David Moenning's Daily State of the Markets: 06/11

M&A Saves the Day

After three straight days of selling last week, some fresh M&A activity emerged Friday afternoon to remind the bulls why they had been moving stocks steadily higher for the past three months. This time is was US Steel (NYSE: X) that was reportedly in play and before you could find the correct spelling of the suitor (ThyssenKrupp) stocks were moving higher in earnest.

Despite the fact that interest rates continued to move up on Friday (the 10-year closed at 5.12%) the bulls quickly remembered that there continues to be a massive pool of private equity money sloshing around the globe and just about any company is fair game right now. And with premiums for deals continuing to be at least 25% to current market prices, the potential deal for X put the buyers in charge.

Now toss in some short covering and the fact that it was a summer Friday and it is little wonder that stocks moved higher. But before we get too excited about the return of the bulls, let's keep in mind that Friday's volume was light, there was some technical damage done during last week's selling, and that interest rates continued to rise.

Turning to this morning, there is no economic news to report before the bell and the foreign markets followed the U.S.'s lead overnight and moved higher. But here in the U.S. things are looking rather flat in pre-market trading.

Running through the rest of the pre-game indicators, the overseas markets were higher across the board. Gold futures are higher by $5.60 this morning with the last trade at $655.90. Crude futures are moving up a bit this morning with the latest quote showing the futures contract up $0.40 to $65.16. Interest rates are higher once again today as the yield on the 10-year currently stands at 5.13%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are looking to open on the flat side. The Dow futures are currently ahead by about 8 points; the S&Ps are about even, and the NASDAQ looks to be about 1 point ahead of fair value at the moment.

Stocks "In Play" This Morning:

News, Upgrades/Downgrades/Brokerage Research:
Adobe Systems (NASDAQ: ADBE) - Estimates increased at Banc of America
Varian Medical Sys (NYSE: VAR) - Upgraded at CIBC
CBOT Holdings (NYSE: BOT) - Downgraded at Credit Suisse
Johnson & Johnson (NYSE: JNJ) - Upgraded at Credit Suisse
Wachovia (NYSE: WB) - Upgraded at Friedman Billings Ramsey
Under Armour (NYSE: UA) - Price target increased at Goldman Sachs
Netflix (NASDAQ: NFLX) - Downgraded at JP Morgan
Brown Forman (NYSE: BF.B) - Upgraded at JP Morgan
UST Inc (NYSE: UST) - Upgraded at UBS
H&R Block (NYSE: HRB) - Upgraded at UBS
Western Digital (NYSE: WDC) - Upgraded at UBS

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

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

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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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