David Moenning's Daily State of the Markets: 04/03

The Big Bout: Data vs. Dollars

Good morning. Yesterday's market match up pitted some important economic data against the big bucks being put up in the M&A arena. In short, the bulls and bears squared off in a classic bout to determine the reigning champion of the stock market world - or, at the very least, to try and identify the leader of the short-term trend.

Unfortunately for the fans however, the fight wasn't exactly of championship caliber. While it is true that the economic data wound up being a blow to the bull’s midsection, the disappointing ISM Manufacturing report wasn’t exactly a knockout punch. And although there was a flurry of activity in the M&A department, none of the deals were able to put the bears on the canvas.

It was reported yesterday that the ISM Manufacturing Composite Index fell 1.4 points in March to 50.9, which was below the consensus estimates for a reading of 52.0. While the composite number was a little on the disappointing side, it was a positive that inventories fell by a rather large amount, meaning that the inventory overhang (a classic sign of economic weakness) has disappeared. However, the Prices Index rose by 6.5 points to its highest level in seven months, which will surely be noticed by Mr. Bernanke and company.

Speaking of the Fed, St. Louis Fed President William Poole, who has been known to move the markets with his comments, said yesterday that inflation remains a "major concern." Poole’s comments should put a nail in the coffin of the idea that the Fed is readying to cut rates. However, the remarks were really more of the same from the FOMC and didn’t have much of an impact on trading.

The bulls countered the bear attack with no fewer than 5 new takeover deals on what turned out to be another Merger Monday. The spate of deals reminded investors that business is good and that values remain abundant at the current level of stock prices.

At the end of the fight, the judges' decision was definitely split. However, the victor’s belt was awarded to the bull camp, who displayed their spoils proudly.

Turning to this morning, once again, there is no major economic news scheduled for release before the bell. However, we will get an update on the state of the housing market via the report on Pending Home Sales this morning at 10:00.

On the news front, it is definitely a positive sign that Iran announced last night it will not put the 15 British sailors on trial and they are hoping for a speedy diplomatic solution. This has taken some of the risk premium out of the price of oil and pushed stock prices higher around the globe.

Running through the rest of the pre-game indicators, the overseas markets are higher across the board. Gold futures are trading down by $2.30 this morning to $669.20. In the oil pits, crude futures are lower by $1.00 with the latest quote at $64.94. Interest rates are moving a little higher this morning, with the yield on the 10-year currently trading at 4.66%. And finally, with about an hour before the bell, stock futures in the U.S. are moving up at the moment. The Dow futures are currently ahead by 45 points; the S&P's are 5 points above board, while the NASDAQ looks to be about 9 points above fair value at the moment

Stocks "In Play" This Morning:

First Data Corp (NYSE: FDC) – Downgraded at AG Edwards, Citigroup, Friedman Billings
eBay (Nasdaq: EBAY) – Estimates increased at Bear Stearns
Chicago Bridge & Iron (NYSE: CBI) – Upgraded at Goldman Sachs
Foster Wheeler (Nasdaq: FWLT) – Upgraded at Goldman Sachs
Google (Nasdaq: GOOG) – Mentioned positively at Goldman Sachs
Prudential (NYSE: PRU) – Added to Conviction Buy List at Goldman Sachs
Novell (Nasdaq:NOVL) – Downgraded at Jefferies
Orient Express Hotels (NYSE: OEH) – Downgraded at Merrill Lynch
Quicksilver (NYSE: ZQK) – Upgraded at Morgan Stanley
Tribune Co (NYSE: TRB) – Upgraded at Prudential
Johnson & Johnson (NYSE: JNJ) – Upgraded at Raymond James
Alliant Energy (NYSE: LNT) – Downgraded at RW Baird
Apple (Nasdaq: AAPL) – Estimates increased at Thomas Weisel
Amerigroup (NYSE: AGP) – Upgraded at Wachovia

Mr. Moenning holds Long positions in stocks mentioned: GS, MER, AAPL

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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