David Moenning's Daily State of the Markets: 04/16
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Looking Ahead, Not Back
Good morning. Stocks advanced smartly on Friday, despite the higher than expected headline PPI number, the lower than expected consumer sentiment data from the gang at the University of Michigan, and the uncertainty surrounding the upcoming onslaught of earnings reports. But at the end of the day, the NYSE and S&P Mid-cap indices wound up at fresh all-time highs, while the Dow closed just 175 points away from the Promised Land.
At first blush, it would appear that the bears should be a bit frustrated right now. A month ago, they had their opponents on the run with a slew of concerns and things were looking bleak. With the combination of an economy that is slowing down, lower profit growth projections from this quarter’s earnings numbers, and a Fed that refuses to yield the right of way in the interest rate front, one might have expected the bears to be running with the ball at the present time.
However, we need to keep in mind that the stock market is a discounting mechanism for the future and not the past. At this stage of the game, everybody knows the growth rate of the economy is slowing. Everybody knows that the growth rate of earnings is likely to be a bit lower this time around. And everybody knows that when oil rises, consumer confidence tends to tumble.
So, in short, since Friday’s bad news was already well known, this means that there is a strong chance that stocks have already priced in this particular batch of negatives. And because of this, investors were able to look ahead and not back.
Turning to this morning, we’ve got a fresh batch of earnings reports, several new M&A deals, and some economic data to sift through before the opening bell rings.
On the earnings front, Citigroup (C), Eaton (ETN), Eli Lilly (LLY), and Mattel (MAT) - all of which are part of the S&P 500 - came in with results that were ahead of the Reuters consensus estimates on a headline basis.
Next up, there are some pretty big names involved with this edition of Merger Monday. Sallie Mae (SLM) is being purchased by a group including a private-equity firm, Bank of America, and JP Morgan for more than $25 Billion. In addition, Google has announced a deal to acquire DoubleClick, an internet advertising company, for $3.1 Billion. And as the saying goes, a billion here and a billion there – before long, you are talking about some real money.
On the economic front, the good news is that March Retail Sales came in higher than expected at +0.7% versus consensus at +0.6%. In addition, February’s numbers saw significant revisions higher to +0.5% from +0.1%. And when you strip out the sale of automobiles, the Ex-Autos number was pretty much in line with expectations.
We also got the report on the April Empire Manufacturing Index, which gives us a peek at the state of the manufacturing sector in the New York region. This number was a bit of a disappointment as the number came in at 3.8 versus expectations for a reading of 7.5.
Running through the rest of the pre-game indicators, the major foreign markets were up nicely across the board. Gold futures are continuing to rally and are trading up by $2 to $692.00. In the oil pits, crude futures are up $0.31 with the latest quote at $63.94. Interest rates are moving higher in response to the positive retail sales data this morning as the yield on the 10-year is currently trading at 4.77%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to advance at the open. The Dow futures are currently ahead by 37 points; the S&P’s are a about 5 points above board, while the NASDAQ looks to be about 7 points above fair value at the moment
Stocks "In Play" This Morning:
Citigroup (NYSE: C) – Reported $1.18 vs. $1.10
Eaton (NYSE: ETN) – Reported $1.55 vs. $1.41
Eli Lilly (NYSE: LLY) – Reported $0.84 vs. $0.79
Mattel (NYSE: MAT) – Reported $0.03 vs. <$0.05>
Adobe Systems (Nasdaq: ADBE) – Mentioned positively in Barron’s
Office Depot (NYSE: ODP) – Mentioned positively in Barron’s
SLM Corp (NYSE: SLM) – Confirms purchase by JPM, BAC, and Private Equity
Google (Nasdaq:GOOG) – Confirms purchase of DoubleClick
Federal Natl Mort (NYSE: FNM) – Upgraded at BofA
Lam Research (Nasdaq:LRCX) – Upgraded at Bear Stearns
Valero (NYSE: VLO) – Downgraded at Citigroup
Tesoro (NYSE: TSO) – Downgraded at Citigroup
BHP Billiton (NYSE: BHP) – Downgraded at Citigroup
Moodys (NYSE: MCO) – Upgraded at JP Morgan
Hershey (NYSE: HSY) – Downgraded at JP Morgan
Amgen (Nasdaq: AMGN) – Upgraded at Merrill Lynch
AT&T (NYSE: T) – Upgraded at RBC
Supervalu Inc (NYSE: SVU) – Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: GS, T, MER, VLO
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. Stocks advanced smartly on Friday, despite the higher than expected headline PPI number, the lower than expected consumer sentiment data from the gang at the University of Michigan, and the uncertainty surrounding the upcoming onslaught of earnings reports. But at the end of the day, the NYSE and S&P Mid-cap indices wound up at fresh all-time highs, while the Dow closed just 175 points away from the Promised Land.
At first blush, it would appear that the bears should be a bit frustrated right now. A month ago, they had their opponents on the run with a slew of concerns and things were looking bleak. With the combination of an economy that is slowing down, lower profit growth projections from this quarter’s earnings numbers, and a Fed that refuses to yield the right of way in the interest rate front, one might have expected the bears to be running with the ball at the present time.
However, we need to keep in mind that the stock market is a discounting mechanism for the future and not the past. At this stage of the game, everybody knows the growth rate of the economy is slowing. Everybody knows that the growth rate of earnings is likely to be a bit lower this time around. And everybody knows that when oil rises, consumer confidence tends to tumble.
So, in short, since Friday’s bad news was already well known, this means that there is a strong chance that stocks have already priced in this particular batch of negatives. And because of this, investors were able to look ahead and not back.
Turning to this morning, we’ve got a fresh batch of earnings reports, several new M&A deals, and some economic data to sift through before the opening bell rings.
On the earnings front, Citigroup (C), Eaton (ETN), Eli Lilly (LLY), and Mattel (MAT) - all of which are part of the S&P 500 - came in with results that were ahead of the Reuters consensus estimates on a headline basis.
Next up, there are some pretty big names involved with this edition of Merger Monday. Sallie Mae (SLM) is being purchased by a group including a private-equity firm, Bank of America, and JP Morgan for more than $25 Billion. In addition, Google has announced a deal to acquire DoubleClick, an internet advertising company, for $3.1 Billion. And as the saying goes, a billion here and a billion there – before long, you are talking about some real money.
On the economic front, the good news is that March Retail Sales came in higher than expected at +0.7% versus consensus at +0.6%. In addition, February’s numbers saw significant revisions higher to +0.5% from +0.1%. And when you strip out the sale of automobiles, the Ex-Autos number was pretty much in line with expectations.
We also got the report on the April Empire Manufacturing Index, which gives us a peek at the state of the manufacturing sector in the New York region. This number was a bit of a disappointment as the number came in at 3.8 versus expectations for a reading of 7.5.
Running through the rest of the pre-game indicators, the major foreign markets were up nicely across the board. Gold futures are continuing to rally and are trading up by $2 to $692.00. In the oil pits, crude futures are up $0.31 with the latest quote at $63.94. Interest rates are moving higher in response to the positive retail sales data this morning as the yield on the 10-year is currently trading at 4.77%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to advance at the open. The Dow futures are currently ahead by 37 points; the S&P’s are a about 5 points above board, while the NASDAQ looks to be about 7 points above fair value at the moment
Stocks "In Play" This Morning:
Citigroup (NYSE: C) – Reported $1.18 vs. $1.10
Eaton (NYSE: ETN) – Reported $1.55 vs. $1.41
Eli Lilly (NYSE: LLY) – Reported $0.84 vs. $0.79
Mattel (NYSE: MAT) – Reported $0.03 vs. <$0.05>
Adobe Systems (Nasdaq: ADBE) – Mentioned positively in Barron’s
Office Depot (NYSE: ODP) – Mentioned positively in Barron’s
SLM Corp (NYSE: SLM) – Confirms purchase by JPM, BAC, and Private Equity
Google (Nasdaq:GOOG) – Confirms purchase of DoubleClick
Federal Natl Mort (NYSE: FNM) – Upgraded at BofA
Lam Research (Nasdaq:LRCX) – Upgraded at Bear Stearns
Valero (NYSE: VLO) – Downgraded at Citigroup
Tesoro (NYSE: TSO) – Downgraded at Citigroup
BHP Billiton (NYSE: BHP) – Downgraded at Citigroup
Moodys (NYSE: MCO) – Upgraded at JP Morgan
Hershey (NYSE: HSY) – Downgraded at JP Morgan
Amgen (Nasdaq: AMGN) – Upgraded at Merrill Lynch
AT&T (NYSE: T) – Upgraded at RBC
Supervalu Inc (NYSE: SVU) – Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: GS, T, MER, VLO
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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