David Moenning�s Daily State of the Markets: 03/20
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Wearing of the Green
Good Monday morning and welcome back to the game. Traders threw their own kind of St. Patty�s day celebration on Friday as the market finished the week with some additional green on the screens. Friday�s party actually capped a week-long celebration of the wearing of the green as the �one and done� theme became the focal point of the markets. The Dow and S&P 500 rallied for the sixth straight day to finish at yet another new cycle high, while the NYSE, Russell 2000, and S&P Small and Mid Caps all closed out the week at all time highs.
Last week�s economic data furthered the notion that the economy is growing at a modest clip at the moment, but that there is still no threat of inflation. Friday�s economic reports mirrored the theme. Industrial production rebounded, Capacity Utilization upticked modestly, and the University of Michigan�s Consumer Sentiment Index came in a bit below expectations.
The report on Industrial Production showed an increase of +0.7% in February, although this was a touch under the consensus estimates. Over the last twelve months, production has increased by +3.3%, which is consistent with the current outlook for modest growth in the economy.
Capacity Utilization at the nation�s factories showed an increase to 81.2%, which was close to expectations of 81.4%. However, the utilization rate remains just above the long-term average for the past 30+ years. This means that analysts and the Fed alike will be watching this data for signs of inflation going forward. Finally, the U of M sentiment numbers were a little punk as it is becoming clear that the consumer is a bit cautious at the present time.
The markets have obviously embraced that idea that the Fed will soon end their long hike down the measured path. Most analysts now expect the Fed to raise the Fed Funds rate to 4.75% at the end of the month and then perhaps to 5% in May. But most everyone believes that the move to 5% will be the end of the line. Traders like the idea because the economy and corporate America are �doing just fine, thank you� after 2 years of a tightening campaign. The bulls argue that with the Fed on hiatus, stocks can march higher. We remain a tad skeptical of this notion at the present time, but will remain open minded.
Looking to the week ahead, we�ve got a moderate amount of economic data on tap. This morning we�ll get an update on the Leading Economic Indicators at 10:00 a.m. Tuesday brings another peek at the inflation picture with the February PPI report before the bell. On Wednesday, traders are on their own as there is no data to review. Thursday brings an update on the state of the housing market with the report on last month�s Existing Home sales. And on Friday, the reports on sales of Durable Goods and New Home sales will be released.
Turning to this morning, stocks are upbeat before the bell in anticipation that Mr. Bernanke will confirm that the Fed is nearing an end of its campaign in a speech this evening. Running through the pre-game indicators about 45 minutes before the bell, overseas markets are all higher. Oil futures are down a little this morning with crude currently trading at $62.40. Natural Gas is trading down to $6.80 right now. Bond yields are little changed this morning with the 10-yr currently quoted at 4.66%. And finally, stock futures in the U.S. are modestly higher at the moment with the S&Ps ahead of fair value by about +1.50.
Stocks �In Play� This Morning:
UNH � WSJ questions timing of the granting of options
CRAY � New designs to reduce prices for supercomputers. Affects IBM, INTC CSCO � CIBC upgrades networkers
XOM � Dresdner upgrades global oils. Also mentions BP, COP, CVX, RDS.A
AAPL � Company rumored to announce Video iPod Download Service
AMAT � B of A says semi-equipment stocks to remain under pressure
SUN � Downgraded at Deutsche
JCP � Targeting KSS, company will open free standing stores in Chicago area
INTC � Estimates Reduced at Prudential
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: CSCO, UNH, AMAT, SUN
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) 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 Monday morning and welcome back to the game. Traders threw their own kind of St. Patty�s day celebration on Friday as the market finished the week with some additional green on the screens. Friday�s party actually capped a week-long celebration of the wearing of the green as the �one and done� theme became the focal point of the markets. The Dow and S&P 500 rallied for the sixth straight day to finish at yet another new cycle high, while the NYSE, Russell 2000, and S&P Small and Mid Caps all closed out the week at all time highs.
Last week�s economic data furthered the notion that the economy is growing at a modest clip at the moment, but that there is still no threat of inflation. Friday�s economic reports mirrored the theme. Industrial production rebounded, Capacity Utilization upticked modestly, and the University of Michigan�s Consumer Sentiment Index came in a bit below expectations.
The report on Industrial Production showed an increase of +0.7% in February, although this was a touch under the consensus estimates. Over the last twelve months, production has increased by +3.3%, which is consistent with the current outlook for modest growth in the economy.
Capacity Utilization at the nation�s factories showed an increase to 81.2%, which was close to expectations of 81.4%. However, the utilization rate remains just above the long-term average for the past 30+ years. This means that analysts and the Fed alike will be watching this data for signs of inflation going forward. Finally, the U of M sentiment numbers were a little punk as it is becoming clear that the consumer is a bit cautious at the present time.
The markets have obviously embraced that idea that the Fed will soon end their long hike down the measured path. Most analysts now expect the Fed to raise the Fed Funds rate to 4.75% at the end of the month and then perhaps to 5% in May. But most everyone believes that the move to 5% will be the end of the line. Traders like the idea because the economy and corporate America are �doing just fine, thank you� after 2 years of a tightening campaign. The bulls argue that with the Fed on hiatus, stocks can march higher. We remain a tad skeptical of this notion at the present time, but will remain open minded.
Looking to the week ahead, we�ve got a moderate amount of economic data on tap. This morning we�ll get an update on the Leading Economic Indicators at 10:00 a.m. Tuesday brings another peek at the inflation picture with the February PPI report before the bell. On Wednesday, traders are on their own as there is no data to review. Thursday brings an update on the state of the housing market with the report on last month�s Existing Home sales. And on Friday, the reports on sales of Durable Goods and New Home sales will be released.
Turning to this morning, stocks are upbeat before the bell in anticipation that Mr. Bernanke will confirm that the Fed is nearing an end of its campaign in a speech this evening. Running through the pre-game indicators about 45 minutes before the bell, overseas markets are all higher. Oil futures are down a little this morning with crude currently trading at $62.40. Natural Gas is trading down to $6.80 right now. Bond yields are little changed this morning with the 10-yr currently quoted at 4.66%. And finally, stock futures in the U.S. are modestly higher at the moment with the S&Ps ahead of fair value by about +1.50.
Stocks �In Play� This Morning:
UNH � WSJ questions timing of the granting of options
CRAY � New designs to reduce prices for supercomputers. Affects IBM, INTC CSCO � CIBC upgrades networkers
XOM � Dresdner upgrades global oils. Also mentions BP, COP, CVX, RDS.A
AAPL � Company rumored to announce Video iPod Download Service
AMAT � B of A says semi-equipment stocks to remain under pressure
SUN � Downgraded at Deutsche
JCP � Targeting KSS, company will open free standing stores in Chicago area
INTC � Estimates Reduced at Prudential
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: CSCO, UNH, AMAT, SUN
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) 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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