David Moenning's Daily State of the Markets: 06/29

Fed Day XVII - What Will They Say?

Good morning and welcome to Fed Day XVII. Stocks basically marked time yesterday until a report out of Iraq indicated that Sunni insurgents had made an offer to stop the persistent attacks on military forces. The report definitely improved the mood as it reminded traders that there are issues around the world to be considered besides what the Fed has to say today.

While it was nice to see a little bounce after Tuesday�s drubbing, the bottom line is that the markets have been simply waiting to hear what Mr. Bernanke and Company have to say today. After all the debate and teeth gnashing, today at 2:15 pm eastern time we will finally hear the statement which accompanies the 17th straight rate hike.

It is widely anticipated that the FOMC will announce another one-quarter point increase in the Fed Funds rate, taking the overnight rate charged to banks to 5.25%. While there has been an awful lot of talk about the Fed going 50 bps this time, the odds still appear to favor a smaller hike for now.

The key question, of course, is what the statement accompanying the announcement will hold. Will there be any hint of a pause at this time or will we simply hear the same old talk about being data dependent going forward? It will suffice to say that any discussion of when the Fed will stop hiking rates is likely to be greeted with cheers while a repeat of recent statements may draw a round of boos from the crowd.

Whatever the statement holds, it is important to remember that the markets typically experience some volatility in both directions after such an announcement. And oftentimes the initial move is the fake out move, so it will be important to keep our wits about us in the final 90 minutes of today�s session.

Turning to this morning, the market seems to be cheering the end of the waiting game and there may be a little short covering and �buying of the fact� going on at the present time. Traders may also be encouraged by the action overseas which saw strong returns across the board. In addition, it was reported that Germany�s unemployment rate came in below expectations.

On the subject of economic news, the Final Q1 GDP numbers were a little bit better than expected on balance. The headline GDP number came in right on target at 5.6%, which was above the prior estimate of 5.3%. However the Price Index (inflation) saw an increase of 3.1%, which was lower than the 3.3% expectation. And finally, Personal Consumption was a smidge below expectations at 5.1%.

Running through the rest of the pre-game indicators, as we mentioned, overseas markets are all higher and the major indices are enjoying gains in the 1% range. Gold is moving up by $2.70 and is trading at $583.70 at the moment. Oil is continuing to move higher this morning and August crude futures are currently up by $0.38 to $72.57. Interest rates are quiet this morning with the 2-year currently trading at 5.26% while the 10-yr is quoted at 5.23% right now. And finally, with about an hour before the bell, stock futures in the U.S. are heading higher. The Dow futures are currently ahead by 40 points; the S&Ps are up by 4.10, and the NASDAQ is also sporting a gain of 4 points.

Stocks �In Play� This Morning:
Intl Game Technology (IGT) � Upgraded at JP Morgan
Valero (VLO) � Upgraded at Merrill Lynch
NASDAQ Market (NDAQ) � Upgraded at Thomas Weisel
Duke Energy (DUK) � Upgraded at Lehman, Raised dividend
Boston Scientific (BSX) � Downgraded at Citigroup
Aztar (AZR) � Downgraded at JP Morgan
McDonalds (MCD) � Upgraded at Merrill Lynch
Sprint Nextel (S) � Downgraded at Wachovia
Telecomm Italia (TI) � Upgraded at Bernstein
3Com (COMS) � Reported -$0.01 vs. -$0.05, Declines to provide guidance
Google (GOOG) � Confirms introduction of online payment system
Micron Technology (MU) � Reports $0.12 vs. $0.08
Worthington Steel (WOR) � Reports $0.53 vs. $0.43, Revenues of $822M vs. $736.1
Circuit City (CC) � Raises dividend, Increases buyback program

Positions in stocks mentioned: IGT, VLO, WOR

** 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.

You May Also Be Interested In

• Midday movers: PepsiCo, JetBlue fall; GM, Danaher and UPS rise
• After-hours movers: Alcoa rises; Equifax and Las Vegas Sands fall
• After-hours movers: Cadence Design Systems, Cleveland-Cliffs, Riot Platforms, and more