David Moenning's Daily State of the Markets: 2/24
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Off With the TARP, On With the CAP
If you will recall, Timothy Geithner did give a pretty good speech back on February 10th. However, he also left out a detail or two with regard to just how his “new” plan was going to make everything all better in the banking system – not the least of which was the name of the program.
Yesterday morning, in a joint statement issued by the Treasury Department, the FDIC, and the Federal Reserve (among others), we learned that the name of the new plan isn’t TARP II – The Supersized Version, but rather the Capital Assistance Program. And while the name could be considered a little drab, we will admit that the CAP does have a much sportier and upbeat connotation than does a musty old tarp.
Moving on to the more important aspects of the government’s press release, the group basically tried to stress that that the U.S. Government stands firmly behind the banking system during this period of financial strain, which is an awfully nice way to phrase what the country is experiencing. The statement noted that beginning February 25th; banks would begin being evaluated in order to determine if additional capital was required in response to the more challenging environment we now face.
If the so-called “stress test” indicates that a bank does indeed need to add some cash to their coffers, they will be welcome to find it on their own. But given that raising money for a bank these days is a rather tall order, the government says it stands ready to provide a “temporary capital buffer.” While this also has a nice connotation, the reality is that the Government would then be stepping in for a while.
At first blush, this sounded like a good thing and the futures rallied in pre-market trading. However, once investors figured out what was really happening and that Citi (C) was already lining up at the government’s doorstep, the happy mood quickly gave way to more selling.
Up until mid-afternoon, the decline seemed rather subdued. Well, until White House Press Secretary Ron “I’ll buy you cup of decaf” Gibbs decided to dodge a question on nationalizing banks, that is. After that, things got ugly in a hurry and word that AIG (AIG) was going to need another couple bucks certainly didn’t help.
While the big banks actually held up fairly well during the carnage, the regional banks and the rest of the stock market did not. The indices plummeted another -3.5% or so, with the S&P finishing at its lowest level since April 11, 1997. And don’t look now, but the major indices are seeing an awful lot of red ink so far this year as the S&P is now down -17.7% year-to-date, while the Dow is off -18.9% and the Russell 2000 is down an even -21%.
So, is the stock market trying to tell us something or perhaps send a message to someone? Feel free to insert your favorite political rant here on the subject of taxes, the stimulus, and/or economic policy. But it will suffice to say that if somebody in the new administration doesn’t provide some clarity on the fate of the banks pretty soon, we’re going to need a bigger CAP.
Turning to this morning, we don’t have any economic news before the bell however, we will get reports on Consumer Confidence, the Richmond Fed Index, and Housing prices at 10:00 am. In pre-market trading, it looks as if JP Morgan’s (JPM) voluntary dividend cut has helped improve the mood a bit.
Running through the rest of the pre-game indicators, the major foreign markets are lower across the board. Crude futures are down a bit with the latest quote showing oil trading lower by $0.11 to $38.83. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.77%, while overnight LIBOR is at 0.27% and the yield on the 3-month T-Bill is trading at 0.29%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a modestly higher open. The Dow futures are currently ahead by about 70 points; the S&P’s are up by about 8 points, while the NASDAQ looks to be about 11 points above fair value at the moment.
Stocks “In Play” This Morning:
Yesterday’s Earnings After the Bell:
DTE Energy (NYSE: DTE) – Reported $0.88 vs. $0.98
Forest Oil (NYSE: FST) – Reported $0.32 vs. $0.32
Hecla Mining (NYSE: HL) – Reported -$0.24 vs. -$0.17
Health Management Assoc (NYSE: HMA)– Reported $0.07 vs. $0.06
Hertz Global Holdings (NYSE: HTZ) – Reported -$0.22 vs. -$0.05
Nordstrom (NYSE: JWN) – Reported $0.31 vs. $0.30
Liberty Global (Nasdaq: LBTYA) – Reported -$2.60 vs. -$0.06
Mohawk Inds (NYSE: MHK) – Reported $0.18 vs. $0.24
ONEOK Partners (NYSE: OKS) – Reported $1.09 vs. $1.04
Orbitz Worldwide (NYSE: OWW) – Reported $0.10 vs. $0.03
Today’s Earnings Before the Bell:
Cracker Barrel (Nasdaq: CBRL) – Reported $0.81 vs. $0.75
Dominos Pizza (NYSE: DPZ) – Reported $0.19 vs. $0.17
Fresh Del Monte (NYSE: FDP) – Reported $0.36 vs. $0.37
Home Depot (NYSE: HD) – Reported $0.19 vs. $0.15
HJ Heinz (NYSE: HNZ) – Reported $0.76 vs. $0.65
Macy’s (NYSE: M) – Reported $1.06 vs. $1.01
Medco Health Solutions (NYSE: MHS) – Reported $0.59 vs. $0.58
Quanta Services (NYSE: PWR) – Reported $0.24 vs. $0.22
Radio Shack (NYSE: RSH) – Reported $0.58 vs. $0.73
Tenet Healthcare (NYSE: THC) – Reported -$0.07 vs. -$0.02
Target (NYSE: TGT) – Reported $0.81 vs. $0.83
Today’s Corporate News, Upgrades/Downgrades/Brokerage Research:
Qualcomm (Nasdaq: QCOM) – Upgraded at Argus Research
Brocade (Nasdaq: BRCD) – Downgraded at Argus
Southern Co (NYSE: SO) – Upgraded at Bank of America Merrill
NiSource (NYSE: NI) – Upgraded at Bank of America Merrill
Duke Energy (NYSE: DUK) – Upgraded at Bank of America Merrill
Developers Diversified Realty (NYSE: DDR) – Upgraded at Bank of America Merrill
Reynolds American (NYSE: RAI) – Downgraded at Bank of America Merrill
Marvell Technology (MRVL) – Upgraded at Barclays
Apple (Nasdaq: AAPL) – Downgraded at Calyon Securities
Noble Corp (NYSE: NE) – Downgraded at Credit Suisse
Pulte Home (NYSE: PHM) – Upgraded at Credit Suisse
Carnival Cruise Lines (NYSE: CCL) – Added to Conviction Sell list at Goldman
Royal Caribbean Cruises (NYSE: RCL) – Removed from Conviction Sell list at Goldman
CIGNA (NYSE: CI) – Mentioned positively at Goldman
UnitedHealth Group (NYSE: UNH) – Mentioned positively at Goldman
El Paso Electric (NYSE: EE) – Upgraded at Goldman
Capital One (NYSE: COF) – Downgraded at JP Morgan
Goldman Sachs (NYSE: GS) – Mentioned positively at Morgan Stanley
CH Robinson Worldwide (Nasdaq: CHRW) – Downgraded at Wachovia
Disclosure: Mr. Moenning and/or related firms hold long positions in: none
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.
If you will recall, Timothy Geithner did give a pretty good speech back on February 10th. However, he also left out a detail or two with regard to just how his “new” plan was going to make everything all better in the banking system – not the least of which was the name of the program.
Yesterday morning, in a joint statement issued by the Treasury Department, the FDIC, and the Federal Reserve (among others), we learned that the name of the new plan isn’t TARP II – The Supersized Version, but rather the Capital Assistance Program. And while the name could be considered a little drab, we will admit that the CAP does have a much sportier and upbeat connotation than does a musty old tarp.
Moving on to the more important aspects of the government’s press release, the group basically tried to stress that that the U.S. Government stands firmly behind the banking system during this period of financial strain, which is an awfully nice way to phrase what the country is experiencing. The statement noted that beginning February 25th; banks would begin being evaluated in order to determine if additional capital was required in response to the more challenging environment we now face.
If the so-called “stress test” indicates that a bank does indeed need to add some cash to their coffers, they will be welcome to find it on their own. But given that raising money for a bank these days is a rather tall order, the government says it stands ready to provide a “temporary capital buffer.” While this also has a nice connotation, the reality is that the Government would then be stepping in for a while.
At first blush, this sounded like a good thing and the futures rallied in pre-market trading. However, once investors figured out what was really happening and that Citi (C) was already lining up at the government’s doorstep, the happy mood quickly gave way to more selling.
Up until mid-afternoon, the decline seemed rather subdued. Well, until White House Press Secretary Ron “I’ll buy you cup of decaf” Gibbs decided to dodge a question on nationalizing banks, that is. After that, things got ugly in a hurry and word that AIG (AIG) was going to need another couple bucks certainly didn’t help.
While the big banks actually held up fairly well during the carnage, the regional banks and the rest of the stock market did not. The indices plummeted another -3.5% or so, with the S&P finishing at its lowest level since April 11, 1997. And don’t look now, but the major indices are seeing an awful lot of red ink so far this year as the S&P is now down -17.7% year-to-date, while the Dow is off -18.9% and the Russell 2000 is down an even -21%.
So, is the stock market trying to tell us something or perhaps send a message to someone? Feel free to insert your favorite political rant here on the subject of taxes, the stimulus, and/or economic policy. But it will suffice to say that if somebody in the new administration doesn’t provide some clarity on the fate of the banks pretty soon, we’re going to need a bigger CAP.
Turning to this morning, we don’t have any economic news before the bell however, we will get reports on Consumer Confidence, the Richmond Fed Index, and Housing prices at 10:00 am. In pre-market trading, it looks as if JP Morgan’s (JPM) voluntary dividend cut has helped improve the mood a bit.
Running through the rest of the pre-game indicators, the major foreign markets are lower across the board. Crude futures are down a bit with the latest quote showing oil trading lower by $0.11 to $38.83. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.77%, while overnight LIBOR is at 0.27% and the yield on the 3-month T-Bill is trading at 0.29%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a modestly higher open. The Dow futures are currently ahead by about 70 points; the S&P’s are up by about 8 points, while the NASDAQ looks to be about 11 points above fair value at the moment.
Stocks “In Play” This Morning:
Yesterday’s Earnings After the Bell:
DTE Energy (NYSE: DTE) – Reported $0.88 vs. $0.98
Forest Oil (NYSE: FST) – Reported $0.32 vs. $0.32
Hecla Mining (NYSE: HL) – Reported -$0.24 vs. -$0.17
Health Management Assoc (NYSE: HMA)– Reported $0.07 vs. $0.06
Hertz Global Holdings (NYSE: HTZ) – Reported -$0.22 vs. -$0.05
Nordstrom (NYSE: JWN) – Reported $0.31 vs. $0.30
Liberty Global (Nasdaq: LBTYA) – Reported -$2.60 vs. -$0.06
Mohawk Inds (NYSE: MHK) – Reported $0.18 vs. $0.24
ONEOK Partners (NYSE: OKS) – Reported $1.09 vs. $1.04
Orbitz Worldwide (NYSE: OWW) – Reported $0.10 vs. $0.03
Today’s Earnings Before the Bell:
Cracker Barrel (Nasdaq: CBRL) – Reported $0.81 vs. $0.75
Dominos Pizza (NYSE: DPZ) – Reported $0.19 vs. $0.17
Fresh Del Monte (NYSE: FDP) – Reported $0.36 vs. $0.37
Home Depot (NYSE: HD) – Reported $0.19 vs. $0.15
HJ Heinz (NYSE: HNZ) – Reported $0.76 vs. $0.65
Macy’s (NYSE: M) – Reported $1.06 vs. $1.01
Medco Health Solutions (NYSE: MHS) – Reported $0.59 vs. $0.58
Quanta Services (NYSE: PWR) – Reported $0.24 vs. $0.22
Radio Shack (NYSE: RSH) – Reported $0.58 vs. $0.73
Tenet Healthcare (NYSE: THC) – Reported -$0.07 vs. -$0.02
Target (NYSE: TGT) – Reported $0.81 vs. $0.83
Today’s Corporate News, Upgrades/Downgrades/Brokerage Research:
Qualcomm (Nasdaq: QCOM) – Upgraded at Argus Research
Brocade (Nasdaq: BRCD) – Downgraded at Argus
Southern Co (NYSE: SO) – Upgraded at Bank of America Merrill
NiSource (NYSE: NI) – Upgraded at Bank of America Merrill
Duke Energy (NYSE: DUK) – Upgraded at Bank of America Merrill
Developers Diversified Realty (NYSE: DDR) – Upgraded at Bank of America Merrill
Reynolds American (NYSE: RAI) – Downgraded at Bank of America Merrill
Marvell Technology (MRVL) – Upgraded at Barclays
Apple (Nasdaq: AAPL) – Downgraded at Calyon Securities
Noble Corp (NYSE: NE) – Downgraded at Credit Suisse
Pulte Home (NYSE: PHM) – Upgraded at Credit Suisse
Carnival Cruise Lines (NYSE: CCL) – Added to Conviction Sell list at Goldman
Royal Caribbean Cruises (NYSE: RCL) – Removed from Conviction Sell list at Goldman
CIGNA (NYSE: CI) – Mentioned positively at Goldman
UnitedHealth Group (NYSE: UNH) – Mentioned positively at Goldman
El Paso Electric (NYSE: EE) – Upgraded at Goldman
Capital One (NYSE: COF) – Downgraded at JP Morgan
Goldman Sachs (NYSE: GS) – Mentioned positively at Morgan Stanley
CH Robinson Worldwide (Nasdaq: CHRW) – Downgraded at Wachovia
Disclosure: Mr. Moenning and/or related firms hold long positions in: none
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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