David Moenning's Daily State of the Markets: 09/21

Steady As She Goes

Good morning. As expected, Mr. Bernanke and Co. didn�t provide any surprises to investors in yesterday�s announcement that the Fed would keep rates on a steady course for now. In addition, and also not surprisingly, the FOMC did not provide any clues about the future. Thus, after the requisite knee-jerk reaction following the announcement, which was negative this time, stocks were able to hold onto their gains and the bulls went home with big smiles.

Don�t look now, but despite all the fretting and hand wringing relating to inflation, the economy, and the Fed, the big blue chip indices are within spitting distance of their highs for the year. The S&P 500 finished less than a point from the 2006 high water mark while the venerable DJIA, which, for those of you keeping score at home, is the new leader, is just 29 points from a new high for the year. But what is sure to attract commentators� attention is the fact that the Dow is now just 137 points, or a good afternoon of buy programs, away from the Promised Land � new all-time high territory.

It was solid earnings from unlikely places and the ongoing drop in oil prices that pushed stocks uncharacteristically higher in front of the FOMC announcement. Instead of fearing what Mr. Bernanke might say, this time, investors felt they could count on the Fed to remain on the sidelines. Thus, with crude falling to its lowest level since March (oil was down another -$1.20 to $60.46) and surprisingly strong earnings from the likes of Oracle and Morgan Stanley, stocks marched steadily higher yesterday.

But before we brush aside the Fed completely and resume the countdown to new all-time highs for the Dow (which, by the way is the only index of the big three that is even remotely close to the highs seen during the good ol� days of 2000), we should note that the FOMC remains concerned that some inflation risks remain and effectively left the door open to more rate hikes by saying, �additional firming may be needed.�

So, while the Fed is likely to keep the boat �steady as she goes� for awhile and investors shouldn�t need to worry about any additional rate hikes any time soon, we will need to continue to keep an eye on the data � because you can rest assured that Mr. Bernanke and friends will be watching it like a hawk (or a dove).

Turning to this morning, there is no economic data scheduled for release before the bell, but we will get a peek at the Index of Leading Economic Indicators at 10:00 am and then the Philly Fed report is due to be released at noon. And while it is still very early (Chicago traffic still mandates a very early wake up call) the bulls appear to be looking to build on recent gains today.

However, let�s remember how the game is played and that stocks don�t go up in a straight line. So for now at least, we might want to be on the alert for a pullback from an overbought position, which ought to bring out the dip-buyers in short order.

Stocks �In Play� This Morning:

Cisco (CSCO) � Upgraded at Piper Jaffray
Broadcom (BRCM) � Added to Top Picks list at Friedman, Billings, Ramsey
Time Warner (TWX) � Mentioned positively in WSJ
Agere Systems (AGR) � Downgraded at CIBC
Forest Labs (FRX) � Downgraded at Citigroup
Symantec (SYMC) � Added to Buy List at Goldman Sachs
BEA Systems (BEAS) � Removed from Buy List at Goldman Sachs
Gartner (IT) � Added to Buy List at Goldman Sachs
Darden Restaurants (DRI) � Upgraded at Goldman Sachs
Avalon Bay (AVB) � JP Morgan initiated coverage with Overweight
Federated Dept Stores (FD) � Downgraded at Keybanc/McDonald
Clorox (CLX) � Upgraded at Merrill
Wendy�s (WEN) � Upgraded at Morgan Stanley
Raytheon (RTN) � Downgraded at Wachovia

Long positions in stocks mentioned: CSCO, AVB

** 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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