David Moenning's Daily State of the Markets: 08/07
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Different Views, Same Result
Good Monday morning and welcome back to the game. One way to look at Friday�s disappointing showing is that traders decided to �sell the news� once they got what they wanted from the jobs report. Another way to look at it is that the big giveback was triggered by no one wanting to stay long in front of a weekend with so much going on in the Middle East conflict. But either way you look at it, the result was not encouraging for the bulls as stocks gave up every inch of an early 100 point gain and finished in the red.
The bulls appeared to get everything they wanted and then some from Friday�s jobs report. Job growth was weaker than expected for the fourth straight month and the unemployment rate jumped by 0.2% (which, by the way, got some help from the rounding up of decimals). And it terms of bad news being good, it doesn�t get much better than that. Stock and bond futures popped higher immediately following the 8:30 a.m. report on the assumption that the Fed would surely pause soon and the enthusiasm continued after the opening bell rang. Well, for 15 minutes, anyway.
After tacking on a quick 100 points, it was all downhill from there. Most news reports talked about traders� concern over the economy and whether the news will be enough to convince the Fed to pause on Tuesday. However, in light of the fact that stocks spiked lower immediately following a report that Iran was readying troops to confront Israel and the U.S., it is more likely that Friday�s rally failure had more to do with fear of WWIII breaking out over the weekend, than worry over the Fed and the economy.
Although the reports of troop movements in Iran were never confirmed and were likely derived from the rumor mill (especially since the bond and commodities markets did not join the panic), they were enough to spook traders into selling. The thinking here was simple: Why not take some quick profits instead of spending the weekend tied to the news wires?
Looking ahead to this week, we can skip the review of the economic data because Tuesday�s Fed meeting is really all that matters right now. Most analysts expect the Fed to announce that they will pause their hike down the measured path in Tuesday�s announcement. The only question is if they will pause before or after another 25 bp rate hike?
The Fed Funds futures closed Friday predicting just a 15% probability of another hike on Tuesday, which was down from a reading of 40% before the jobs report. However, as we�ve highlighted recently, there continues to be some inflationary pressures percolating, so the FOMC might want to take the �just in case� route before taking a break in the campaign.
Turning to this morning, stocks are heading a bit lower as the bears turn to their old friend, oil prices, for some help. A report from BP that it will shut down the Prudhoe Bay oil field in Alaska for an undetermined length of time due to corrosion problems with the pipeline has moved crude futures up more than a dollar this morning and has caused difficulties for the bulls worldwide.
Running through the rest of the pre-game indicators, with the exception of Hong Kong, the major overseas markets are all lower across the board. Gold futures are moving higher this morning and are currently exchanging hands at $658.10. As we mentioned, Oil is moving higher by $1.13 to $75.89 on the potential supply interruption. Interest rates are little changed with the 2-year currently quoted at 4.93% while the 10-yr is trading with a yield of 4.91% right now. And finally, with about an hour before the bell, stock futures in the U.S. are a bit lower. The Dow futures are currently off by 43, the S&Ps are down by 5.30, and the NASDAQ is sporting a decline of about 7 points.
Stocks �In Play� This Morning:
Barrick Gold (ABX) � Upgraded at Prudential
Aon Corp (AOC) � Upgraded at Citigroup, Downgraded at Lehman
Navistar (NAV) � Upgraded at Bear Stearns
Intl Paper (IP) � Mentioned positively in Barron�s
Dell Computer (DELL) � Mentioned cautiously in Barron�s
AmerisourceBergen (ABC) � Will merge pharmacy business with KND
Progressive (PGR) � Downgraded at AG Edwards
Ann Taylor Stores (ANN) � Downgraded at BofA
SAP (SAP) � Upgraded at Bernstein
SK Telecom (SKM) � Downgraded at HSBC
Allegheny Tech (ATI) � Price target increased at Jeffries
J2 Global Telecom (JCOM) � Downgraded at Jeffries
Sprint Nextel (S) � Removed from Focus List at JP Morgan
Swift Transportation (SWFT) � Removed from Focus List at JP Morgan
Avnet (AVT) � Added to Focus List at JP Morgan
Occidental Petroleum (OXY) � Downgraded at JP Morgan
Lockheed Martin (LMT) � Downgraded at Stifel
Merrill Lynch (MER) � Mentioned positively at Bear Stearns
Have a great day and until next time, �may the bulls be with you!�
Long positions in stocks mentioned: BSC, ABC, ATI, MER
** 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 Monday morning and welcome back to the game. One way to look at Friday�s disappointing showing is that traders decided to �sell the news� once they got what they wanted from the jobs report. Another way to look at it is that the big giveback was triggered by no one wanting to stay long in front of a weekend with so much going on in the Middle East conflict. But either way you look at it, the result was not encouraging for the bulls as stocks gave up every inch of an early 100 point gain and finished in the red.
The bulls appeared to get everything they wanted and then some from Friday�s jobs report. Job growth was weaker than expected for the fourth straight month and the unemployment rate jumped by 0.2% (which, by the way, got some help from the rounding up of decimals). And it terms of bad news being good, it doesn�t get much better than that. Stock and bond futures popped higher immediately following the 8:30 a.m. report on the assumption that the Fed would surely pause soon and the enthusiasm continued after the opening bell rang. Well, for 15 minutes, anyway.
After tacking on a quick 100 points, it was all downhill from there. Most news reports talked about traders� concern over the economy and whether the news will be enough to convince the Fed to pause on Tuesday. However, in light of the fact that stocks spiked lower immediately following a report that Iran was readying troops to confront Israel and the U.S., it is more likely that Friday�s rally failure had more to do with fear of WWIII breaking out over the weekend, than worry over the Fed and the economy.
Although the reports of troop movements in Iran were never confirmed and were likely derived from the rumor mill (especially since the bond and commodities markets did not join the panic), they were enough to spook traders into selling. The thinking here was simple: Why not take some quick profits instead of spending the weekend tied to the news wires?
Looking ahead to this week, we can skip the review of the economic data because Tuesday�s Fed meeting is really all that matters right now. Most analysts expect the Fed to announce that they will pause their hike down the measured path in Tuesday�s announcement. The only question is if they will pause before or after another 25 bp rate hike?
The Fed Funds futures closed Friday predicting just a 15% probability of another hike on Tuesday, which was down from a reading of 40% before the jobs report. However, as we�ve highlighted recently, there continues to be some inflationary pressures percolating, so the FOMC might want to take the �just in case� route before taking a break in the campaign.
Turning to this morning, stocks are heading a bit lower as the bears turn to their old friend, oil prices, for some help. A report from BP that it will shut down the Prudhoe Bay oil field in Alaska for an undetermined length of time due to corrosion problems with the pipeline has moved crude futures up more than a dollar this morning and has caused difficulties for the bulls worldwide.
Running through the rest of the pre-game indicators, with the exception of Hong Kong, the major overseas markets are all lower across the board. Gold futures are moving higher this morning and are currently exchanging hands at $658.10. As we mentioned, Oil is moving higher by $1.13 to $75.89 on the potential supply interruption. Interest rates are little changed with the 2-year currently quoted at 4.93% while the 10-yr is trading with a yield of 4.91% right now. And finally, with about an hour before the bell, stock futures in the U.S. are a bit lower. The Dow futures are currently off by 43, the S&Ps are down by 5.30, and the NASDAQ is sporting a decline of about 7 points.
Stocks �In Play� This Morning:
Barrick Gold (ABX) � Upgraded at Prudential
Aon Corp (AOC) � Upgraded at Citigroup, Downgraded at Lehman
Navistar (NAV) � Upgraded at Bear Stearns
Intl Paper (IP) � Mentioned positively in Barron�s
Dell Computer (DELL) � Mentioned cautiously in Barron�s
AmerisourceBergen (ABC) � Will merge pharmacy business with KND
Progressive (PGR) � Downgraded at AG Edwards
Ann Taylor Stores (ANN) � Downgraded at BofA
SAP (SAP) � Upgraded at Bernstein
SK Telecom (SKM) � Downgraded at HSBC
Allegheny Tech (ATI) � Price target increased at Jeffries
J2 Global Telecom (JCOM) � Downgraded at Jeffries
Sprint Nextel (S) � Removed from Focus List at JP Morgan
Swift Transportation (SWFT) � Removed from Focus List at JP Morgan
Avnet (AVT) � Added to Focus List at JP Morgan
Occidental Petroleum (OXY) � Downgraded at JP Morgan
Lockheed Martin (LMT) � Downgraded at Stifel
Merrill Lynch (MER) � Mentioned positively at Bear Stearns
Have a great day and until next time, �may the bulls be with you!�
Long positions in stocks mentioned: BSC, ABC, ATI, MER
** 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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