David Moenning's Daily State of the Markets: 07/25
Tweet
Share
E-mail
Optimism Returns
Optimism returned to the corner of Broad and Wall yesterday to the tune 183 points on the DJIA as some impressive merger activity and a slew of solid earnings reports helped improve the mood. The glass was definitely half-full yesterday after the biggest leveraged buyout in history and a high profile buyout in tech showed that corporate America has confidence in the economy.
Traders love M&A activity because it shows that company executives see value in the companies they are buying and that the outlook for business going forward is solid. The investor group that is helping take HCA Inc. private obviously believes what management sees and is willing to put up cash for the biggest LBO deal ever. This view is in direct contrast to all the worry lately about the economy lapsing into recession in the near future in response to higher rates, a slowing housing market, and persistently high oil prices.
Solid earnings numbers also played a role in yesterday�s blast higher. While the early part of the earnings parade was a rather slow moving affair, the pace has definitely picked up lately as positive surprises are currently outpacing negative surprises 71% to 16.1%. Yesterday, we saw several high profile companies report strong numbers including Merck, Schering Plough, American Express, and BellSouth.
Condoleezza Rice�s surprise visit to the Middle East may have also lent a hand yesterday. The conflict has been escalating on a daily basis over the past week and there is a great deal of concern about the situation spreading. However, the Secretary�s visit offers the potential for both sides to back off and allow the peace process time to function.
Finally, from a technical standpoint, it was nice to finally see some follow-through to last week�s 200 point surge. Yesterday�s move was broad based and technically sound. Although the bulls would have preferred to see a bit more volume on the move, it was encouraging that advancing issues swamped decliners 2517 to 599 and up volume was 8.5 stronger than down volume. However, the bears are quick to counter with the fact that yesterday�s move did not erase last week�s damage and that the bulls still have some work to do in order to upgrade the environment.
Turning to this morning, there is no economic news scheduled for release before the bell. However, we will get numbers on Consumer Confidence and Existing Home Sales at 10:00 as well as the Richmond Fed Index.
In terms of the market�s mood before the bell, while there continues to be a flood of earnings, the report from UPS seems to have put a damper on the morning outlook. The company reported earnings that were $0.03 below estimates and then reduced earnings guidance for the coming quarter and the full year. However, one company does not a market make and the bulls will continue to look for that elusive follow-through today.
Running through the rest of the pre-game indicators, overseas markets are higher across the board. Gold futures are rebounding this morning and are currently exchanging hands almost $9 higher at $622. Oil is also moving up as crude futures are currently trading up by $0.40 to $75.45. Interest rates are little changed this morning with the 2-year currently at 5.08% while the 10-yr is trading with a yield at 5.04% right now. And finally, with about an hour before the bell, stock futures in the U.S. are mixed. The Dow futures are currently off by 7 points; the S&Ps are down a fraction, and the NASDAQ is showing a gain of about 3 points.
Stocks �In Play� This Morning:
United Parcel Service (UPS) � Reported $0.97 vs. $1.00, Reduces guidance
Laboratory Corp (LH) � Reported $0.87 vs. $0.83
DuPont (DD) � Reported $1.01 vs. $0.95
Kraft Foods (KFT) � Reported $0.51 vs. $0.48, Upgraded at JP Morgan
Texas Instruments (TXN) � Reported $0.47 vs. $0.47
Sandisk (SNDK) � Reported $0.47 vs. $0.37
Altria (MO) � Reported $1.41 vs. $1.37, Increases guidance
Circuit City (CC) � Upgraded at Goldman Sachs
EBay (EBAY) � Upgraded at Bear Stearns
Dicks Sporting Goods (DKS) � Downgraded at Goldman
Symantec (SYMC) � Downgraded at Merrill Lynch
YRC Worldwide (YRCW) � Upgraded at Credit Suisse
Union Pacific (UNP) � Upgraded at Stifel Nicolaus
Illinois Tool Works (ITW) � Upgraded at Goldman
American Express (AXP) � Upgraded at Stifel Nicolaus
AmerisourceBergen (ABC) � Reported $0.57 vs. $0.53
BJ Services (BJS) � Reported $0.67 vs. $0.58
Merck (MRK) � Upgraded at Merrill Lynch
Positions in stocks mentioned: GS, LH, BSC, MO, UNP, AXP, BLS
** 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.
Optimism returned to the corner of Broad and Wall yesterday to the tune 183 points on the DJIA as some impressive merger activity and a slew of solid earnings reports helped improve the mood. The glass was definitely half-full yesterday after the biggest leveraged buyout in history and a high profile buyout in tech showed that corporate America has confidence in the economy.
Traders love M&A activity because it shows that company executives see value in the companies they are buying and that the outlook for business going forward is solid. The investor group that is helping take HCA Inc. private obviously believes what management sees and is willing to put up cash for the biggest LBO deal ever. This view is in direct contrast to all the worry lately about the economy lapsing into recession in the near future in response to higher rates, a slowing housing market, and persistently high oil prices.
Solid earnings numbers also played a role in yesterday�s blast higher. While the early part of the earnings parade was a rather slow moving affair, the pace has definitely picked up lately as positive surprises are currently outpacing negative surprises 71% to 16.1%. Yesterday, we saw several high profile companies report strong numbers including Merck, Schering Plough, American Express, and BellSouth.
Condoleezza Rice�s surprise visit to the Middle East may have also lent a hand yesterday. The conflict has been escalating on a daily basis over the past week and there is a great deal of concern about the situation spreading. However, the Secretary�s visit offers the potential for both sides to back off and allow the peace process time to function.
Finally, from a technical standpoint, it was nice to finally see some follow-through to last week�s 200 point surge. Yesterday�s move was broad based and technically sound. Although the bulls would have preferred to see a bit more volume on the move, it was encouraging that advancing issues swamped decliners 2517 to 599 and up volume was 8.5 stronger than down volume. However, the bears are quick to counter with the fact that yesterday�s move did not erase last week�s damage and that the bulls still have some work to do in order to upgrade the environment.
Turning to this morning, there is no economic news scheduled for release before the bell. However, we will get numbers on Consumer Confidence and Existing Home Sales at 10:00 as well as the Richmond Fed Index.
In terms of the market�s mood before the bell, while there continues to be a flood of earnings, the report from UPS seems to have put a damper on the morning outlook. The company reported earnings that were $0.03 below estimates and then reduced earnings guidance for the coming quarter and the full year. However, one company does not a market make and the bulls will continue to look for that elusive follow-through today.
Running through the rest of the pre-game indicators, overseas markets are higher across the board. Gold futures are rebounding this morning and are currently exchanging hands almost $9 higher at $622. Oil is also moving up as crude futures are currently trading up by $0.40 to $75.45. Interest rates are little changed this morning with the 2-year currently at 5.08% while the 10-yr is trading with a yield at 5.04% right now. And finally, with about an hour before the bell, stock futures in the U.S. are mixed. The Dow futures are currently off by 7 points; the S&Ps are down a fraction, and the NASDAQ is showing a gain of about 3 points.
Stocks �In Play� This Morning:
United Parcel Service (UPS) � Reported $0.97 vs. $1.00, Reduces guidance
Laboratory Corp (LH) � Reported $0.87 vs. $0.83
DuPont (DD) � Reported $1.01 vs. $0.95
Kraft Foods (KFT) � Reported $0.51 vs. $0.48, Upgraded at JP Morgan
Texas Instruments (TXN) � Reported $0.47 vs. $0.47
Sandisk (SNDK) � Reported $0.47 vs. $0.37
Altria (MO) � Reported $1.41 vs. $1.37, Increases guidance
Circuit City (CC) � Upgraded at Goldman Sachs
EBay (EBAY) � Upgraded at Bear Stearns
Dicks Sporting Goods (DKS) � Downgraded at Goldman
Symantec (SYMC) � Downgraded at Merrill Lynch
YRC Worldwide (YRCW) � Upgraded at Credit Suisse
Union Pacific (UNP) � Upgraded at Stifel Nicolaus
Illinois Tool Works (ITW) � Upgraded at Goldman
American Express (AXP) � Upgraded at Stifel Nicolaus
AmerisourceBergen (ABC) � Reported $0.57 vs. $0.53
BJ Services (BJS) � Reported $0.67 vs. $0.58
Merck (MRK) � Upgraded at Merrill Lynch
Positions in stocks mentioned: GS, LH, BSC, MO, UNP, AXP, BLS
** 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.
You May Also Be Interested In
- After-Hours Movers: AMAT, DLO, GLOB, YSS, ETON
- After-Hours Movers: CSCO, COHR, HLIT, CBRS, STUB, ENS
- After-Hours Movers: P, RIOT, BW, RKLB, HIMS, UPWK
Create E-mail Alert Related Categories
Contributors, Special ReportsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
