David Moenning's Daily State of the Markets: 10/09

David Moenning’s Daily State of the Markets:

Waiting For The Details

All in all, the bulls have to be pretty pleased with the results of Monday’s session. After a very nice run last week, yesterday was the type of day where the bears could have made their presence felt. But instead of a nasty pullback, we got a session where investors basically appeared to be sitting on their hands awaiting more details from the Fed and Corporate America.

No one would have been terribly surprised to see the bears try to get something going yesterday. Japan and Canada were on holiday, the banks were closed here in the U.S., there were new concerns about retail, there was no economic data to review, and Ryder Systems preannounced weak earnings for the quarter. So, with light participation and traders biding their time in front of the release of the Fed minutes and the start of the earnings parade, one might have expected the bears to have a good day.

However, with the market having recovered the entire credit crisis correction and sitting at new highs, it would appear that traders are discounting positive things going forward from the economy, the Fed, and the third quarter’s earnings. Therefore, until more details become available, there appears to be little reason to do much selling right now.

We will start to get some of the details traders are looking for this afternoon. First, the minutes from the September FOMC meeting will be released. This will help us to understand what Mr. Bernanke & Company were thinking when they decided to surprise everyone with a larger than expected rate cut last month. Specifically, traders are looking to find out if the FOMC was targeting economic weakness or the problems in the credit markets.

As we mentioned yesterday, if the Fed decided to cut rates in response to the surprisingly weak jobs report in August – which, of course, was reversed last Friday – then we really can’t expect the Fed to cut rates any further. If, however, the Fed went the extra mile with the rate cut in order to shore up the difficulties in the money market, then we might see another reduction in rates come Halloween.

Then after the close, the earnings parade officially gets started with Alcoa’s (AA) quarterly results. Although the reporting season doesn’t really get rolling until next week, Alcoa’s report is viewed as the lead float in the parade.

Turning to this morning, once again we don’t have any economic data to review before the opening bell and there isn’t much on the calendar today other than the release of the Fed minutes at 2:00 pm eastern.

Running through the rest of the pre-game indicators, the overseas markets are higher across the board this morning. Crude futures are down $0.20 so far with the latest quote at $78.82. Interest rates are a little lower this morning with the 10-yr trading at a yield of 4.62% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. look like they will try to open higher. The Dow futures are currently ahead by about 20 points; the S&Ps are up by about 4 points, while the NASDAQ looks to be about 3 points ahead of fair value at the moment.


Stocks “In Play” This Morning:

News, Upgrades/Downgrades/Brokerage Research:

Coca Cola (NYSE: KO) – Downgraded at Deutsche Bank

PepsiCo (NYSE: PEP) – Downgraded at Deutsche Bank

JetBlue Airways (Nasdaq: JBLU) – Downgraded at Goldman Sachs

US Airways (NYSE: LCC) – Upgraded at Goldman Sachs

Cognos Inc (Nasdaq: COGN) – Downgraded at Goldman Sachs, Jefferies

Cooper Cos (NYSE: COO) – Downgraded at JP Morgan

Cardinal Health (NYSE: CAH) – Upgraded at Merrill Lynch

Mentor Corp (NYSE: MNT) – Downgraded at Merrill Lynch

Corning (NYSE: GLW) – Estimates increased at Thomas Weisel

Business Objects (Nasdaq: BOBJ) – Downgraded at UBS

Hewitt Assoc (NYSE: HEW) – Mentioned positively at Wachovia

Mr. Moenning holds Long positions in stocks mentioned: MER, KO, HEW

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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