David Moenning's Daily State of the Markets: 10/11

Tech Marches On – Is The Story That Good?

With little doubt that stocks were becoming extended, it wasn’t exactly surprising to see a pullback of sorts during Wednesday’s session. Question marks on the Fed’s intentions, a couple crummy earnings reports, a warning or two in the oil patch, and a delay at Boeing all seemed to combine to give the bears a reason to be. So with the bulls looking for a little R&R, the venerable DJIA found itself down more than -150 during the lunch break.

At least part of the problem yesterday was that the earnings season started off with a thud. Alcoa (AA) kicked things off by missing the consensus estimate by a penny and International Paper (IP) chipped in by warning that their estimates were too high. Then with both Chevron (CVX) and Valero (VLO) warning that a drop in refining margins would weigh on their results for the quarter, suddenly the optimism for the earnings season became a bit dimmer.

In addition, news that Boeing (BA) would delay delivery of the first 787 Dreamliners by six months definitely put a damper on the day and helped push the Dow down.

But through it all, traders continued to believe that technology represents the best place to park cash. The Google phenomenon continued as the stock moved up another $10 yesterday in a down market. And don’t look now folks, but GOOG has bounced up more than $100 over the past month alone. However, the NASDAQ was hardly a one-trick pony as the tech-heavy index actually gained ground yesterday while the Dow dropped -85.

The thinking in four-letter-land is that technology not only offers a safe haven on sorts from the credit crisis, the mortgage mess, and the concerns about the consumer, it also provides exposure to strong earnings, overseas growth, and expanding IT budgets. However, many of the leaders are becoming more than a little extended, so this probably isn’t exactly the time to be jumping on the tech bandwagon.

Turning to this morning, stocks moved up on response to the report that Wal-Mart (WMT) has increased their projections for the quarter. The thinking here is pretty simple; if Wal-Mart’s earnings are going to be better than expected, it’s hard to get overly negative on the consumer or the economy as a whole. However, Target (TGT) just hit the wires with a reduction in their estimates for the full year. So it will be interesting to see which report carries more weight with traders.

Running through the rest of the pre-game indicators; the overseas markets are higher across the board this morning. Crude futures are up $0.88 so far with the latest quote at $82.18. Interest rates are up again this morning on the improving jobs picture and the 10-yr is trading at a yield of 4.69% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking fairly strong. The Dow futures are currently ahead by about 60 points; the S&Ps are up by about 8 points, while the NASDAQ looks to be about 11 points above of fair value at the moment.

Stocks "In Play" This Morning:

Today's Earnings Before the Bell:

PepsiCo (PEP) – Reported $0.99 vs. $0.96

News, Upgrades/Downgrades/Brokerage Research:

Wal-Mart (WMT) – Increased quarterly earnings guidance
Sotheby’s (BID) – Target increased at BofA
ValueClick (VCLK) – Downgraded at Citi
Union Pacific (UNP) – Initiated Buy at Goldman Sachs
Apple (AAPL) – Target increased at Goldman Sachs
CSX Corp (CSX) – Downgraded at Lehman
Burlington Northern Santa Fe (BNI) – Downgraded at Lehman
Norfolk Southern (NSC) – Upgraded at Lehman
Monsanto (MON) – Mentioned positively at Morgan Stanley
Sandisk (SNDK) – Downgraded at Oppenheimer
NASDAQ Stock Market (NDAQ) – Downgraded at Piper
Nvidia (NVDA) – Downgraded at ThinkEquity
Texas Instruments (TXN) – Downgraded at ThinkEquity
Intel (INTC) – Downgraded at ThinkEquity
Expeditors Intl (EXPD) – Downgraded at UBS

Mr. Moenning holds Long positions in stocks mentioned: AAPL

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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