David Moenning's Daily State of the Markets: 09/18
Tweet
Share
E-mailGet Alerts BBY Hot Sheet
Join SI Premium – FREE
What's The Number?
Stocks wound up heading a little lower yesterday in front of today's Fed meeting. This isn't to say that nothing happened during the session or that traders simply spent the day biding their time. In fact, there were some negative inputs on the credit crisis and economic fronts. However, it appeared that traders simply decided to avoid punishing stocks further in front of the rate cut that is expected today at 2:17pm eastern.
Although there was a fair amount of bad news that the bears could have keyed off of, including oil prices closing at a new all-time high, just about everybody in the game expects the Fed to cut rates this afternoon and just about everybody knows that this has historically been a positive for stocks. So, despite customers lining up to pull their savings out of the UK’s Northern Rock bank yesterday and the likelihood that the scene will be repeated elsewhere in Europe, stocks managed to hold their ground.
The question of the day has to do with today's numbers. Although everyone expects the Fed to cut rates, there has been a great deal of debate as to whether the reduction in Fed Funds rate will be 25 basis points (0.25%) or 50? One camp believes that the Fed must act now in a decisive manner so as to avoid falling behind the curve. This group argues that the economy is weakening daily and that a cut of 50bp is needed to insure that we don’t slip into recession.
However, Mr. Bernanke and Co. may also consider the fact that there is no real evidence of the purported economic weakness at the present time and therefore, a more moderate approach is warranted. This thinking would argue for a 25bp cut today and perhaps a hint or two from the Fed that more help is available should the data warrant such a move.
There is also a good bit of speculation that the FOMC will make another cut in the Discount Rate. After all, this is this rate that has a bigger impact on the credit crisis and so far at least, banks have been reluctant to borrow at the Discount window due to the high rates involved. Thus, if the FOMC really wants to reduce the impact of the credit crunch, then cutting the Discount Rate makes sense.
But that's not the only number that traders are waiting on. With the big brokerage firms reporting earnings this week, there is a great deal of anticipation in terms of how much damage the mortgage mess has inflicted on the earnings of Lehman, Goldman, and Morgan Stanley. Lehman just reported that it earned $1.54 in their third quarter, which was above the Reuters consensus of $1.47.
Turning to this morning's pre-market, we've got another number to review before the bell – this one from the inflation department. The government reported that August’s Producer Price Index came in much lower than expected with a drop of -1.4%. This pushed the year-over-year number down to 2.2%, which will give the Fed "cover" to do whatever it wants. In addition, the core rate, which strips out food and energy, rose by +0.2% in August, which was a tenth higher than expectations. However, the year-over-year number remains a manageable 2.2%.
Running through the rest of the pre-game indicators, the overseas markets are mixed right now. Crude futures are up by another $0.32, with the latest quote at $80.89. Interest rates are up a little this morning and the 10-yr is trading at a yield of 4.48% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently ahead by about 60 points; the S&Ps are up by about 6 points, and the NASDAQ looks to be about 13 points above fair value at the moment.
Stocks "In Play" This Morning:
Today's Earnings Before the Bell:
Best Buy (NYSE: BBY) – Reported $0.55 vs. $0.44, Increases guidance
Lehman Bros (NYSE: LEH) – Reported $1.54 vs. $1.47
News, Upgrades/Downgrades/Brokerage Research
Boeing (NYSE: BA) – Target lowered at BofA
Sprint Nextel (NYSE: S) – Target reduced at Citi
E*Trade (Nasdaq: ETFC) – Reduced guidance, Downgraded at Goldman Sachs
Illinois Tool Works (NYSE: ITW) – Downgraded at BB&T Capital
FedEx (NYSE: FDX) – Estimates reduced at JP Morgan
Lockheed Martin (NYSE: LMT) – Upgraded at Merrill Lynch
Urban Outfitters (Nasdaq: URBN) – Estimates reduced at Sun Trust
FMC Technologies (NYSE: FTI) – Downgraded at Wachovia
Cameron Intl (NYSE: CAM) – Downgraded at Wachovia
Mr. Moenning holds Long positions in stocks mentioned: MER, FTI, CAM
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.
Stocks wound up heading a little lower yesterday in front of today's Fed meeting. This isn't to say that nothing happened during the session or that traders simply spent the day biding their time. In fact, there were some negative inputs on the credit crisis and economic fronts. However, it appeared that traders simply decided to avoid punishing stocks further in front of the rate cut that is expected today at 2:17pm eastern.
Although there was a fair amount of bad news that the bears could have keyed off of, including oil prices closing at a new all-time high, just about everybody in the game expects the Fed to cut rates this afternoon and just about everybody knows that this has historically been a positive for stocks. So, despite customers lining up to pull their savings out of the UK’s Northern Rock bank yesterday and the likelihood that the scene will be repeated elsewhere in Europe, stocks managed to hold their ground.
The question of the day has to do with today's numbers. Although everyone expects the Fed to cut rates, there has been a great deal of debate as to whether the reduction in Fed Funds rate will be 25 basis points (0.25%) or 50? One camp believes that the Fed must act now in a decisive manner so as to avoid falling behind the curve. This group argues that the economy is weakening daily and that a cut of 50bp is needed to insure that we don’t slip into recession.
However, Mr. Bernanke and Co. may also consider the fact that there is no real evidence of the purported economic weakness at the present time and therefore, a more moderate approach is warranted. This thinking would argue for a 25bp cut today and perhaps a hint or two from the Fed that more help is available should the data warrant such a move.
There is also a good bit of speculation that the FOMC will make another cut in the Discount Rate. After all, this is this rate that has a bigger impact on the credit crisis and so far at least, banks have been reluctant to borrow at the Discount window due to the high rates involved. Thus, if the FOMC really wants to reduce the impact of the credit crunch, then cutting the Discount Rate makes sense.
But that's not the only number that traders are waiting on. With the big brokerage firms reporting earnings this week, there is a great deal of anticipation in terms of how much damage the mortgage mess has inflicted on the earnings of Lehman, Goldman, and Morgan Stanley. Lehman just reported that it earned $1.54 in their third quarter, which was above the Reuters consensus of $1.47.
Turning to this morning's pre-market, we've got another number to review before the bell – this one from the inflation department. The government reported that August’s Producer Price Index came in much lower than expected with a drop of -1.4%. This pushed the year-over-year number down to 2.2%, which will give the Fed "cover" to do whatever it wants. In addition, the core rate, which strips out food and energy, rose by +0.2% in August, which was a tenth higher than expectations. However, the year-over-year number remains a manageable 2.2%.
Running through the rest of the pre-game indicators, the overseas markets are mixed right now. Crude futures are up by another $0.32, with the latest quote at $80.89. Interest rates are up a little this morning and the 10-yr is trading at a yield of 4.48% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently ahead by about 60 points; the S&Ps are up by about 6 points, and the NASDAQ looks to be about 13 points above fair value at the moment.
Stocks "In Play" This Morning:
Today's Earnings Before the Bell:
Best Buy (NYSE: BBY) – Reported $0.55 vs. $0.44, Increases guidance
Lehman Bros (NYSE: LEH) – Reported $1.54 vs. $1.47
News, Upgrades/Downgrades/Brokerage Research
Boeing (NYSE: BA) – Target lowered at BofA
Sprint Nextel (NYSE: S) – Target reduced at Citi
E*Trade (Nasdaq: ETFC) – Reduced guidance, Downgraded at Goldman Sachs
Illinois Tool Works (NYSE: ITW) – Downgraded at BB&T Capital
FedEx (NYSE: FDX) – Estimates reduced at JP Morgan
Lockheed Martin (NYSE: LMT) – Upgraded at Merrill Lynch
Urban Outfitters (Nasdaq: URBN) – Estimates reduced at Sun Trust
FMC Technologies (NYSE: FTI) – Downgraded at Wachovia
Cameron Intl (NYSE: CAM) – Downgraded at Wachovia
Mr. Moenning holds Long positions in stocks mentioned: MER, FTI, CAM
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.
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: CRWV, NBIS, SMCI, LITE, CAVA, HRB
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!
