David Moenning's Daily State of the Markets: 10/31
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Mixed Reviews
Good morning. Stocks finished mixed Monday as analysts had feelings that were, well, mixed in regard to the day�s various stimuli. Let�s see, the economic data was definitely a mixed bag, oil was a distinct positive, earnings were up and down, Wal-Mart provided disappointing sales guidance, tech caught an important upgrade in Yahoo, and the Fed�s Jeffrey Lacker felt compelled to tell us how uncomfortable he was about the level of inflation. So when you add it all up, there was little reason for either team to make any major commitments.
The mixed news began with the Personal Income and Spending report. Personal Income was up more than expected, which is a good thing, while Personal Spending came in on the light side, which is a bit puzzling considering the public�s distaste for saving. The inflation component of the report was in line with expectations and managed to fall a tenth on a year-over-year basis. But since this is old news at this stage, the markets responded with a yawn.
In the early going, it looked like the pullback that started on Friday might continue. Earnings from Verizon and a disappointing sales forecast from Wal-Mart provided the glass-is-half-empty crowd with some fodder. However, the bulls countered with plunging oil prices as December Crude futures fell -$2.39 to $58.36. Our heroes in horns also got a boost from tech as both Yahoo! and the semis received some favorable analyst reviews � which helped the NASDAQ put up green numbers on the day.
Richmond Fed President Jeffrey Lacker tried to stir the pot by suggesting that current levels of inflation are �discomforting� and that the economy could withstand further tightening by the Fed. And although yields did move modestly higher immediately following the statement, traders soon recognized that Mr. Lacker, who has called for a rate hike at the last three Fed meetings, was simply singing a familiar tune and therefore, there was really nothing new in his comments.
So, given the mixed bag of news and a market that has run a long way in a fairly short period of time, one could easily argue that the bears missed an opportunity yesterday. But, with crude prices crumbling on concerns over global growth and OPEC�s apparent inability to work together to keep prices above $60, the consumer appears to be happy. And in short, if the consumer is happy, then there is only so much downside potential available at this time of year.
But let�s remember that we are more than a little overdue for a pullback, so it is probably a good idea to be on the lookout for new that might be less mixed and more supportive of the bear case.
In looking at this morning�s pre-market activity, stocks are looking modestly higher in the early going. Our economic data du jour is the 3rd Quarter�s Employment Cost Index, which came in a smidge higher than expectations at 1.0%. We�ll get a report on Consumer Confidence at 10:00, but don�t forget about Friday�s big Kahuna economic data, the Employment Report.
Running through the rest of the pre-game indicators, the major overseas markets are modestly higher this morning. Gold futures are falling and are quoted at $602.50 right now. Crude futures are also in decline this morning with the latest quote showing oil down $0.56 to $57.80. Interest rates are little changed this morning with the 2-year currently quoted at 4.77% while the 10-yr is trading with a yield of 4.67% right now. And finally, with about an hour before the bell, stock futures in the U.S. are trading a little higher. The Dow futures are currently 13 points above fair value, the S&Ps are ahead by 2.40, and the NASDAQ is sporting a gain of about 5 point at the moment.
Stocks �In Play� This Morning:
Procter & Gamble (PG) � Reported $0.79 vs. $0.78
Archer Daniels Midland (ADM) � Reported $0.61 vs. $0.56
Cummins (CMI) � Reported $3.37 vs. $3.65
Qwest (Q) � Reported $0.07 vs. $0.07
Interactive Corp (IACI) � Reported $0.35 vs. $0.33
Marathon Oil (MRO) � Reported $4.30 vs. $3.62
Rio Tinto (RTP) � Mentioned positively in WSJ
Kohls (KSS) � Downgraded at AG Edwards
Clear Channel Comm (CCU) � Downgraded at BofA, Wachovia
Barr Pharmaceuticals (BRL) � Upgraded at Citigroup
Time Warner (TWX) � Upgraded at Cowen
Chubb (CB) � Downgraded at Credit Suisse
Cisco (CSCO) � Added to Buy List at Goldman Sachs
Ciena (CIEN) � Removed from Buy List at Goldman Sachs
Potash (POT) � Upgraded at Merrill Lynch
Campbell Soup (CPB) � Upgraded at Prudential
Verizon (VZ) � Downgraded at UBS, Raymond James
Constellation Energy (CEG) � Upgraded at UBS
Accenture (ACN) � Downgraded at Stifel Nicolaus
Long positions in stocks mentioned: CMI, MER, Q, KSS, CSCO, GS
** 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.
Good morning. Stocks finished mixed Monday as analysts had feelings that were, well, mixed in regard to the day�s various stimuli. Let�s see, the economic data was definitely a mixed bag, oil was a distinct positive, earnings were up and down, Wal-Mart provided disappointing sales guidance, tech caught an important upgrade in Yahoo, and the Fed�s Jeffrey Lacker felt compelled to tell us how uncomfortable he was about the level of inflation. So when you add it all up, there was little reason for either team to make any major commitments.
The mixed news began with the Personal Income and Spending report. Personal Income was up more than expected, which is a good thing, while Personal Spending came in on the light side, which is a bit puzzling considering the public�s distaste for saving. The inflation component of the report was in line with expectations and managed to fall a tenth on a year-over-year basis. But since this is old news at this stage, the markets responded with a yawn.
In the early going, it looked like the pullback that started on Friday might continue. Earnings from Verizon and a disappointing sales forecast from Wal-Mart provided the glass-is-half-empty crowd with some fodder. However, the bulls countered with plunging oil prices as December Crude futures fell -$2.39 to $58.36. Our heroes in horns also got a boost from tech as both Yahoo! and the semis received some favorable analyst reviews � which helped the NASDAQ put up green numbers on the day.
Richmond Fed President Jeffrey Lacker tried to stir the pot by suggesting that current levels of inflation are �discomforting� and that the economy could withstand further tightening by the Fed. And although yields did move modestly higher immediately following the statement, traders soon recognized that Mr. Lacker, who has called for a rate hike at the last three Fed meetings, was simply singing a familiar tune and therefore, there was really nothing new in his comments.
So, given the mixed bag of news and a market that has run a long way in a fairly short period of time, one could easily argue that the bears missed an opportunity yesterday. But, with crude prices crumbling on concerns over global growth and OPEC�s apparent inability to work together to keep prices above $60, the consumer appears to be happy. And in short, if the consumer is happy, then there is only so much downside potential available at this time of year.
But let�s remember that we are more than a little overdue for a pullback, so it is probably a good idea to be on the lookout for new that might be less mixed and more supportive of the bear case.
In looking at this morning�s pre-market activity, stocks are looking modestly higher in the early going. Our economic data du jour is the 3rd Quarter�s Employment Cost Index, which came in a smidge higher than expectations at 1.0%. We�ll get a report on Consumer Confidence at 10:00, but don�t forget about Friday�s big Kahuna economic data, the Employment Report.
Running through the rest of the pre-game indicators, the major overseas markets are modestly higher this morning. Gold futures are falling and are quoted at $602.50 right now. Crude futures are also in decline this morning with the latest quote showing oil down $0.56 to $57.80. Interest rates are little changed this morning with the 2-year currently quoted at 4.77% while the 10-yr is trading with a yield of 4.67% right now. And finally, with about an hour before the bell, stock futures in the U.S. are trading a little higher. The Dow futures are currently 13 points above fair value, the S&Ps are ahead by 2.40, and the NASDAQ is sporting a gain of about 5 point at the moment.
Stocks �In Play� This Morning:
Procter & Gamble (PG) � Reported $0.79 vs. $0.78
Archer Daniels Midland (ADM) � Reported $0.61 vs. $0.56
Cummins (CMI) � Reported $3.37 vs. $3.65
Qwest (Q) � Reported $0.07 vs. $0.07
Interactive Corp (IACI) � Reported $0.35 vs. $0.33
Marathon Oil (MRO) � Reported $4.30 vs. $3.62
Rio Tinto (RTP) � Mentioned positively in WSJ
Kohls (KSS) � Downgraded at AG Edwards
Clear Channel Comm (CCU) � Downgraded at BofA, Wachovia
Barr Pharmaceuticals (BRL) � Upgraded at Citigroup
Time Warner (TWX) � Upgraded at Cowen
Chubb (CB) � Downgraded at Credit Suisse
Cisco (CSCO) � Added to Buy List at Goldman Sachs
Ciena (CIEN) � Removed from Buy List at Goldman Sachs
Potash (POT) � Upgraded at Merrill Lynch
Campbell Soup (CPB) � Upgraded at Prudential
Verizon (VZ) � Downgraded at UBS, Raymond James
Constellation Energy (CEG) � Upgraded at UBS
Accenture (ACN) � Downgraded at Stifel Nicolaus
Long positions in stocks mentioned: CMI, MER, Q, KSS, CSCO, GS
** 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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