David Moenning's Daily State of the Markets: 10/03
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Access Denied (Again)
Good morning. The fourth quarter began with a thud yesterday as the bulls were once again denied access to new-high territory. For the third day in a row, the DJIA did manage to briefly peek its head above the old high water mark. But once again, the move was met with selling almost immediately and the bulls were forced to retreat.
Lower oil prices and better than expected economic data were unable to lend the bulls a hand on Monday as it would appear that we�ve entered a period of backing and filling. And while the bulls would have preferred to see a new all-time high close before a consolidation phase began, everybody knows that stocks don�t go straight up and that parabolic moves are unsustainable. Thus, even the most ardent bulls can agree that the market has earned a rest here.
Despite ongoing chatter about OPEC production cuts, traders in the oil pits remained skeptical and instead focused on the current high level of crude inventories. The November futures contract gave back $1.88, which was a drop of -3%, and closed at $61.03. Until yesterday, falling oil had been viewed as a catalyst for the end-of-quarter window dressing and the new-high hoopla in stocks. However, yesterday, it appeared that concerns over the state of the economy took center stage.
Wal-Mart got the worry warts started by issuing sales guidance on Saturday that was below consensus. Then the ISM Manufacturing Index came in below expectations and fell to its lowest level since May 2005. This, when coupled with last week�s Philly Fed report, indicates that growth in the manufacturing sector is slowing.
There was some good news though, as the Prices Paid component of the ISM report fell by a whopping 12 points, which was the largest decline in 18 months. This is a clear indication that inflation pressures are indeed moderating, which should help keep the Fed on the sidelines. In addition, there was talk of major buyout in the casino sector, and we all know how Wall Street loves their M&A deals.
We could go on about how the downgrade of Apple (AAPL) and the legal troubles at Qualcomm (QCOM), which certainly helped push tech lower. But in reality, we need to recognize that stocks have enjoyed a stellar run over the past two and one-half months, and we were due for a pause in the action. So, with the pullback looking very modest so far and volume on the light side, we should probably give the bulls the benefit of doubt at this stage.
Turning to this morning, there is no economic data scheduled for release before the bell today. However, we do have some new geopolitical issues to deal with this morning as North Korea has pledged today to conduct its first-ever nuclear test. While this is certainly a disconcerting headline, the markets don�t appear overly rattled by the news as stocks look to continue in their backing and filling mode this morning.
Running through the pre-game indicators, overseas markets are modestly lower for the most part. Gold futures are moving down hard this morning and are quoted at $594.30 right now. Crude oil futures are also moving lower again and are currently off another $0.59 at $60.44. Interest rates are fairly steady so far with the 2-year currently quoted at 4.66% while the 10-yr is trading with a yield of 4.62% right now. And finally, with an hour before the bell, stock futures in the U.S. are a bit below fair value. The Dow futures are currently off by -12, the S&Ps are up down -2.00, and the NASDAQ is sitting with a decline of about 4.5 points at the moment.
Stocks �In Play� This Morning:
General Motors (GM) � Mentioned cautiously in Barron�s
Marvell Technology (MRVL) � Reduced revenue guidance
Costco Wholesale (COST) � Downgraded at BofA
Dow Chemical (DOW) � Downgraded at BofA
DR Horton (DHI) � Downgraded at Credit Suisse
Repsol (REP) � Upgraded at Lehman
Apache (APA) � Upgraded at Lehman
Abbott Labs (ABT) � Downgraded at Merrill Lynch
Boston Scientific (BSX) � Downgraded at Merrill Lynch
T Rowe Price (TROW) � Downgraded at Wachovia
St Jude Medical (STJ) � Upgraded at Merrill Lynch
Sepracor (SEPR) � Downgraded at Goldman Sachs
Liberty Media (LCAPA) � Upgraded at Citigroup
Pepsi Bottling Group (PBG) � Reported earnings that met expectations
Dell Computer (DELL) - Downgraded at AmTech
Long positions in stocks mentioned: ABT, TROW
** 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.
www.TopGunsTrading.com
Good morning. The fourth quarter began with a thud yesterday as the bulls were once again denied access to new-high territory. For the third day in a row, the DJIA did manage to briefly peek its head above the old high water mark. But once again, the move was met with selling almost immediately and the bulls were forced to retreat.
Lower oil prices and better than expected economic data were unable to lend the bulls a hand on Monday as it would appear that we�ve entered a period of backing and filling. And while the bulls would have preferred to see a new all-time high close before a consolidation phase began, everybody knows that stocks don�t go straight up and that parabolic moves are unsustainable. Thus, even the most ardent bulls can agree that the market has earned a rest here.
Despite ongoing chatter about OPEC production cuts, traders in the oil pits remained skeptical and instead focused on the current high level of crude inventories. The November futures contract gave back $1.88, which was a drop of -3%, and closed at $61.03. Until yesterday, falling oil had been viewed as a catalyst for the end-of-quarter window dressing and the new-high hoopla in stocks. However, yesterday, it appeared that concerns over the state of the economy took center stage.
Wal-Mart got the worry warts started by issuing sales guidance on Saturday that was below consensus. Then the ISM Manufacturing Index came in below expectations and fell to its lowest level since May 2005. This, when coupled with last week�s Philly Fed report, indicates that growth in the manufacturing sector is slowing.
There was some good news though, as the Prices Paid component of the ISM report fell by a whopping 12 points, which was the largest decline in 18 months. This is a clear indication that inflation pressures are indeed moderating, which should help keep the Fed on the sidelines. In addition, there was talk of major buyout in the casino sector, and we all know how Wall Street loves their M&A deals.
We could go on about how the downgrade of Apple (AAPL) and the legal troubles at Qualcomm (QCOM), which certainly helped push tech lower. But in reality, we need to recognize that stocks have enjoyed a stellar run over the past two and one-half months, and we were due for a pause in the action. So, with the pullback looking very modest so far and volume on the light side, we should probably give the bulls the benefit of doubt at this stage.
Turning to this morning, there is no economic data scheduled for release before the bell today. However, we do have some new geopolitical issues to deal with this morning as North Korea has pledged today to conduct its first-ever nuclear test. While this is certainly a disconcerting headline, the markets don�t appear overly rattled by the news as stocks look to continue in their backing and filling mode this morning.
Running through the pre-game indicators, overseas markets are modestly lower for the most part. Gold futures are moving down hard this morning and are quoted at $594.30 right now. Crude oil futures are also moving lower again and are currently off another $0.59 at $60.44. Interest rates are fairly steady so far with the 2-year currently quoted at 4.66% while the 10-yr is trading with a yield of 4.62% right now. And finally, with an hour before the bell, stock futures in the U.S. are a bit below fair value. The Dow futures are currently off by -12, the S&Ps are up down -2.00, and the NASDAQ is sitting with a decline of about 4.5 points at the moment.
Stocks �In Play� This Morning:
General Motors (GM) � Mentioned cautiously in Barron�s
Marvell Technology (MRVL) � Reduced revenue guidance
Costco Wholesale (COST) � Downgraded at BofA
Dow Chemical (DOW) � Downgraded at BofA
DR Horton (DHI) � Downgraded at Credit Suisse
Repsol (REP) � Upgraded at Lehman
Apache (APA) � Upgraded at Lehman
Abbott Labs (ABT) � Downgraded at Merrill Lynch
Boston Scientific (BSX) � Downgraded at Merrill Lynch
T Rowe Price (TROW) � Downgraded at Wachovia
St Jude Medical (STJ) � Upgraded at Merrill Lynch
Sepracor (SEPR) � Downgraded at Goldman Sachs
Liberty Media (LCAPA) � Upgraded at Citigroup
Pepsi Bottling Group (PBG) � Reported earnings that met expectations
Dell Computer (DELL) - Downgraded at AmTech
Long positions in stocks mentioned: ABT, TROW
** 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.
www.TopGunsTrading.com
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