David Moenning's Daily State of the Markets: 10/11
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Looking For a Reason
Good morning. Stocks managed to meander higher yesterday with the Dow tacking on another one-half point to its all-time closing high. And while the media headlines mention a fourth straight up day, you have to squint really hard to see any movement at all over the past few sessions. In short, traders spent the day looking for a reason to take action one way or the other and with the market in an upward mode at the moment, the lack of a negative catalyst allowed the bulls to claim victory once again.
With traders waiting on earnings and next week�s inflation data, there simply wasn�t much action to report in stocks. However, there was some activity worthy of note in the oil and bond markets. Bond traders made up for lost ground yesterday (the bond market was closed Monday) by sending yields up significantly for the third straight day. At issue is the idea the Fed may be planning to stay on hold instead of moving to an easing bias. With the recent weak economic data, bond traders have embraced the fact that the FOMC generally begins easing rates within 6 � 8 months of the last rate hike. Stock traders haven�t really paid much attention to the move so far, but with yields now pushing 4.8% on the 10-year, you can rest assured that somebody�s going to notice sometime soon.
On the oil front, the question of OPEC�s official stance has been the primary mover of prices lately. And although some smaller producers favor a formal production cut, Saudi Arabia, which is the group�s de facto leader, has signaled that it will not adjust its production. This pushed the price of crude lower and the front month futures contract wound up with a loss of $1.44 on the session.
The question of the day is if falling oil prices are more important to traders than rising interest rates? In light of the fact that the bond move appears to be simply a corrective, countertrend move while the price of oil continues to trend lower, the bulls will argue that significantly lower oil trumps slightly higher rates � for now at least.
Traders may find lots of reasons to take action in the near future as the drought of data is quickly coming to a close. Alcoa kicked off the earnings parade with its usual thud after the close yesterday by missing big while Genentech provided a better-than-expected report. Earnings reports will continue to flood in over the next couple of weeks and will likely be the focal point of trading.
Turning to this morning, we once again don�t have any economic news to review before the bell, but we will get the release of the minutes from the September Fed meeting later this afternoon. In addition, we�ll hear from Atlanta Fed President Jeffrey Lacker at 1:30. You may recall that Mr. Lacker has been the lone dissenter in the recent Fed decisions, so his thoughts will be widely anticipated.
Stocks are looking lower in the early going in response to more nuclear talk, the weak report from AA, and an earnings warning in the financial sector.
Running through the pre-game indicators, with the exception of Hong Kong, the major overseas markets are lower across the board. Gold futures are moving up a smidge this morning and are quoted at $577.00 right now. Crude oil futures are also moving a little higher so far and are currently ahead by $0.13 at $58.65. Interest rates are little changed so far with the 2-year currently quoted at 4.81% while the 10-yr is trading with a yield of 4.75% right now. And finally, with an hour before the bell, stock futures in the U.S. are a trading well below above value. The Dow futures are currently off by more than 37 points, the S&Ps are 5.7 points below fair value, and the NASDAQ is also under fair value by about 9 points.
Stocks �In Play� This Morning:
Alcoa (AA) � Reported $0.62 vs. $0.77, Price target reduced at UBS
Genentech (DNA) � Reported $0.55 vs. $0.47
Fastenal (FAST) Reported $0.36 vs. $0.35
Everest RE (RE) � Downgraded at Citigroup
Freescale Semiconductor (FSL) � Downgraded at Citigroup
Cummins (CMI) � Downgraded at Credit Suisse
Legg Mason (LM) � Reduced earnings guidance, Downgraded at Credit Suisse, Merrill Lynch, Target reduced at BofA
Broadcom (BRCM) � Downgraded at JMP Securities
Waste Management (WMI) � Removed from Focus List at JP Morgan
Citigroup (C) � Downgraded at Keefe, Bruyette & Woods
Allegheny Technology (ATI) � Upgraded at Merrill Lynch
Adtran (ADTN) � Upgraded at Morgan Keegan, Mentioned positively at Morgan Stanley
Washington Mutual (WM) � Upgraded at Morgan Stanley
Novastar Financial (NFI) � Downgraded at Morgan Stanley
LG Philips (LPL) � Downgraded at Merrill Lynch
US Air (LCC) � Downgraded at Calyon
Sovereign Bancorp (SOV) � Upgraded at Friedman Billings
WellPoint Health (WLP) � Mentioned positively at Citigroup
Cisco (CSCO) � Mentioned positively at Morgan Stanley
Motorola (MOT) � Mentioned positively at Morgan Stanley
Long positions in stocks mentioned: CMI, WMI, CSCO
** 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. Stocks managed to meander higher yesterday with the Dow tacking on another one-half point to its all-time closing high. And while the media headlines mention a fourth straight up day, you have to squint really hard to see any movement at all over the past few sessions. In short, traders spent the day looking for a reason to take action one way or the other and with the market in an upward mode at the moment, the lack of a negative catalyst allowed the bulls to claim victory once again.
With traders waiting on earnings and next week�s inflation data, there simply wasn�t much action to report in stocks. However, there was some activity worthy of note in the oil and bond markets. Bond traders made up for lost ground yesterday (the bond market was closed Monday) by sending yields up significantly for the third straight day. At issue is the idea the Fed may be planning to stay on hold instead of moving to an easing bias. With the recent weak economic data, bond traders have embraced the fact that the FOMC generally begins easing rates within 6 � 8 months of the last rate hike. Stock traders haven�t really paid much attention to the move so far, but with yields now pushing 4.8% on the 10-year, you can rest assured that somebody�s going to notice sometime soon.
On the oil front, the question of OPEC�s official stance has been the primary mover of prices lately. And although some smaller producers favor a formal production cut, Saudi Arabia, which is the group�s de facto leader, has signaled that it will not adjust its production. This pushed the price of crude lower and the front month futures contract wound up with a loss of $1.44 on the session.
The question of the day is if falling oil prices are more important to traders than rising interest rates? In light of the fact that the bond move appears to be simply a corrective, countertrend move while the price of oil continues to trend lower, the bulls will argue that significantly lower oil trumps slightly higher rates � for now at least.
Traders may find lots of reasons to take action in the near future as the drought of data is quickly coming to a close. Alcoa kicked off the earnings parade with its usual thud after the close yesterday by missing big while Genentech provided a better-than-expected report. Earnings reports will continue to flood in over the next couple of weeks and will likely be the focal point of trading.
Turning to this morning, we once again don�t have any economic news to review before the bell, but we will get the release of the minutes from the September Fed meeting later this afternoon. In addition, we�ll hear from Atlanta Fed President Jeffrey Lacker at 1:30. You may recall that Mr. Lacker has been the lone dissenter in the recent Fed decisions, so his thoughts will be widely anticipated.
Stocks are looking lower in the early going in response to more nuclear talk, the weak report from AA, and an earnings warning in the financial sector.
Running through the pre-game indicators, with the exception of Hong Kong, the major overseas markets are lower across the board. Gold futures are moving up a smidge this morning and are quoted at $577.00 right now. Crude oil futures are also moving a little higher so far and are currently ahead by $0.13 at $58.65. Interest rates are little changed so far with the 2-year currently quoted at 4.81% while the 10-yr is trading with a yield of 4.75% right now. And finally, with an hour before the bell, stock futures in the U.S. are a trading well below above value. The Dow futures are currently off by more than 37 points, the S&Ps are 5.7 points below fair value, and the NASDAQ is also under fair value by about 9 points.
Stocks �In Play� This Morning:
Alcoa (AA) � Reported $0.62 vs. $0.77, Price target reduced at UBS
Genentech (DNA) � Reported $0.55 vs. $0.47
Fastenal (FAST) Reported $0.36 vs. $0.35
Everest RE (RE) � Downgraded at Citigroup
Freescale Semiconductor (FSL) � Downgraded at Citigroup
Cummins (CMI) � Downgraded at Credit Suisse
Legg Mason (LM) � Reduced earnings guidance, Downgraded at Credit Suisse, Merrill Lynch, Target reduced at BofA
Broadcom (BRCM) � Downgraded at JMP Securities
Waste Management (WMI) � Removed from Focus List at JP Morgan
Citigroup (C) � Downgraded at Keefe, Bruyette & Woods
Allegheny Technology (ATI) � Upgraded at Merrill Lynch
Adtran (ADTN) � Upgraded at Morgan Keegan, Mentioned positively at Morgan Stanley
Washington Mutual (WM) � Upgraded at Morgan Stanley
Novastar Financial (NFI) � Downgraded at Morgan Stanley
LG Philips (LPL) � Downgraded at Merrill Lynch
US Air (LCC) � Downgraded at Calyon
Sovereign Bancorp (SOV) � Upgraded at Friedman Billings
WellPoint Health (WLP) � Mentioned positively at Citigroup
Cisco (CSCO) � Mentioned positively at Morgan Stanley
Motorola (MOT) � Mentioned positively at Morgan Stanley
Long positions in stocks mentioned: CMI, WMI, CSCO
** 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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