David Moenning's Daily State of the Markets: 10/16
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It�s All Good (For Now)
Good morning. Despite rising oil, looming inflation data, an overbought condition, and a couple of big downgrades to GE and Home Depot, the current �it�s all good� attitude lifted the Dow to its seventh record close in the last ten sessions and to within a stone�s throw of 12,000. It didn�t seem to matter what the bears came up with as the answer to any and all objections seemed to be the same: �let�s buy �em!�
In the early going, it looked it might finally be the bear�s turn to run with the ball. Oil was moving back toward $60 (crude finished up $1.37 to $59.94) in response to more talk of production cuts at OPEC and natural gas was spiking on the unexpected early winter weather in the east. In addition, the downgrades of market bellwethers GE and HD appeared to set a negative tone and it was natural to see stocks open to the down side. And so, with the PPI report just a session away, it would not have been surprising to see traders stand aside and stocks take a hit yesterday.
But not even evidence that the economy is doing better than most had expected nor Fed Governor William Poole�s suggestion that more policy firming might be needed was enough for the bears to get anything going.
Thus, after a brief decline in the morning, it turned out to be another day of green screens as the bulls simply pushed forward in their quest to clear Dow 12,000. And although our heroes in hooves fell about 19 points shy of their target, they still have to feel good about their efforts on the session.
The current optimistic mood seems to be derived from the concept of another strong earnings season coupled with the much sought after �soft landing� for the economy. In short, the economy seems to be humming along right now without any real inflation risks and analysts are projecting that the S&P�s earnings will grow by 13% this quarter. And if the numbers come in as expected, it would mark the thirteenth straight quarter of double digit gains � something that hasn�t happened since the 1950�s.
However, before you run out and tap the Home Equity Line again to buy some more Microsoft, Intel, AT&T, and GM, we should keep in mind that we�ve got a lot of economic data ahead this week. In addition, we�ve got an options expiration event on Friday and just about everybody in the game knows that we usually see at least one nasty day on the way to Friday�s expiration.
Turning to this morning, the data du jour is the Producer Price Index, which came in with rather surprising results. On a headline basis, the PPI actually FELL by -1.3%, which was far greater than the expectations for a drop of -0.6% and the drop was the largest since April 2003. However, the Core rate rose by +0.6%, which, again, was a much bigger number than the consensus expectations for a gain of +0.2%. On a year-over-year basis, PPI was higher by +0.9% while the Core sports an increase of +1.2%
Running through the pre-game indicators, the major overseas markets are lower across the board on some tough talk out of North Korea regarding sanctions being an act of war and threats of another nuclear test. Gold futures are moving a little lower this morning and are quoted at $597.70 right now. Crude oil futures are currently ahead by $0.36 at $60.30 at the moment. Interest rates are actually a little lower after the PPI report with the 2-year currently quoted at 4.85% while the 10-yr is trading with a yield of 4.77% right now. And finally, with an hour before the bell, stock futures in the U.S. are heading down. The Dow futures are currently off by -27, the S&Ps are down -5.20, and the NASDAQ is sporting a decline of about 11 points.
So, the question of the day is this: Will the bears finally get a chance to get back in the game, or will the bulls find a way to spin the PPI data positively as well?
Stocks �In Play� This Morning:
Intel (INTC) � Downgraded at Goldman Sachs
Wells Fargo (WFC) � Reported $0.64 vs. $0.63
Forest Labs (FRX) � Reported $0.75 vs. $0.65
Merrill Lynch (MER) � Reported $2.00 vs. $1.47
Best Buy (BBY) � Downgraded at Raymond James
Circuit City (CC) � Downgraded at Raymond James
Chicago Merc Exch (CME) � To purchase CBOT
Johnson & Johnson (JNJ) � Reported $0.98 vs. $0.93
Ford (F) � Downgraded at Calyon Securities
Yahoo (YHOO) � Downgraded at Cowen
Synopsys (SNPS) � Upgraded at Cowen
Nissan (NSANY) � Downgraded at Deutsche Bank
Eaton (ETN) � Downgraded at Jefferies
Southwest Air (LUV) � Downgraded at Lehman
Lam Research (LRCX) � Downgraded at Lehman
Applebees (APPB) � Upgraded at Merrill Lynch
Werner Ent (WERN) � Downgraded at Wachovia
Freeport McMoRan (FCX) � Reports $1.67 vs. $1.59l
Long positions in stocks mentioned: MER, CME, JNJ, LEH, LUV
** 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. Despite rising oil, looming inflation data, an overbought condition, and a couple of big downgrades to GE and Home Depot, the current �it�s all good� attitude lifted the Dow to its seventh record close in the last ten sessions and to within a stone�s throw of 12,000. It didn�t seem to matter what the bears came up with as the answer to any and all objections seemed to be the same: �let�s buy �em!�
In the early going, it looked it might finally be the bear�s turn to run with the ball. Oil was moving back toward $60 (crude finished up $1.37 to $59.94) in response to more talk of production cuts at OPEC and natural gas was spiking on the unexpected early winter weather in the east. In addition, the downgrades of market bellwethers GE and HD appeared to set a negative tone and it was natural to see stocks open to the down side. And so, with the PPI report just a session away, it would not have been surprising to see traders stand aside and stocks take a hit yesterday.
But not even evidence that the economy is doing better than most had expected nor Fed Governor William Poole�s suggestion that more policy firming might be needed was enough for the bears to get anything going.
Thus, after a brief decline in the morning, it turned out to be another day of green screens as the bulls simply pushed forward in their quest to clear Dow 12,000. And although our heroes in hooves fell about 19 points shy of their target, they still have to feel good about their efforts on the session.
The current optimistic mood seems to be derived from the concept of another strong earnings season coupled with the much sought after �soft landing� for the economy. In short, the economy seems to be humming along right now without any real inflation risks and analysts are projecting that the S&P�s earnings will grow by 13% this quarter. And if the numbers come in as expected, it would mark the thirteenth straight quarter of double digit gains � something that hasn�t happened since the 1950�s.
However, before you run out and tap the Home Equity Line again to buy some more Microsoft, Intel, AT&T, and GM, we should keep in mind that we�ve got a lot of economic data ahead this week. In addition, we�ve got an options expiration event on Friday and just about everybody in the game knows that we usually see at least one nasty day on the way to Friday�s expiration.
Turning to this morning, the data du jour is the Producer Price Index, which came in with rather surprising results. On a headline basis, the PPI actually FELL by -1.3%, which was far greater than the expectations for a drop of -0.6% and the drop was the largest since April 2003. However, the Core rate rose by +0.6%, which, again, was a much bigger number than the consensus expectations for a gain of +0.2%. On a year-over-year basis, PPI was higher by +0.9% while the Core sports an increase of +1.2%
Running through the pre-game indicators, the major overseas markets are lower across the board on some tough talk out of North Korea regarding sanctions being an act of war and threats of another nuclear test. Gold futures are moving a little lower this morning and are quoted at $597.70 right now. Crude oil futures are currently ahead by $0.36 at $60.30 at the moment. Interest rates are actually a little lower after the PPI report with the 2-year currently quoted at 4.85% while the 10-yr is trading with a yield of 4.77% right now. And finally, with an hour before the bell, stock futures in the U.S. are heading down. The Dow futures are currently off by -27, the S&Ps are down -5.20, and the NASDAQ is sporting a decline of about 11 points.
So, the question of the day is this: Will the bears finally get a chance to get back in the game, or will the bulls find a way to spin the PPI data positively as well?
Stocks �In Play� This Morning:
Intel (INTC) � Downgraded at Goldman Sachs
Wells Fargo (WFC) � Reported $0.64 vs. $0.63
Forest Labs (FRX) � Reported $0.75 vs. $0.65
Merrill Lynch (MER) � Reported $2.00 vs. $1.47
Best Buy (BBY) � Downgraded at Raymond James
Circuit City (CC) � Downgraded at Raymond James
Chicago Merc Exch (CME) � To purchase CBOT
Johnson & Johnson (JNJ) � Reported $0.98 vs. $0.93
Ford (F) � Downgraded at Calyon Securities
Yahoo (YHOO) � Downgraded at Cowen
Synopsys (SNPS) � Upgraded at Cowen
Nissan (NSANY) � Downgraded at Deutsche Bank
Eaton (ETN) � Downgraded at Jefferies
Southwest Air (LUV) � Downgraded at Lehman
Lam Research (LRCX) � Downgraded at Lehman
Applebees (APPB) � Upgraded at Merrill Lynch
Werner Ent (WERN) � Downgraded at Wachovia
Freeport McMoRan (FCX) � Reports $1.67 vs. $1.59l
Long positions in stocks mentioned: MER, CME, JNJ, LEH, LUV
** 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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