David Moenning Daily State of the Markets: 1/30
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Earnings Trump Economy
The bulls once again took advantage of decent earnings from some big names on Friday and somehow managed to not only escape the surprisingly weak GDP data, but actually prosper.
A second straight day of nearly triple digit gains didn�t even seem feasible at 8:30 am as the preliminary report for fourth quarter GDP came in at less than half what had been expected. One look at the headlines from the report suggested that the bears would most likely enjoy a good day chasing the bulls around the exchange.
The report showed the economy growing at just 1.1%, which was well below the consensus of 2.6%. Consumer expenditures came in at the lowest level since the last recession and durable purchases fell by the largest amount since 1987. And if it hadn�t for inventory building, the economy wouldn�t have grown at all. In addition, the inflation measures came in a bit hotter than expected. Frankly speaking, none of this sounded very encouraging before the bell.
However, when digging into the report, analysts discovered that the primary cause for the punk data was a drop in government spending. Therefore, knowing that the government rarely stops spending for long, traders quickly dismissed the report and turned their attention back to the earnings parade.
Then once the report on New Homes sales hit the wires, it was the bull�s turn to do the chasing. While analysts had expected a drop of 1.1% in the sale of new homes, the actual number showed a gain of 2.9%. Sure, prices pulled back a bit, but everybody knows that the rate of appreciation seen last year was unsustainable. The end result is this data clearly demonstrates that the consumer is far from dead and that the housing market is unlikely to implode any time soon.
So with an explanation for the lousy GDP report, some decent earnings, and a data showing that a housing collapse isn�t in the cards, stocks followed through on Thursday�s blast. The Dow finished with its second straight day of nearly triple digit gains while the NYSE, Russell 2000, S&P Small Cap, and S&P Mid Caps all moved up to fresh all-time highs. Volume was strong and breadth was excellent, so the bears had little to gripe about.
Turning to this morning, the government reported that Personal Income rose by +0.4% in December, which was in-line with expectations, while Personal Spending increased by +0.9%, which was a bit better than expected. The Core PCE Deflator (inflation) was a bright spot, as it came in with a gain of just +0.1 versus expectations for +0.2%. And then on a year-over-year basis, the deflator gained +1.9%, which, while not excessive, continues to bump up against the Fed�s comfort zone.
Running through the pre-game indicators, overseas markets, with the exception of Japan are fairly flat; gold is trading higher by +$3.70 to $562.50; oil is lower by $0.39 to $67.37; natural gas is moving up $0.17 to $8.40; bond yields are moving a bit higher on this morning�s data, with the 10-yr currently yielding 4.54%; and finally, stock futures are waffling around breakeven before the bell.
So with the earnings parade continuing, lots of economic data, and a new Fed-Head taking over, it will be very interesting to see if the bulls can keep the ball moving up field.
Stocks "In Play" This Morning:
XOM � Reported $1.65 vs. $1.45, Revenues $99.66B vs. $101.3B
JNPR � Upgraded at Piper
CCE � Upgraded to Buy at Deutsche Bank
MAT � Reports $0.58 vs. $0.49, Revenues $1.84B vs. $1.89B
SII � Reports $0.45 vs. $0.43, Revenues $1.53B vs. $1.49B, Increases Guidance
TXN � Upgraded at Bernstein
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: CCE
To see David Moenning�s Trading Record or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
The bulls once again took advantage of decent earnings from some big names on Friday and somehow managed to not only escape the surprisingly weak GDP data, but actually prosper.
A second straight day of nearly triple digit gains didn�t even seem feasible at 8:30 am as the preliminary report for fourth quarter GDP came in at less than half what had been expected. One look at the headlines from the report suggested that the bears would most likely enjoy a good day chasing the bulls around the exchange.
The report showed the economy growing at just 1.1%, which was well below the consensus of 2.6%. Consumer expenditures came in at the lowest level since the last recession and durable purchases fell by the largest amount since 1987. And if it hadn�t for inventory building, the economy wouldn�t have grown at all. In addition, the inflation measures came in a bit hotter than expected. Frankly speaking, none of this sounded very encouraging before the bell.
However, when digging into the report, analysts discovered that the primary cause for the punk data was a drop in government spending. Therefore, knowing that the government rarely stops spending for long, traders quickly dismissed the report and turned their attention back to the earnings parade.
Then once the report on New Homes sales hit the wires, it was the bull�s turn to do the chasing. While analysts had expected a drop of 1.1% in the sale of new homes, the actual number showed a gain of 2.9%. Sure, prices pulled back a bit, but everybody knows that the rate of appreciation seen last year was unsustainable. The end result is this data clearly demonstrates that the consumer is far from dead and that the housing market is unlikely to implode any time soon.
So with an explanation for the lousy GDP report, some decent earnings, and a data showing that a housing collapse isn�t in the cards, stocks followed through on Thursday�s blast. The Dow finished with its second straight day of nearly triple digit gains while the NYSE, Russell 2000, S&P Small Cap, and S&P Mid Caps all moved up to fresh all-time highs. Volume was strong and breadth was excellent, so the bears had little to gripe about.
Turning to this morning, the government reported that Personal Income rose by +0.4% in December, which was in-line with expectations, while Personal Spending increased by +0.9%, which was a bit better than expected. The Core PCE Deflator (inflation) was a bright spot, as it came in with a gain of just +0.1 versus expectations for +0.2%. And then on a year-over-year basis, the deflator gained +1.9%, which, while not excessive, continues to bump up against the Fed�s comfort zone.
Running through the pre-game indicators, overseas markets, with the exception of Japan are fairly flat; gold is trading higher by +$3.70 to $562.50; oil is lower by $0.39 to $67.37; natural gas is moving up $0.17 to $8.40; bond yields are moving a bit higher on this morning�s data, with the 10-yr currently yielding 4.54%; and finally, stock futures are waffling around breakeven before the bell.
So with the earnings parade continuing, lots of economic data, and a new Fed-Head taking over, it will be very interesting to see if the bulls can keep the ball moving up field.
Stocks "In Play" This Morning:
XOM � Reported $1.65 vs. $1.45, Revenues $99.66B vs. $101.3B
JNPR � Upgraded at Piper
CCE � Upgraded to Buy at Deutsche Bank
MAT � Reports $0.58 vs. $0.49, Revenues $1.84B vs. $1.89B
SII � Reports $0.45 vs. $0.43, Revenues $1.53B vs. $1.49B, Increases Guidance
TXN � Upgraded at Bernstein
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: CCE
To see David Moenning�s Trading Record or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
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