David Moenning's Daily State of the Markets: 09/17

A Rocky Start

Stocks didn't exactly start off with a bang on Friday and are unlikely to do so again today. The problem was, and continues to be, the news that the UK lender Northern Rock needed emergency funding on Friday from the Bank of England. And just about the time that investors were beginning to feel that we'd seen the worst from the credit crisis, this bailout has resurrected concerns that there may be other shoes yet to drop.

The good news, at least from Friday's perspective, is that the bad news from across the pond didn’t seem to spook investors here. In fact, nothing in the news seemed to bother investors on Friday as the punk retail sales numbers, the weaker than expected Industrial Production, and the tighter than expected Capacity Utilization number (which can be considered inflationary), were simply shrugged off.

The feeling seemed to be that since the cavalry was mounting their white horses and would soon ride to the rescue with a rate cut on Tuesday, that stocks should be bought. Or maybe investors were encouraged by the fact that the consumer sentiment data shows that consumers have been rather nonchalant about the whole credit crisis thing so far. But in any event, the stock market showed rather remarkable resiliency on Friday.

However, turning to this morning, some nervousness seems to be returning to the market as the scene in the UK can hardly be ignored. Reports are that customers are continuing to line up at branches across the country to withdraw their savings. The stock of Northern Rock has lost more than 50% since Thursday and is down 30% so far today. This is putting pressure on the currency as well as the Bank of England, which is drawing fire for not having acted earlier.

The run on Northern Rock has caused considerable weakness in European trading, which, so far at least appears to have spilled over into the U.S futures markets. In addition, it probably didn’t help much that former Fed Chairman Alan Greenspan told 60 minutes last night that the decline in home prices is not even close to being over.

We've also got some economic news to review this morning before the bell. The Empire Manufacturing report for September has just been released and shows that manufacturing in the New York region was weaker than it was in August and weaker than expectations. However, with the markets waiting anxiously on Ben Bernanke tomorrow, there has been little reaction to the news.

Running through the rest of the pre-game indicators, the overseas markets are all lower right now. Crude futures are off by $0.61, with the latest quote at $78.49. Interest rates are up a little this morning and the 10-yr is trading at a yield of 4.46% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open lower. The Dow futures are currently off by about 65 points; the S&Ps are down by about 10 points, and the NASDAQ looks to be about 11 points below fair value at the moment.

Stocks "In Play" This Morning:

News, Upgrades/Downgrades/Brokerage Research:

Ford (NYSE: F) – Upgraded at Bear Stearns
Brocade (Nasdaq: BRCD) – Upgraded at Citi
Marsh & McLennan (NYSE: MMC) – Downgraded at Citi, Morgan Stanley
Nokia (NYSE: NOK) – Upgraded at HSBC
Apache (NYSE: APA) – Added to Conviction Buy list at Goldman Sachs
Forest Oil (NYSE: FST) – Removed from Conviction Buy list at Goldman
Smith Intl (NYSE: SII) – Estimated reduced at JP Morgan
Adobe Systems (ADBE) – Mentioned positively at JP Morgan
New York Times (NYSE: NYT) – Downgraded at Merrill Lynch
Conagra Foods (NYSE: CAG) – Upgraded at Merrill Lynch
Marriott Intl (NYSE: MAR) – Upgraded at Morgan Stanley
Aon Corp (NYSE:AON) – Upgraded at Morgan Stanley
American Tower (NYSE: AMT) – Upgraded at Morgan Stanley
Temple Inland (NYSE: TIN) – Upgraded at UBS
CSX Corp (NYSE: CSX) – Upgraded at UBS

Mr. Moenning holds Long positions in stocks mentioned: MER

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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