David Moenning's Daily State of the Markets 10/19
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Bubblin' Crude
Although I have been accused of being rather upbeat on the state of the markets lately, in all fairness, you do have to give the bulls some credit here. Let’s face it; the bears have had their chances with rising oil prices, some downright crummy earnings in the financial sector, an unrelenting decline in the dollar, and some pitiful numbers in the housing market. And yet, through it all, our furry friends have been unable to get much going to the downside.
Yesterday was a perfect example of why, so far at least, it remains the bulls' ballgame. For starters, crude oil continued to blast higher, finishing at the rather rude level of $89.48. It doesn’t really matter whether you choose to blame tensions Turkey or the steady drop in greenback; the bottom line is that November crude futures closed at another new all-time record high and moved through $90 in the overnight session.
Next, logic would seem to suggest that the recent spate of “kitchen sink” earnings reports in the financial sector (deemed so due to the propensity for banks to throw anything and everything negative into their forecasts) could be a solid excuse to do some selling. It has become quite clear that we aren’t completely sure as to the extent of the damage from the credit crunch as banks are keeping the hardest hit securities off their books at the present time.
However, all the negatives out there can't seem to put our heroes in horns on the defensive to any great degree. Sure, stocks are in pullback mode at the moment. But perhaps the prospects of another rate cut at the October 31st Fed meeting and some performance anxiety is helping to keep the indices up near record levels.
One thing is for sure in the bull camp. If you step away from the financials, earnings have been solid so far – especially in the tech sector. And although tech has enjoyed a stellar run of late, the good results are not lost on anyone right now. For example, after the close, Google became the latest big-name tech company to beat estimates as the company earned $4.23 Billion last quarter or $3.91 per share, which was ahead of the Reuters consensus estimate of $3.77.
Turning to this morning, we've got an expiration Friday on our hands, which is something that has probably helped produce some of the intraday volatility this week. And while we don’t have any economic data to review before the bell today, we will hear from Ben Bernanke at 10:00 am this morning. In addition, there is a healthy batch of earnings reports to peruse.
In addition to earnings, the big story, once again this morning is oil. As we mentioned, crude futures went through $90 overnight and while the contract is currently trading below that level, almost no one can ignore the price of oil right now.
Running through the rest of the pre-game indicators; the overseas markets are mixed. Crude futures are heading higher again with the latest quote up $0.21 to $89.68. Interest rates are moving lower again this morning with the 10-yr trading at a yield of 4.49% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open lower. The Dow futures are currently off by about 40 points; the S&Ps are down by about 7 points, while the NASDAQ looks to be about 3 points above fair value at the moment.
Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Avaya (NYSE: AV) – Reported $0.19 vs. $0.18
Capital One (NYSE: COF) – Reported <$0.21> vs. <$0.20>
Gilead Sciences (Nasdaq: GILD) – Reported $0.42 vs. $0.39
Google (Nasdaq: GOOG) – Reported $3.91 vs. $3.77
Intuitive Surgical (ISRG) – Reported $0.95 vs. $0.79
Robert Half Intl (NYSE: RHI) – Reported $0.46 vs. $0.46
Sandisk (Nasdaq: SNDK) – Reported $0.54 vs. $0.32
Xilinx (Nasdaq: XLNX) – Reported $0.30 vs. $0.29
Today’s Earnings Before the Bell:
Alltel (NYSE: AT) – Reported $0.81 vs. $0.73
Boston Scientific (NYSE: BSX) – Reported $0.20 vs. $0.16
Caterpillar (NYSE: CAT) – Reported $1.40 vs. $1.43
Fifth Third Bancorp (Nasdaq: FITB) – Reported $0.71 vs. $0.68
Harley Davidson (NYSE: HOG) – Reported $1.07 vs. $1.04
Honeywell (NYSE: HON) – Reported $0.81 vs. $0.82
McDonalds (NYSE: MCD) – Reported $0.83 vs. $0.83
3M Corp (NYSE: MMM) – Reported $1.33 vs. $1.27
Schlumberger (NYSE: SLB) – Reported $1.09 vs. $1.06
Wachovia (NYSE: WB) – Reported $0.90 vs. $1.04
Xerox (NYSE: XRX) – Reported $0.27 vs. $0.26
News, Upgrades/Downgrades/Brokerage Research:
Overseas Shipholding Group (NYSE: OSG) – Upgraded at BofA
Broadcom (Nasdaq: BRCM) – Estimates increased at BofA
Brinker Intl (NYSE: EAT) – Upgraded at Bear Stearns
AMR Corp (NYSE: AMR) – Downgraded at Calyon
Sprint Nextel (NYSE: S) – Upgraded at Credit Suisse
Microsoft (Nasdaq: MSFT) – Mentioned positively at Deutsche Bank
Capital One (NYSE: COF) – Downgraded at Friedman Billings
Google (Nasdaq: GOOG) – Target increased at Goldman Sachs, Citi
UnitedHealth Group (NYSE: UNH) – Downgraded at JP Morgan
Teradyne (NYSE: TER) – Upgraded at JP Morgan
Hansen Natural (Nasdaq: HANS) – Downgraded at JP Morgan
Torchmark (NYSE: TMK) – Upgraded at Merrill Lynch
Southern Copper (NYSE: PCU) – Downgraded at UBS
HSBC Holdings (NYSE: HBC) – Downgraded at UBS
Astrazeneca (NYSE: AZN) – Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: MER
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.
Although I have been accused of being rather upbeat on the state of the markets lately, in all fairness, you do have to give the bulls some credit here. Let’s face it; the bears have had their chances with rising oil prices, some downright crummy earnings in the financial sector, an unrelenting decline in the dollar, and some pitiful numbers in the housing market. And yet, through it all, our furry friends have been unable to get much going to the downside.
Yesterday was a perfect example of why, so far at least, it remains the bulls' ballgame. For starters, crude oil continued to blast higher, finishing at the rather rude level of $89.48. It doesn’t really matter whether you choose to blame tensions Turkey or the steady drop in greenback; the bottom line is that November crude futures closed at another new all-time record high and moved through $90 in the overnight session.
Next, logic would seem to suggest that the recent spate of “kitchen sink” earnings reports in the financial sector (deemed so due to the propensity for banks to throw anything and everything negative into their forecasts) could be a solid excuse to do some selling. It has become quite clear that we aren’t completely sure as to the extent of the damage from the credit crunch as banks are keeping the hardest hit securities off their books at the present time.
However, all the negatives out there can't seem to put our heroes in horns on the defensive to any great degree. Sure, stocks are in pullback mode at the moment. But perhaps the prospects of another rate cut at the October 31st Fed meeting and some performance anxiety is helping to keep the indices up near record levels.
One thing is for sure in the bull camp. If you step away from the financials, earnings have been solid so far – especially in the tech sector. And although tech has enjoyed a stellar run of late, the good results are not lost on anyone right now. For example, after the close, Google became the latest big-name tech company to beat estimates as the company earned $4.23 Billion last quarter or $3.91 per share, which was ahead of the Reuters consensus estimate of $3.77.
Turning to this morning, we've got an expiration Friday on our hands, which is something that has probably helped produce some of the intraday volatility this week. And while we don’t have any economic data to review before the bell today, we will hear from Ben Bernanke at 10:00 am this morning. In addition, there is a healthy batch of earnings reports to peruse.
In addition to earnings, the big story, once again this morning is oil. As we mentioned, crude futures went through $90 overnight and while the contract is currently trading below that level, almost no one can ignore the price of oil right now.
Running through the rest of the pre-game indicators; the overseas markets are mixed. Crude futures are heading higher again with the latest quote up $0.21 to $89.68. Interest rates are moving lower again this morning with the 10-yr trading at a yield of 4.49% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open lower. The Dow futures are currently off by about 40 points; the S&Ps are down by about 7 points, while the NASDAQ looks to be about 3 points above fair value at the moment.
Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Avaya (NYSE: AV) – Reported $0.19 vs. $0.18
Capital One (NYSE: COF) – Reported <$0.21> vs. <$0.20>
Gilead Sciences (Nasdaq: GILD) – Reported $0.42 vs. $0.39
Google (Nasdaq: GOOG) – Reported $3.91 vs. $3.77
Intuitive Surgical (ISRG) – Reported $0.95 vs. $0.79
Robert Half Intl (NYSE: RHI) – Reported $0.46 vs. $0.46
Sandisk (Nasdaq: SNDK) – Reported $0.54 vs. $0.32
Xilinx (Nasdaq: XLNX) – Reported $0.30 vs. $0.29
Today’s Earnings Before the Bell:
Alltel (NYSE: AT) – Reported $0.81 vs. $0.73
Boston Scientific (NYSE: BSX) – Reported $0.20 vs. $0.16
Caterpillar (NYSE: CAT) – Reported $1.40 vs. $1.43
Fifth Third Bancorp (Nasdaq: FITB) – Reported $0.71 vs. $0.68
Harley Davidson (NYSE: HOG) – Reported $1.07 vs. $1.04
Honeywell (NYSE: HON) – Reported $0.81 vs. $0.82
McDonalds (NYSE: MCD) – Reported $0.83 vs. $0.83
3M Corp (NYSE: MMM) – Reported $1.33 vs. $1.27
Schlumberger (NYSE: SLB) – Reported $1.09 vs. $1.06
Wachovia (NYSE: WB) – Reported $0.90 vs. $1.04
Xerox (NYSE: XRX) – Reported $0.27 vs. $0.26
News, Upgrades/Downgrades/Brokerage Research:
Overseas Shipholding Group (NYSE: OSG) – Upgraded at BofA
Broadcom (Nasdaq: BRCM) – Estimates increased at BofA
Brinker Intl (NYSE: EAT) – Upgraded at Bear Stearns
AMR Corp (NYSE: AMR) – Downgraded at Calyon
Sprint Nextel (NYSE: S) – Upgraded at Credit Suisse
Microsoft (Nasdaq: MSFT) – Mentioned positively at Deutsche Bank
Capital One (NYSE: COF) – Downgraded at Friedman Billings
Google (Nasdaq: GOOG) – Target increased at Goldman Sachs, Citi
UnitedHealth Group (NYSE: UNH) – Downgraded at JP Morgan
Teradyne (NYSE: TER) – Upgraded at JP Morgan
Hansen Natural (Nasdaq: HANS) – Downgraded at JP Morgan
Torchmark (NYSE: TMK) – Upgraded at Merrill Lynch
Southern Copper (NYSE: PCU) – Downgraded at UBS
HSBC Holdings (NYSE: HBC) – Downgraded at UBS
Astrazeneca (NYSE: AZN) – Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: MER
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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