David Moenning's Daily State of the Markets: 02/16
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The Econ-o-rama Continues
Good morning. It's been a very busy week in terms of economic reporting and although the data has been a mixed bag in terms of results, stocks have continued to respond favorably. In the last two days alone the econ-o-rama has bombarded investors with two days of Bernanke Congressional testimony as well as reports on Retail Sales, Jobless Claims, Import Prices, manufacturing in the New York region, Foreign Security Purchases, and the Philadelphia Fed. And then just in case you thought this morning’s options expiration might be enough to deal with, we’ll also get data on the Producer Price Index and the Housing Market before the bell.
We could very easily spend the rest of this report reviewing the details of each economic report. However, unless you are a closet economist, a review of that many numbers might be a bit on the dull side. And since we have taken a pledge to avoid boring rehashes of the news, let’s fast-forward to the summary.
In short, Ben Bernanke told Congress and the markets what they wanted to hear this week. While the Fed Chairman did warn about the possibility of further rate hikes if the data warrants such a move, anyone following the numbers can plainly see the Bernanke’s gang will likely be sitting on their hands for much of the year.
In reviewing the rest of the data from the week, it would appear that the Goldilocks scenario remains the primary theme. The economy is clearly not hot enough to create further increases in inflation (although we will hear more on that subject in just a few minutes) and yet isn’t cold enough to cause any serious consideration of a recession.
While the manufacturing sector continues to struggle, the good news is that the consumer is alive and shopping (although the weather does seem to be impacting the public’s desire to head to the mall) and the services sector is doing just fine, thank you.
In short, there have been plenty of things for the worry-warts to find fault with this week. But with investors focusing on the macro view as well as a steady flow of M&A activity – which indicates values remain reasonable enough for people to plunk down a billion here and there – stocks have managed to look at the glass as being more than half-full. For the third straight day yesterday, the Dow, NYSE, and Mid-Cap indices finished at new all-time highs while the S&P managed to inch ever closer to its previous record close set on March 23, 2000.
Turning to this morning, the econo-rama continues as we’ve got fresh data on housing and inflation. Just seconds ago, the government reported that the Producer Price Index fell by -0.6% in January, thanks mostly to the drop in energy prices, which was right on the money with analyst expectations. And when you strip out food and energy, the Core Rate also came in on target with a gain of +0.2%. On a year-over-year basis, the headline PPI has risen just +0.2% while the Core is up +1.8%, which remains at the high end of the Fed’s comfort zone.
However, the theory that the housing market may be turning the corner was dealt a blow this morning as Housing Starts were up less than expected and Permits were down significantly.
The markets have shown little reaction to the numbers as there is really nothing new in this morning’s data.
Running through the pre-game indicators, the major overseas markets appeared to be on hold in front of the inflation numbers. Gold futures are trading down $3.00 to $668.40 right now. In the oil pits, crude futures are off $0.18 this morning with the latest quote at $57.81. Interest rates are falling again this morning with the yield on the 10-year currently trading at 4.67% which continues to be an important break-down on a chart basis. And finally, with 45 minutes before the bell, stock futures in the U.S. are looking to open on the flat side. The Dow futures are currently off by about 5 points; the S&P’s are fractionally lower at the moment, while the NASDAQ looks to be about 2 points below fair value at the moment.
Stocks “In Play” This Morning:
AMR Corp (NYSE: AMR) – Business Week reports AMR is buyout target, Reuters denies
Agilent Technologies (NYSE: A) – Reported $0.39 vs. $0.34
Allied Waste (NYSE: AW) – Reported $0.17 vs. $0.14
Psychiatric Solutions (NYSE: PSYS) – Reported $0.33 vs. $0.30
Colgate Palmolive (NYSE: CL) – Upgraded at BofA
Google (Nasdaq: GOOG) – Mentioned positively at Citigroup
Terex (NYSE: TEX) – Upgraded at Citigroup
Alltel Corp (NYSE: AT) – Downgraded at Citigroup
International Paper (NYSE: IP) – Upgraded at Deutsche Bank
Coca Cola (NYSE: KO) – Upgraded at Goldman Sachs
Pepsico (NYSE: PEP) – Upgraded at Goldman
Constellation Brands (NYSE: STZ) – Downgraded at Goldman
Avon Products (NYSE: AVO) – Upgraded at Prudential
Mr. Moenning holds Long positions in stocks mentioned: GS, TEX, PSYS, AVP
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.
Good morning. It's been a very busy week in terms of economic reporting and although the data has been a mixed bag in terms of results, stocks have continued to respond favorably. In the last two days alone the econ-o-rama has bombarded investors with two days of Bernanke Congressional testimony as well as reports on Retail Sales, Jobless Claims, Import Prices, manufacturing in the New York region, Foreign Security Purchases, and the Philadelphia Fed. And then just in case you thought this morning’s options expiration might be enough to deal with, we’ll also get data on the Producer Price Index and the Housing Market before the bell.
We could very easily spend the rest of this report reviewing the details of each economic report. However, unless you are a closet economist, a review of that many numbers might be a bit on the dull side. And since we have taken a pledge to avoid boring rehashes of the news, let’s fast-forward to the summary.
In short, Ben Bernanke told Congress and the markets what they wanted to hear this week. While the Fed Chairman did warn about the possibility of further rate hikes if the data warrants such a move, anyone following the numbers can plainly see the Bernanke’s gang will likely be sitting on their hands for much of the year.
In reviewing the rest of the data from the week, it would appear that the Goldilocks scenario remains the primary theme. The economy is clearly not hot enough to create further increases in inflation (although we will hear more on that subject in just a few minutes) and yet isn’t cold enough to cause any serious consideration of a recession.
While the manufacturing sector continues to struggle, the good news is that the consumer is alive and shopping (although the weather does seem to be impacting the public’s desire to head to the mall) and the services sector is doing just fine, thank you.
In short, there have been plenty of things for the worry-warts to find fault with this week. But with investors focusing on the macro view as well as a steady flow of M&A activity – which indicates values remain reasonable enough for people to plunk down a billion here and there – stocks have managed to look at the glass as being more than half-full. For the third straight day yesterday, the Dow, NYSE, and Mid-Cap indices finished at new all-time highs while the S&P managed to inch ever closer to its previous record close set on March 23, 2000.
Turning to this morning, the econo-rama continues as we’ve got fresh data on housing and inflation. Just seconds ago, the government reported that the Producer Price Index fell by -0.6% in January, thanks mostly to the drop in energy prices, which was right on the money with analyst expectations. And when you strip out food and energy, the Core Rate also came in on target with a gain of +0.2%. On a year-over-year basis, the headline PPI has risen just +0.2% while the Core is up +1.8%, which remains at the high end of the Fed’s comfort zone.
However, the theory that the housing market may be turning the corner was dealt a blow this morning as Housing Starts were up less than expected and Permits were down significantly.
The markets have shown little reaction to the numbers as there is really nothing new in this morning’s data.
Running through the pre-game indicators, the major overseas markets appeared to be on hold in front of the inflation numbers. Gold futures are trading down $3.00 to $668.40 right now. In the oil pits, crude futures are off $0.18 this morning with the latest quote at $57.81. Interest rates are falling again this morning with the yield on the 10-year currently trading at 4.67% which continues to be an important break-down on a chart basis. And finally, with 45 minutes before the bell, stock futures in the U.S. are looking to open on the flat side. The Dow futures are currently off by about 5 points; the S&P’s are fractionally lower at the moment, while the NASDAQ looks to be about 2 points below fair value at the moment.
Stocks “In Play” This Morning:
AMR Corp (NYSE: AMR) – Business Week reports AMR is buyout target, Reuters denies
Agilent Technologies (NYSE: A) – Reported $0.39 vs. $0.34
Allied Waste (NYSE: AW) – Reported $0.17 vs. $0.14
Psychiatric Solutions (NYSE: PSYS) – Reported $0.33 vs. $0.30
Colgate Palmolive (NYSE: CL) – Upgraded at BofA
Google (Nasdaq: GOOG) – Mentioned positively at Citigroup
Terex (NYSE: TEX) – Upgraded at Citigroup
Alltel Corp (NYSE: AT) – Downgraded at Citigroup
International Paper (NYSE: IP) – Upgraded at Deutsche Bank
Coca Cola (NYSE: KO) – Upgraded at Goldman Sachs
Pepsico (NYSE: PEP) – Upgraded at Goldman
Constellation Brands (NYSE: STZ) – Downgraded at Goldman
Avon Products (NYSE: AVO) – Upgraded at Prudential
Mr. Moenning holds Long positions in stocks mentioned: GS, TEX, PSYS, AVP
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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