David Moenning's Daily State of the Markets: 01/04

Here's a link to listen to an Audio Version of the report:

The Survey Says...

Yesterday's action in the stock market made it clear that there remains a great deal of uncertainty regarding the state of the economy right now. Although the bulls had some pretty decent data to work with and things were going in the right direction up until lunchtime, concerns over inflation and today’s jobs report wound up putting a damper on the rebound attempt.

Speaking of jobs, stocks spent much of yesterday’s session in positive territory in response to a pretty solid report from ADP. The private sector jobs report showed that corporate America added 40,000 jobs during December, which was slightly higher than expectations and helped to ease some of the fretting over this morning’s Non-Farm Payrolls number.

Sticking with the economic theme, it was also modestly encouraging that the report on Factory Orders showed an increase of 1.5% in November, which was the largest gain in four months and just about double analysts expectations.

On the credit front, there was actually some good news for a change as the dollar-based LIBOR rate fell to its lowest level in two years. In addition, the report from State Street Corp (STT) was a breath of fresh air for the financials as the bank popped +8.2% on the session and is one of the few stocks in the sector with a solid chart.

Despite the overall positive mood on the day, the bulls went home disappointed as the vast majority of the Dow’s gains were gone by the close and the NASDAQ actually finished in the red. In short, it was the overhang from Wednesday’s slaughter, worries over oil officially hitting $100, and apprehension over today’s jobs data that wound up trumping the positives the bulls could come up with.

Turning to this morning, while there were some green screens in the early going, it’s really all about the jobs report. So without further ado, let’s see what’s in the report. Analysts had been looking for an increase in Non-Farm Payrolls in December of approximately 70,000, an unemployment rate of 4.8% and an increase of average hourly earnings of 0.3%. But unfortunately, the analysts missed the mark this time as the Labor Department said job growth totaled just 18,000 in December, which was the weakest number since August 2003. In addition, the Unemployment rate jumped to 5%, which ought to get the politicians howling out on the campaign trail.

While the data is positive for bond investors and Fed Funds futures are now pricing in a 50/50 chance of a 0.50% rate cut at the end of the month, stocks have plummeted on the news. The Dow futures have gone from +17 to -108 in a matter of minutes and although it is still early, it looks like the not-so Happy New Year theme will continue in the early going.

Running through the rest of the pre-game indicators; the overseas markets are mixed as Japan played catch-up to the downside after being closed for four days, Hong Kong spiked higher, and Europe is sporting modestly negative numbers. Crude futures are down a bit with the latest quote showing the February contract off by $0.14 to $99.04. Interest rates are at new lows on a yield basis with the 10-yr trading at a yield of 3.84% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a down open. The Dow futures are currently off by about 100 points; the S&Ps are lower by about 12, while the NASDAQ looks to be about 23 points below fair value at the moment.

Stocks "In Play" This Morning:

News, Upgrades/Downgrades/Brokerage Research:

EOG Resources (NYSE: EOG) – Downgraded at Bank of America
Quicksilver Resources (NYSE: KWK) – Downgraded at Bank of America
Investment Technology Group (NYSE: ITG) – Upgraded at Bank of America
Crown Holdings (NYSE: CCK) – Downgraded at Bank of America
Owens Illinois (NYSE: OI) – Downgraded at Bank of America
Ball Corp (NYSE: BLL) – Upgraded at Bank of America
Echostar (Nasdaq: DISH) – Upgraded at Bernstein
Motorola (NYSE: MOT) – Estimates and target reduced at Citi
Citigroup (NYSE: C) – Estimates reduces at Credit Suisse
Allstate (NYSE: ALL) – Upgraded at Friedman Billings
PetroChina (NYSE: PTR) – Upgraded at Goldman Sachs
Waste Management (NYSE: WMI) – Upgraded at Goldman Sachs
Boeing (NYSE: BA) – Estimates increased at Jefferies
Intel (Nasdaq: INTC) – Downgraded at JP Morgan
Aptar Group (NYSE: ATR) – Upgraded at Merrill Lynch
Hess Corp (NYSE: HES) – Downgraded at Merrill Lynch
Circuit City (NYSE: CC) – Target reduced at UBS
Waters Corp (NYSE: WAT) – Target increased at UBS

Mr. Moenning holds Long positions in stocks mentioned: PTR, HES, WAT, STT

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

** 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.

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