David Moenning's Daily State of the Markets: 08/15
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Price: $602.50 +2.35%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.4%
EPS Growth %: +37.1%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.4%
EPS Growth %: +37.1%
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Has The Consumer Noticed?
While those of us in the business of managing money spend most of our time reviewing every piece of data we can get our hands on, the general public is usually oblivious to the goings on of the economy. The price of oil is a perfect example of this theory as the consumer has barely noticed the fact that crude has surged over the past couple of years and the bottom line is the dramatic increase at the gas pump hasn’t really impacted their shopping habits.
However, yesterday’s reports from both Wal-Mart and Home Depot suggest that the consumer may be feeling the pinch of the housing downturn. And although the average homeowner couldn’t tell you the difference between a Subprime and Alt-A loan, what they do know is that it is tougher to get a mortgage right now and that the payments on their adjustable rate mortgages are going up. As a result, the nation’s two biggest retailers didn’t have good things to say about the outlook going forward.
The problem for the stock market is that a major portion of the bullish argument for stocks these days is the idea that the economy will be just fine once this credit crisis blows over. Therefore, the sudden gloomy outlook on the health of the consumer could spell trouble for the bullishly inclined if it worsens.
Speaking of problems, the bulls certainly encountered a few yesterday. In addition to the disappointing forecast from Wal-Mart, traders had to deal with liquidity issues in the short-term money market business for hedge funds, a warning from UBS that their earnings are at risk if the current trading environment doesn't perk up, talk of problems at Lehman, more difficulties at Thornburg Mortgage, and the ever-popular concerns over the looming redemptions at hedge funds.
The result of the hand-wringing was another crummy day on Wall Street. The Dow finished with a loss of -208 and all three major indices (DJIA, S&P 500, and NASDAQ) went out at fresh closing lows. And according to the technicians, this is never a good thing.
One of the biggest problems right now is that no one has a handle on just how much money is going to be pulled out of hedge funds in the near-term. Today is the deadline for redemption requests at most funds and the fear is that funds will be flooded with requests to cash out. Obviously, the concern is that a mass exodus would lead to forced selling, which, in turn would push stocks lower. But, with the deadline now at hand, we should soon get an idea of how bad this particular problem is going to be.
Turning to this morning, concerns over credit and liquidity are pushing indices lower around the globe. But, for a moment at least we will turn our attention to the macro economic picture as the Government has just released the July CPI numbers. The headline CPI came in right on target with an increase of +0.1%. And believe it or not, economists were also dead on with their predictions for the Core Rate as the number was in line with expectations and showed a gain of +0.2%.
Running through the rest of the pre-game indicators, as we mentioned, the overseas markets are down hard across the board. Crude futures are higher by $0.67 on the storms brewing in the Gulf and the latest quote is at $73.05. Interest rates are falling this morning as the 10-yr is trading with a yield of 4.72% right now. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open lower once again. The Dow futures are currently off by about 50 points; the S&Ps are about 6 points below breakeven, and the NASDAQ looks to be about 10 points under fair value at the moment.
Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Applied Materials (Nasdaq: AMAT) – Reported $0.35 vs. $0.32
Harman Intl (NYSE: HAR) – Reported $0.98 vs. $1.24
Today’s Earnings Before the Bell:
Deere & Co (NYSE: DE) – Reported $2.37 vs. $1.99
Sara Lee (NYSE: SLE) – Reported $0.16 vs. $0.13
News, Upgrades/Downgrades/Brokerage Research:
GlobalSantaFe (NYSE: GSF) – Upgraded at Bernstein
Rowan Cos (NYSE: RDC) – Downgraded at Bernstein
Thornburg Mortgage (NYSE: TMA) – Downgraded at Citi, Piper Jaffray
UBS (NYSE: UBS) – Downgraded at Citi
Pulte Home (NYSE: PHM) – Debt downgraded at Fitch
Molson Coors (NYSE: TAP) – Added to Conviction Buy list at Goldman
Brasil Telecom (NYSE: BRP) – Upgraded at Goldman
Pepsico (NYSE: PEP) – Downgraded at Goldman
TRW Automotive (NYSE: TRW) – Upgraded at Goldman
Visteon (NYSE: VC) – Downgraded at Goldman
Countrywide Financial (NYSE: CFC) – Downgraded at Merrill Lynch
Deutsche Bank (NYSE: DB) – Downgraded at Merrill Lynch
Mr. Moenning holds Long positions in stocks mentioned: MER, AMAT
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.
While those of us in the business of managing money spend most of our time reviewing every piece of data we can get our hands on, the general public is usually oblivious to the goings on of the economy. The price of oil is a perfect example of this theory as the consumer has barely noticed the fact that crude has surged over the past couple of years and the bottom line is the dramatic increase at the gas pump hasn’t really impacted their shopping habits.
However, yesterday’s reports from both Wal-Mart and Home Depot suggest that the consumer may be feeling the pinch of the housing downturn. And although the average homeowner couldn’t tell you the difference between a Subprime and Alt-A loan, what they do know is that it is tougher to get a mortgage right now and that the payments on their adjustable rate mortgages are going up. As a result, the nation’s two biggest retailers didn’t have good things to say about the outlook going forward.
The problem for the stock market is that a major portion of the bullish argument for stocks these days is the idea that the economy will be just fine once this credit crisis blows over. Therefore, the sudden gloomy outlook on the health of the consumer could spell trouble for the bullishly inclined if it worsens.
Speaking of problems, the bulls certainly encountered a few yesterday. In addition to the disappointing forecast from Wal-Mart, traders had to deal with liquidity issues in the short-term money market business for hedge funds, a warning from UBS that their earnings are at risk if the current trading environment doesn't perk up, talk of problems at Lehman, more difficulties at Thornburg Mortgage, and the ever-popular concerns over the looming redemptions at hedge funds.
The result of the hand-wringing was another crummy day on Wall Street. The Dow finished with a loss of -208 and all three major indices (DJIA, S&P 500, and NASDAQ) went out at fresh closing lows. And according to the technicians, this is never a good thing.
One of the biggest problems right now is that no one has a handle on just how much money is going to be pulled out of hedge funds in the near-term. Today is the deadline for redemption requests at most funds and the fear is that funds will be flooded with requests to cash out. Obviously, the concern is that a mass exodus would lead to forced selling, which, in turn would push stocks lower. But, with the deadline now at hand, we should soon get an idea of how bad this particular problem is going to be.
Turning to this morning, concerns over credit and liquidity are pushing indices lower around the globe. But, for a moment at least we will turn our attention to the macro economic picture as the Government has just released the July CPI numbers. The headline CPI came in right on target with an increase of +0.1%. And believe it or not, economists were also dead on with their predictions for the Core Rate as the number was in line with expectations and showed a gain of +0.2%.
Running through the rest of the pre-game indicators, as we mentioned, the overseas markets are down hard across the board. Crude futures are higher by $0.67 on the storms brewing in the Gulf and the latest quote is at $73.05. Interest rates are falling this morning as the 10-yr is trading with a yield of 4.72% right now. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open lower once again. The Dow futures are currently off by about 50 points; the S&Ps are about 6 points below breakeven, and the NASDAQ looks to be about 10 points under fair value at the moment.
Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Applied Materials (Nasdaq: AMAT) – Reported $0.35 vs. $0.32
Harman Intl (NYSE: HAR) – Reported $0.98 vs. $1.24
Today’s Earnings Before the Bell:
Deere & Co (NYSE: DE) – Reported $2.37 vs. $1.99
Sara Lee (NYSE: SLE) – Reported $0.16 vs. $0.13
News, Upgrades/Downgrades/Brokerage Research:
GlobalSantaFe (NYSE: GSF) – Upgraded at Bernstein
Rowan Cos (NYSE: RDC) – Downgraded at Bernstein
Thornburg Mortgage (NYSE: TMA) – Downgraded at Citi, Piper Jaffray
UBS (NYSE: UBS) – Downgraded at Citi
Pulte Home (NYSE: PHM) – Debt downgraded at Fitch
Molson Coors (NYSE: TAP) – Added to Conviction Buy list at Goldman
Brasil Telecom (NYSE: BRP) – Upgraded at Goldman
Pepsico (NYSE: PEP) – Downgraded at Goldman
TRW Automotive (NYSE: TRW) – Upgraded at Goldman
Visteon (NYSE: VC) – Downgraded at Goldman
Countrywide Financial (NYSE: CFC) – Downgraded at Merrill Lynch
Deutsche Bank (NYSE: DB) – Downgraded at Merrill Lynch
Mr. Moenning holds Long positions in stocks mentioned: MER, AMAT
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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