David Moenning's Daily State of the Markets: 2/25

The Jack Bauer of Finance?

Looking more than ready to take on his antagonists, Fed Chairman Ben Bernanke was the bulls’ best friend yesterday as he helped ignite a short-covering rally good for a gain of +4% on the S&P 500. Almost in stark contrast to our new Treasury Secretary, Mr. Bernanke exuded confidence during his testimony before the Senate Banking Committee; prompting Wall Street veteran and hedge fund manager Doug Kass to label him as the Jack Bauer of finance.

After a heart-stopping dive on Monday worthy of a “24” episode, stocks rebounded in dramatic fashion up off of their nearly 12-year lows yesterday. The move was in response to Mr. Bernanke confronting his captors head on and pledging to do whatever it takes to keep the banking system sound. And while under intense fire from his interrogators, the Fed Chairman also managed to swiftly arrest the topic of nationalizing the banks.

Okay, we will have to admit that the bearded Ivy League economist now responsible for the world’s biggest economy will probably never be confused for Agent Jack Bauer, who is everybody’s favorite one-man wrecking crew and protector of everything good. But then again, with the nation’s economy and banking system under attack from weapons of financial destruction, and Bernanke taking a page out of this year’s plot line in “24” to do “whatever it takes,” maybe this analogy works after all!

Mr. Bernanke also gave the bulls some ammunition for their fight when he suggested that the recession would end during the second half of 2009 and that 2010 would be a year of recovery. However, there was a catch to this prediction. Bernanke said, “If actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability -- and only if that is the case, in my view -- there is a reasonable prospect that the current recession will end in 2009…”

Although the comments from Mr. Bernanke were widely recognized as the trigger for yesterday’s blast, we should also note that rumors of changes in the mark-to-market rules seemed to spark the initial move higher. However, given the ongoing lack of details from the administration on their plan to fix the banking system, I guess we’ll have to wait and see on this one.

From a technical perspective, it was indeed positive that volume increased during the sprint higher; that up volume swamped down volume by a measure of 13.5 to 1; and that advancing issues buried decliners 6 to 1. However, from a chart standpoint, the day looked like just another rebound day coming from an oversold condition fueled, at least in part, by short-covering. And unfortunately, these days have meant very little over the past four months.

Turning to this morning, there is no economic news before the bell and unfortunately we still do not have any details on what the plan is for the banks. However, it does appear that Citi (C) is close to a deal with the government which could lead to the taxpayer owning 40% of the big bank. But as far as the markets are concerned, until we get some details, we may not be able to do much more than bounce around.

Running through the rest of the pre-game indicators, the major foreign markets are up across the board. Crude futures are up a bit with the latest quote showing oil trading higher by $0.61 to $40.57. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.82%, 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 slightly lower open. The Dow futures are currently off by about 50 points; the S&P’s are down by about 5 points, while the NASDAQ looks to be about 6 points below fair value at the moment.

Stocks “In Play” This Morning:

Yesterday’s Earnings After the Bell:
Chicago Bridge (NYSE: CBI) – Reported $0.72 vs. $0.63
Crown Castle (NYSE: CCI) – Reported -$0.24 vs. -$0.04
DreamWorks Animation (NYSE: DWA) – Reported $0.46 vs. $0.64
First Solar (Nasdaq: FSLR) – Reported $1.61 vs. $1.30
Health Care REIT (NYSE: HCN) – Reported $0.83 vs. $0.83
Nabors Industries (NYSE: NBR) – Reported $0.83 vs. $0.81
Papa John’s (Nasdaq: PZZA) – Reported $0.48 vs. $0.41
Range Resources (NYSE: RRC) – Reported $0.33 vs. $0.21
Wynn Resorts (Nasdaq: WYNN) – Reported $0.07 vs. $0.41

Today’s Earnings Before the Bell:

AMBAC (NYSE: ABK) – Reported -$8.14 vs. -$0.68
Central European Media Group (CETV) – Reported $0.35 vs. $1.51
Discovery Communications (Nasdaq: DISCA) – Reported $0.25 vs. $0.30
Del Monte Foods (NYSE: DLM) – Reported $0.30 vs. $0.22
Denbury Resources (NYSE: DNR) – Reported $0.18 vs. $0.13
Dollar Tree (Nasdaq: DLTR) – Reported $1.15 vs. $1.13
NICOR (NYSE: GAS) – Reported $1.05 vs. $0.67
Quicksilver Resources (NYSE: KWK) – Reported $0.23 vs. $0.22
RR Donnelly & Sons (NYSE: RRD) – Reported $0.63 vs. $0.56
Saks (NYSE: SKS) – Reported -$0.60 vs. -$0.30

Today’s Corporate News, Upgrades/Downgrades/Brokerage Research:

Fomento Econ Mexicano (NYSE: FMX) – Initiated overweight at Barclays
Coca Cola FEMSA (NYSE: KOF) – Initiated equal weight at Barclays
Home Depot (NYSE: HD) – Estimates reduced at Barclays
Intel (Nasdaq: INTC) – Estimates increased at Barclays
Telecom de Sao Paulo (NYSE: TSP) – Upgraded at Goldman
Telecom Argentina (NYSE: TEO) – Downgraded at Goldman
AT&T (NYSE: T) – Upgraded at JP Morgan
First Solar (Nasdaq: FSLR) – Downgraded at Think Equity
Microsoft (Nasdaq: MSFT) – Estimates and target reduced at UBS
Chubb (NYSE: CB) – Upgraded at UBS
Vulcan Materials (NYSE: VMC) – Upgraded at UBS
Logitech (Nasdaq: LOGI) – Upgraded at Argus Research

Disclosure: Mr. Moenning and/or related firms hold long positions in: none

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

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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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