yesterday afternoon, although the catalyst for the 90 point move higher was not entirely obvious. But after a week of selling and another crummy economic report yesterday morning, the bulls will take any kind of rebound they can get and care little for the reasoning behind the move.
You see, yesterday morning the market indices found themselves in a precarious position on a chart basis. While even the most ardent bulls would admit that the bears were overdue for some time with the ball, the fact that stocks were breaking down on the charts as the opening bell rang yesterday definitely caused some consternation in the bull camp.
With a Durable Goods report that was surprisingly weaker than expected and North Korea playing with their missiles again before the bell yesterday, it looked like it was going to be another rough outing for the home town heroes. Stocks opened down hard again, causing the technicians to start screaming about a "double-top" formation and the accompanying downside projections.
But, never fear my dear, because M&A is still here. And while we can\'t pin the rebound on a summer Wednesday\'s deal activity, it should be noted that there continues to be a rather robust amount of M&A activity during a time when the sky is supposed to be falling on the liquidity and interest rate fronts.
We also can\'t really suggest that stocks rallied in anticipation of today\'s Fed meeting. After all, no one expects the Fed to do anything, although most everyone is very interested in what Mr. Bernanke and Co. will have to say on the topic of the economy, inflation, and interest rates.
Maybe, just maybe, it was the sudden realization that the Fed isn\'t likely to say much of anything new that caused traders to rethink their bearish bent. Maybe traders also realized that much of the recent decline has been based on fear. Or maybe, it was just time to go the other way for a day or so.
In any event, the bulls come into today\'s session breathing a little easier and waiting on the Fed.
Turning to this morning, while we will be waiting on the Fed announcement at 2:15 this afternoon, we also have some economic data to review before the bell. The Government just announced that the final numbers for the first quarter\'s GDP growth rate was up 0.7%, which was a bit light in terms of analyst expectations.
But the more important numbers in the report have to do with personal consumption and inflation, so let\'s get to them. Personal Consumption came in at 4.2%, which again was a little lower than expectations for a reading of 4.4%. Next up, the Core PCE (a measure of inflation) came in a bit hotter than analysts had been looking for at +2.4%. And finally, the GDP Price Deflator (another inflation indicator) was reported at 4.2%, which was also 0.2% higher than expectations.
Market reaction to the news is about as expected with the inflation numbers a bit higher than analysts were looking for on a Fed Day. The bonds are currently moving lower in price and higher in yield while the stock futures have moved a bit lower, but not dramatically so.
Running through the rest of the pre-game indicators, the foreign markets are once again lower across the board. Gold futures are moving up this morning by $5.00 to $649.80. In the oil pits, crude futures are moving up by $0.64 with the latest quote at $69.60. Interest rates are up this morning with the yield on the 10-year currently trading at 5.10% level. And finally, with about an hour before the bell, stock futures in the U.S. are lower. The Dow futures are currently off by about 31 points; the S&P\'s are about 3 points underwater, while the NASDAQ looks to be about 1 point below fair value at the moment.
Stocks "In Play" This Morning:
Today\'s Earnings Before the Bell:
Family Dollar Stores (NYSE: FDO) - Reported $0.42 vs. $0.41
General Mills (NYSE: GIS) - Reported $0.62 vs. $0.63
Constellation Brands (NYSE: STZ) - Reported $0.21 vs. $0.15
News, Upgrades/Downgrades/Brokerage Research:*
Covance (NYSE: CVD) - Upgraded at Banc of America
Trump Entertainment (NASDAQ: TRMP) - Upgraded at Bear Stearns
Sprint Nextel (NYSE: S) - Downgraded at Citi
Liz Claiborne (NYSE: LIZ) - Upgraded at Credit Suisse
Capital One Financial (NYSE: COF) - Upgraded at Friedman Billings
Alcon (NYSE: ACL) - Upgraded at Goldman Sachs
Stryker Corp (NYSE: SYK) - Downgraded at Goldman Sachs
Southwest Airlines (NYSE: LUV) - Upgraded at JP Morgan
AMR Corp (NYSE: AMR) - Upgraded at JP Morgan
US Airways (NYSE: LCC) - Upgraded at JP Morgan
Continental Airlines (NYSE: CAL) - Downgraded at JP Morgan
Intel (NASDAQ: INTC) - Upgraded at Lehman Brothers
Cisco Systems (NASDAQ: CSCO) - Upgraded at Merrill Lynch
China Telecom (NYSE: CHA) - Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: GS, MER, STZ, ACL, CSCO
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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