David Moenning's Daily State of the Markets: 02/21
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NASDAQ Rejoins the Party
Good morning. After sitting on the sidelines and watching all the other indexes party like it’s 1999 for the past three months, the NASDAQ finally rejoined the fun yesterday by moving up to a new cycle high. Make no mistake about it; the NAZ is nowhere near its record high of 5048.62 set on March 10, 2000. In fact, the tech ladened index still needs to gain a smidge more than 100% from here to return to the Promised Land. But it can now join the S&P in the also-ran category whenever new highs for the DJIA, NYSE, Russell 2000, and S&P Small and Mid Cap indices are mentioned.
Post-expiration sessions are notoriously weak, and Tuesday’s market looked like it would follow that script. Well, for the first hour, anyway. Stocks opened lower on the back of weak earnings from Home Depot whose report seemed to echo the crummy Housing Starts and Permit numbers from Friday. Thus, once again it looked like the bears might be able to get something going.
But, with no fewer than seven M&A deals to talk about and kind words from outgoing Fed Governor Susan Bies, the bulls regained their stride in short order. And before the lunch bell could ring, screens had turned to green and everything was once again right with the world.
As we’ve mentioned, the premiums being offered to companies during acquisitions continues to attract investors’ attention. Yesterday was a prime example as Vulcan Materials (VMC) offered a 45% premium to market prices for shares of Florida Rock (FRK). This makes a clear statement that those doing the buying view current market prices as attractive. So, regardless of how long it’s been since we’ve encountered a pullback, as long as values remain appealing the bulls should be able to continue to play their ball-control style of offense.
It also didn’t hurt yesterday that Fed Governor Susan Bies said nice things about the economy and the state of the housing market. In remarks that seemed to mirror those of her current boss, Ms. Bies suggested that the economy will continue to grow at a modest pace and that the slowdown in housing demand may have bottomed out.
While the session was anything but a resounding success and the volume was on the light side, the very fact that the bears were once again rebuffed from even a minor decline has to be considered a positive.
Turning to this morning, the big news is the fact that the Bank of Japan surprised investors by raising rates by 0.25% to 0.50%. In addition, we’ve got some more inflation data to review. The government just reported that the Consumer Price Index for January came in a little hotter than expected, which isn’t going to make the Fed’s inflation worries go away any time soon.
January’s Consumer Price Index showed a gain of +0.2%, which was a tenth higher than expectations. When you strip out food and energy, the Core Rate was also a tenth stronger than analysts were expecting at +0.3. And on a year-over-year basis, CPI stands at 2.1% while the Core Rate rose to 2.7%, which remains above the Fed’s stated comfort zone.
As expected, stock futures have headed south on the news. But the question, of course, is how long the red ink will last?
Running through the rest of the pre-game indicators, the major overseas markets are fractionally mixed. Gold futures are trading up this morning by $2.30 to $663.30 right now. In the oil pits, crude futures are off another $0.45 this morning with the latest quote at $58.40. Interest rates are a little higher this morning with the yield on the 10-year currently trading at 4.70%. And finally, with an hour before the bell, stock futures in the U.S. are looking to open flat to a little lower. The Dow futures are currently off by about 46 points; the S&P’s are 6 points lower at the moment, while the NASDAQ looks to be about 9 points below fair value at the moment.
Stocks "In Play" This Morning:
GlaxoSmithKline (NYSE: GSK) – Mentioned positively in Barron’s
Hewlett Packard (NYSE: HPQ) – Reported $0.65 vs. $0.62
Medtronic (NYSE: MDT) – Reported $0.61 vs. $0.58
Medco Health Solutions (NYSE: MHS) – Reported $0.84 vs. $0.79
Qualcomm (Nasdaq: QCOM) – Downgraded at AG Edwards
Warner Music Group (NYSE: WMG) – Upgraded at BofA
Wells Fargo (NYSE: WFC) – Upgraded at CIBC
Mattel (NYSE: MAT) – Upgraded at Lehman
Motorola (NYSE: MOT) – Downgraded at Lehman
JetBlue (Nasdaq: JBLU) – Upgraded at Merrill Lynch
Avnet (NYSE: AVT) – Downgraded at Morgan Stanley
Vail Resorts (NYSE: MTN) – Upgraded at Prudential
Palm Inc (Nasdaq: PALM) – Downgraded at ThinkEquity
CSX Corp (NYSE: CSX) – Downgraded at UBS
Kansas City Southern (NYSE: KSU) – Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: LEH, MER, MS
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. After sitting on the sidelines and watching all the other indexes party like it’s 1999 for the past three months, the NASDAQ finally rejoined the fun yesterday by moving up to a new cycle high. Make no mistake about it; the NAZ is nowhere near its record high of 5048.62 set on March 10, 2000. In fact, the tech ladened index still needs to gain a smidge more than 100% from here to return to the Promised Land. But it can now join the S&P in the also-ran category whenever new highs for the DJIA, NYSE, Russell 2000, and S&P Small and Mid Cap indices are mentioned.
Post-expiration sessions are notoriously weak, and Tuesday’s market looked like it would follow that script. Well, for the first hour, anyway. Stocks opened lower on the back of weak earnings from Home Depot whose report seemed to echo the crummy Housing Starts and Permit numbers from Friday. Thus, once again it looked like the bears might be able to get something going.
But, with no fewer than seven M&A deals to talk about and kind words from outgoing Fed Governor Susan Bies, the bulls regained their stride in short order. And before the lunch bell could ring, screens had turned to green and everything was once again right with the world.
As we’ve mentioned, the premiums being offered to companies during acquisitions continues to attract investors’ attention. Yesterday was a prime example as Vulcan Materials (VMC) offered a 45% premium to market prices for shares of Florida Rock (FRK). This makes a clear statement that those doing the buying view current market prices as attractive. So, regardless of how long it’s been since we’ve encountered a pullback, as long as values remain appealing the bulls should be able to continue to play their ball-control style of offense.
It also didn’t hurt yesterday that Fed Governor Susan Bies said nice things about the economy and the state of the housing market. In remarks that seemed to mirror those of her current boss, Ms. Bies suggested that the economy will continue to grow at a modest pace and that the slowdown in housing demand may have bottomed out.
While the session was anything but a resounding success and the volume was on the light side, the very fact that the bears were once again rebuffed from even a minor decline has to be considered a positive.
Turning to this morning, the big news is the fact that the Bank of Japan surprised investors by raising rates by 0.25% to 0.50%. In addition, we’ve got some more inflation data to review. The government just reported that the Consumer Price Index for January came in a little hotter than expected, which isn’t going to make the Fed’s inflation worries go away any time soon.
January’s Consumer Price Index showed a gain of +0.2%, which was a tenth higher than expectations. When you strip out food and energy, the Core Rate was also a tenth stronger than analysts were expecting at +0.3. And on a year-over-year basis, CPI stands at 2.1% while the Core Rate rose to 2.7%, which remains above the Fed’s stated comfort zone.
As expected, stock futures have headed south on the news. But the question, of course, is how long the red ink will last?
Running through the rest of the pre-game indicators, the major overseas markets are fractionally mixed. Gold futures are trading up this morning by $2.30 to $663.30 right now. In the oil pits, crude futures are off another $0.45 this morning with the latest quote at $58.40. Interest rates are a little higher this morning with the yield on the 10-year currently trading at 4.70%. And finally, with an hour before the bell, stock futures in the U.S. are looking to open flat to a little lower. The Dow futures are currently off by about 46 points; the S&P’s are 6 points lower at the moment, while the NASDAQ looks to be about 9 points below fair value at the moment.
Stocks "In Play" This Morning:
GlaxoSmithKline (NYSE: GSK) – Mentioned positively in Barron’s
Hewlett Packard (NYSE: HPQ) – Reported $0.65 vs. $0.62
Medtronic (NYSE: MDT) – Reported $0.61 vs. $0.58
Medco Health Solutions (NYSE: MHS) – Reported $0.84 vs. $0.79
Qualcomm (Nasdaq: QCOM) – Downgraded at AG Edwards
Warner Music Group (NYSE: WMG) – Upgraded at BofA
Wells Fargo (NYSE: WFC) – Upgraded at CIBC
Mattel (NYSE: MAT) – Upgraded at Lehman
Motorola (NYSE: MOT) – Downgraded at Lehman
JetBlue (Nasdaq: JBLU) – Upgraded at Merrill Lynch
Avnet (NYSE: AVT) – Downgraded at Morgan Stanley
Vail Resorts (NYSE: MTN) – Upgraded at Prudential
Palm Inc (Nasdaq: PALM) – Downgraded at ThinkEquity
CSX Corp (NYSE: CSX) – Downgraded at UBS
Kansas City Southern (NYSE: KSU) – Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: LEH, MER, MS
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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