Daily State of the Markets 1/28: Uncertainty Waning?
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Good morning. For the first time in nearly two weeks, stocks put on a pretty good show yesterday. It wasn’t so much the net result that got our attention, but rather the “tape action” that impressed us. In short, stocks had plenty of reasons to continue their dance to the downside yesterday. But instead, our heroes in horns were able to shake off some of the negativity and look on the bright side for a change.
Given the laundry list of bad stuff that was available to the bear camp yesterday, it wasn’t exactly surprising to see stocks spend most of the day in negative territory. And to the glass-is-half-empty crowd, there were signs that the day was going to end badly – especially on a chart basis.
Our furry friends pointed to the confirmation that Chinese banks had not only stopped lending in the middle of January, but were now being asked to take back some of the loans that had been made. Given that the Chinese economy has been the major driver of the global economy, this remains a worrisome situation as “fighting the Fed” is a bad idea in any language.
Speaking of China, the CEO of Caterpillar (CAT) had the line of the day by saying he hoped that China’s officials would be able to slow their economy’s expansion by gently tapping the brakes and avoid sending the global economy through the windshield. Well put.
Next up, the economic calendar provided a source of disappointment as New Home Sales fell unexpectedly for the second month in a row. Make no mistake about it; this was a lousy report and helped send stocks to the lows of the day after its release.
The bear camp could also point to the ongoing sovereign debt concerns across the pond as Greek 10-year yields moved to their highest level since December 1999 and CDS (credit default swaps – yep, they still exist) spreads widened sharply.
Then there was the rally in the dollar, which, while it didn’t seem to impact domestic stocks, did continue to take its toll on commodities and the emerging markets.
And finally, the bears could point to the uncertainty surrounding the President’s State of the Union speech as well as the Bernanke situation. On the political front, Barney Frank also said yesterday that the Financial Reform bill, which includes the taxes/penalties and potential new rules on banks, could become law in just a few months.
On the positive side of the ledger we had the hoopla surrounding the introduction of Apple’s (AAPL) “latest creation” the iPad and some modestly encouraging words about the economy from the FOMC statement. Both of which seemed to encourage traders after the requisite volatility following the Fed announcement.
A specific reason behind the late-day move was largely M.I.A., so we’re going to suggest that some of the uncertainty over the upcoming big, bad events may be waning. In short, it looks like Bernanke will be confirmed and the State of the Union contained no new populist attacks. So, with stocks oversold, it looks like it could be bulls’ ball for a bit. Let’s see what they can do with it.
Turning to this morning, we’ve got some economic data to sift through in addition to the slew of earnings. The Labor Department reported that initial claims for unemployment insurance for the week ending January 23rd fell by 8,000 to 470K, which was above the expectations for a reading of 450K. Continuing Claims for unemployment for the week ending January 16th were in line with consensus at 4.602M vs. expectations for 4.593M and last week’s revised total of 4.659M (from 4.599M).
Next up, orders for long-lasting goods rose less than expected in December. The Commerce Department reported that Durable Goods orders rose by +0.3% during the month, which was below the consensus expectations for +2.0% but above November’s revised reading of +0.2% When you strip out the volatile orders for transportation, orders in December were up +0.9%, which was above the consensus of +0.5%, but below November’s revised reading of 2.0%.
Running through the rest of the pre-game indicators, the overseas markets are higher across the board. Crude futures are up $0.13 to $73.80. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.67%. Next, gold is moving up by $5.20 and the dollar is lower against the Yen and Pound, but higher against the Euro. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a better open. The Dow futures are currently ahead by about 35 points; the S&P’s are up about 4 points, while the NASDAQ looks to be about 6 points below fair value at the moment.
Yesterday's Earnings After The Bell
AmeriCredit ACF $0.33 $0.08
BMC Software BMC $0.76 $0.68
Crown Castle CCI $0.04 -$0.01
Citrix Systems CTXS $0.66 $0.52
E*Trade ETFC -$0.04 -$0.04
Flextronics FLEX $0.17 $0.15
Green Mountain Coffee GMCR $0.27 $0.16
Harris Corp HRS $1.08 $0.95
Lam Research LRCX $0.47 $0.40
LSI Corp LSI $0.18 $0.11
Murphy Oil MUR $1.65* $0.85
Norfolk Southern NSC $0.82 $0.84
Owens-Illinois OI $0.49 $0.47
Qualcomm QCOM $0.62 $0.56
Symantec SYMC $0.40 $0.37
Varian Medical VAR $0.63 $0.56
Werner Enterprises WERN $0.25 $0.25
Earnings Before The Bell
Alaska Air ALK $0.12 $0.32
Baxter BAX $1.03 $1.03
Ball Corp BLL $0.84 $0.71
Bemis BMS $0.45 $0.34
Bristol-Myers BMY $0.47 $0.42
Cardinal Health CAH $0.57 $0.46
Celgene CELG $0.62 $0.62
Check Point Software CHKP $0.61 $0.57
Colgate Palmolive CL $1.21 $1.18
Cypress Semiconductor CY $0.16 $0.11
Rockwell Collins COL $0.76 $0.73
Dominion D $0.63 $0.60
Danaher DHR $1.12 $1.08
Eastman Kodak EK $1.36* $0.18
Estee Lauder EL $1.28 $1.28
Ford F $0.43 $0.26
Goodrich GR $0.82 $0.90
Invesco IVZ $0.25 $0.28
Janus Capital JNS $0.20 $0.20
Life Technologies LIFE $0.80 $0.72
L-3 Communications LLL $1.93 $1.86
Eli Lilly LLY $0.91 $0.91
Lockheed Martin LMT $2.17 $1.99
McCormick MKC $0.91 $0.91
3M MMM $1.30 $1.20
Altria MO $0.39 $0.40
Motorola MOT $0.09 $0.09
Occidental Petroleum OXY $1.30 $1.22
Procter & Gamble PG $1.49 $1.43
Potash POT $0.80 $0.78
Raytheon RTN $1.30 $1.24
AT&T T $0.51 $0.51
Time Warner Cable TWC $0.93 $0.89
Textron TXT $0.15 $0.08
Tyco TYC $0.65 $0.65
Waddell & Reed WDR $0.37 $0.38
Zimmer Holdings ZMH $1.12 $1.08
* Report includes items that make comparisons to the consensus estimate questionable
Wall Street Research Summary
Upgrades:
# Netflix (NFLX) – BofA/Merrill
# Illinois Tool (ITW) – Barclays
# Anadarko Petroleum (APC) – Barclays
# Rockwell Automation (ROK) – Citi
# Nabors Industries (NBR) – Credit Suisse
# SunTrust (STI) – Goldman Sachs
# Zions Bancorp (ZION) – Goldman Sachs
# CME Group (CME) – JP Morgan
# Caterpillar (CAT) – UBS
# Apache (APA) – Wells Fargo
Downgrades:
# Alliant Techsystems (ATK) – Credit Suisse
# Capital One (COF) – Removed from Conviction Buy at Goldman
# Piper Jaffray (PJC) – Removed from Conviction Buy at Goldman
# Burger King (BKC) – Janney Capital
# Warner Chilcott (WCRX) - Jefferies
# Kirby Corp (KEX) – JP Morgan
# Qualcomm (QCOM) - ThinkEquity
# Chesapeake Energy (CHK) – Wells Fargo
Long positions in stocks mentioned: CAT, QCOM, ACF, CCI, GMCR, ALK, CY, EL, MMM, AAPL
Be sure to keep everything in perspective and until next time, “May the bulls be with you!”
David D. Moenning
Founder TopStockPortfolios.com
For more "top stock" portfolios and research, visit www.TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
Given the laundry list of bad stuff that was available to the bear camp yesterday, it wasn’t exactly surprising to see stocks spend most of the day in negative territory. And to the glass-is-half-empty crowd, there were signs that the day was going to end badly – especially on a chart basis.
Our furry friends pointed to the confirmation that Chinese banks had not only stopped lending in the middle of January, but were now being asked to take back some of the loans that had been made. Given that the Chinese economy has been the major driver of the global economy, this remains a worrisome situation as “fighting the Fed” is a bad idea in any language.
Speaking of China, the CEO of Caterpillar (CAT) had the line of the day by saying he hoped that China’s officials would be able to slow their economy’s expansion by gently tapping the brakes and avoid sending the global economy through the windshield. Well put.
Next up, the economic calendar provided a source of disappointment as New Home Sales fell unexpectedly for the second month in a row. Make no mistake about it; this was a lousy report and helped send stocks to the lows of the day after its release.
The bear camp could also point to the ongoing sovereign debt concerns across the pond as Greek 10-year yields moved to their highest level since December 1999 and CDS (credit default swaps – yep, they still exist) spreads widened sharply.
Then there was the rally in the dollar, which, while it didn’t seem to impact domestic stocks, did continue to take its toll on commodities and the emerging markets.
And finally, the bears could point to the uncertainty surrounding the President’s State of the Union speech as well as the Bernanke situation. On the political front, Barney Frank also said yesterday that the Financial Reform bill, which includes the taxes/penalties and potential new rules on banks, could become law in just a few months.
On the positive side of the ledger we had the hoopla surrounding the introduction of Apple’s (AAPL) “latest creation” the iPad and some modestly encouraging words about the economy from the FOMC statement. Both of which seemed to encourage traders after the requisite volatility following the Fed announcement.
A specific reason behind the late-day move was largely M.I.A., so we’re going to suggest that some of the uncertainty over the upcoming big, bad events may be waning. In short, it looks like Bernanke will be confirmed and the State of the Union contained no new populist attacks. So, with stocks oversold, it looks like it could be bulls’ ball for a bit. Let’s see what they can do with it.
Turning to this morning, we’ve got some economic data to sift through in addition to the slew of earnings. The Labor Department reported that initial claims for unemployment insurance for the week ending January 23rd fell by 8,000 to 470K, which was above the expectations for a reading of 450K. Continuing Claims for unemployment for the week ending January 16th were in line with consensus at 4.602M vs. expectations for 4.593M and last week’s revised total of 4.659M (from 4.599M).
Next up, orders for long-lasting goods rose less than expected in December. The Commerce Department reported that Durable Goods orders rose by +0.3% during the month, which was below the consensus expectations for +2.0% but above November’s revised reading of +0.2% When you strip out the volatile orders for transportation, orders in December were up +0.9%, which was above the consensus of +0.5%, but below November’s revised reading of 2.0%.
Running through the rest of the pre-game indicators, the overseas markets are higher across the board. Crude futures are up $0.13 to $73.80. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.67%. Next, gold is moving up by $5.20 and the dollar is lower against the Yen and Pound, but higher against the Euro. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a better open. The Dow futures are currently ahead by about 35 points; the S&P’s are up about 4 points, while the NASDAQ looks to be about 6 points below fair value at the moment.
Yesterday's Earnings After The Bell
AmeriCredit ACF $0.33 $0.08
BMC Software BMC $0.76 $0.68
Crown Castle CCI $0.04 -$0.01
Citrix Systems CTXS $0.66 $0.52
E*Trade ETFC -$0.04 -$0.04
Flextronics FLEX $0.17 $0.15
Green Mountain Coffee GMCR $0.27 $0.16
Harris Corp HRS $1.08 $0.95
Lam Research LRCX $0.47 $0.40
LSI Corp LSI $0.18 $0.11
Murphy Oil MUR $1.65* $0.85
Norfolk Southern NSC $0.82 $0.84
Owens-Illinois OI $0.49 $0.47
Qualcomm QCOM $0.62 $0.56
Symantec SYMC $0.40 $0.37
Varian Medical VAR $0.63 $0.56
Werner Enterprises WERN $0.25 $0.25
Earnings Before The Bell
Alaska Air ALK $0.12 $0.32
Baxter BAX $1.03 $1.03
Ball Corp BLL $0.84 $0.71
Bemis BMS $0.45 $0.34
Bristol-Myers BMY $0.47 $0.42
Cardinal Health CAH $0.57 $0.46
Celgene CELG $0.62 $0.62
Check Point Software CHKP $0.61 $0.57
Colgate Palmolive CL $1.21 $1.18
Cypress Semiconductor CY $0.16 $0.11
Rockwell Collins COL $0.76 $0.73
Dominion D $0.63 $0.60
Danaher DHR $1.12 $1.08
Eastman Kodak EK $1.36* $0.18
Estee Lauder EL $1.28 $1.28
Ford F $0.43 $0.26
Goodrich GR $0.82 $0.90
Invesco IVZ $0.25 $0.28
Janus Capital JNS $0.20 $0.20
Life Technologies LIFE $0.80 $0.72
L-3 Communications LLL $1.93 $1.86
Eli Lilly LLY $0.91 $0.91
Lockheed Martin LMT $2.17 $1.99
McCormick MKC $0.91 $0.91
3M MMM $1.30 $1.20
Altria MO $0.39 $0.40
Motorola MOT $0.09 $0.09
Occidental Petroleum OXY $1.30 $1.22
Procter & Gamble PG $1.49 $1.43
Potash POT $0.80 $0.78
Raytheon RTN $1.30 $1.24
AT&T T $0.51 $0.51
Time Warner Cable TWC $0.93 $0.89
Textron TXT $0.15 $0.08
Tyco TYC $0.65 $0.65
Waddell & Reed WDR $0.37 $0.38
Zimmer Holdings ZMH $1.12 $1.08
* Report includes items that make comparisons to the consensus estimate questionable
Wall Street Research Summary
Upgrades:
# Netflix (NFLX) – BofA/Merrill
# Illinois Tool (ITW) – Barclays
# Anadarko Petroleum (APC) – Barclays
# Rockwell Automation (ROK) – Citi
# Nabors Industries (NBR) – Credit Suisse
# SunTrust (STI) – Goldman Sachs
# Zions Bancorp (ZION) – Goldman Sachs
# CME Group (CME) – JP Morgan
# Caterpillar (CAT) – UBS
# Apache (APA) – Wells Fargo
Downgrades:
# Alliant Techsystems (ATK) – Credit Suisse
# Capital One (COF) – Removed from Conviction Buy at Goldman
# Piper Jaffray (PJC) – Removed from Conviction Buy at Goldman
# Burger King (BKC) – Janney Capital
# Warner Chilcott (WCRX) - Jefferies
# Kirby Corp (KEX) – JP Morgan
# Qualcomm (QCOM) - ThinkEquity
# Chesapeake Energy (CHK) – Wells Fargo
Long positions in stocks mentioned: CAT, QCOM, ACF, CCI, GMCR, ALK, CY, EL, MMM, AAPL
Be sure to keep everything in perspective and until next time, “May the bulls be with you!”
David D. Moenning
Founder TopStockPortfolios.com
For more "top stock" portfolios and research, visit www.TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
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