David Moenning's Daily State of the Markets: 11/01
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Scary Stuff?
Good morning. Although Halloween has come and gone, the frightful holiday seems to have left its mark on the stock market. You see, for the past three sessions, the action in the DJIA has been VERY strange. Maybe it was the overbought condition. Maybe it was the mixed economic news. Maybe it was the ongoing plunge in the bond market. And maybe, just maybe it was the calendar that spooked traders. But, in any event, it has now been three entire days since the venerable Dow has closed at a new all-time high.
In looking back, it has been more than two and one-half months since the DJIA has provided such a frightful performance. Think about it; it�s been three straight days without a green number at the close. And it�s been three straight days since looking at your account balance was the best part of the day. So, in short, it�s been three days of what could be considered very scary behavior in the Dow.
I know what you�re thinking. Hey, Halloween was yesterday � isn�t it a little late to be using all the references to frightening behavior and scary market stuff? To which I reply, guilty as charged. However, when you write a market missive 6 days a week, every once in a while the action is so dull that you�ve got to improvise to keep it even remotely interesting.
All sarcasm aside, yesterday�s session was a pause in the action as trading was basically directionless. Once again, the market acted like a �Weeble� as it definitely wobbled on the economic news, but in the end, stocks failed to fall down.
The day�s economic news was a bit surprising but didn�t really impact trading to any great degree. Before the bell, we learned that the Employment Cost Index accelerated by the largest amount since the second quarter of 2004. And while most of the increase was attributable to government spending, the report highlighted the fact that inflation risks continue to hang around and is why the Fed is unlikely to change their policy stance any time soon.
In addition, we got disappointing news from the Chicago Purchasing Managers report, which suggested that the pace of manufacturing stumbled last month as the index fell a larger-than expected 8.6 points. It was also a little scary to see the Conference Board�s Consumer Confidence Index come in well below expectations. Given the big drop in gasoline prices over the past month, one might have expected to see this index rise, not fall by 1.4 points.
Finally, while stocks did little with yesterday�s trading session, the bond market continues to be on the move. Don�t look now, but in the last five sessions, the yield on the 10-year has plunged from 4.82% to 4.61% at yesterday�s close. The big drop in yields and pop in prices can be attributed to the recent weakness in the economic data and lack of any real inflation threats.
In looking at this morning�s pre-market activity, stocks are moving higher in response to the ADP Employment change numbers. The report showed an increase of 128,000 jobs, which was much higher than the consensus expectations for 108,000 new jobs, but not high enough to spark concerns about the economy overheating.
Running through the rest of the pre-game indicators, the major overseas markets are mostly higher this morning. Gold futures are rebounding a bit and are quoted at $612.20 right now. Crude futures are in decline once again this morning with the latest quote showing oil down $0.18 to $58.58. Interest rates are little changed this morning with the 2-year currently quoted at 4.70% while the 10-yr is trading with a yield of 4.61% right now. And finally, with about an hour before the bell, stock futures in the U.S. are trading higher. The Dow futures are currently almost 40 points above fair value, the S&Ps are ahead by 3.40, and the NASDAQ is sporting a gain of about 6 point at the moment.
Stocks �In Play� This Morning:
Cigna (CI) � Reported $2.48 vs. $2.17
Time Warner (TWX) � Reported $0.19 vs. $0.20
Caremark Rx (CMX) � NY Times reports CVS in talks to buy CMX
AT&T (T) � WJS reports Cingular readying music service
Circuit City (CC) � Mentioned positively at Piper Jaffray
Honda Motor (HMC) � Upgraded at BofA
Plantronics (PLT) � Downgraded at Bear Stearns
Sara Lee (SLE) � Downgraded at Bernstein
Charter Comm (CHTR) � Upgraded at Citigroup
Abercrombie & Fitch (ANF) � Downgraded at Credit Suisse
Martha Stewart Living (MSO) � Upgraded at Credit Suisse
Cardinal Health (CAH) � Added to Conviction Buy list at Goldman Sachs
Baidu (BIDU) � Upgraded at Goldman Sachs
Trammell Crow (TCC) � Downgraded at Morgan Stanley
Omnicare (OCR) � Downgraded at Morgan Stanley, Upgraded at Stifel Nicolaus
Qwest (Q) � Upgraded at Raymond James
Chipotle Mexican Grill (CMG) � Upgraded at Wachovia
Long positions in stocks mentioned: Q, MS, CC, 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. Although Halloween has come and gone, the frightful holiday seems to have left its mark on the stock market. You see, for the past three sessions, the action in the DJIA has been VERY strange. Maybe it was the overbought condition. Maybe it was the mixed economic news. Maybe it was the ongoing plunge in the bond market. And maybe, just maybe it was the calendar that spooked traders. But, in any event, it has now been three entire days since the venerable Dow has closed at a new all-time high.
In looking back, it has been more than two and one-half months since the DJIA has provided such a frightful performance. Think about it; it�s been three straight days without a green number at the close. And it�s been three straight days since looking at your account balance was the best part of the day. So, in short, it�s been three days of what could be considered very scary behavior in the Dow.
I know what you�re thinking. Hey, Halloween was yesterday � isn�t it a little late to be using all the references to frightening behavior and scary market stuff? To which I reply, guilty as charged. However, when you write a market missive 6 days a week, every once in a while the action is so dull that you�ve got to improvise to keep it even remotely interesting.
All sarcasm aside, yesterday�s session was a pause in the action as trading was basically directionless. Once again, the market acted like a �Weeble� as it definitely wobbled on the economic news, but in the end, stocks failed to fall down.
The day�s economic news was a bit surprising but didn�t really impact trading to any great degree. Before the bell, we learned that the Employment Cost Index accelerated by the largest amount since the second quarter of 2004. And while most of the increase was attributable to government spending, the report highlighted the fact that inflation risks continue to hang around and is why the Fed is unlikely to change their policy stance any time soon.
In addition, we got disappointing news from the Chicago Purchasing Managers report, which suggested that the pace of manufacturing stumbled last month as the index fell a larger-than expected 8.6 points. It was also a little scary to see the Conference Board�s Consumer Confidence Index come in well below expectations. Given the big drop in gasoline prices over the past month, one might have expected to see this index rise, not fall by 1.4 points.
Finally, while stocks did little with yesterday�s trading session, the bond market continues to be on the move. Don�t look now, but in the last five sessions, the yield on the 10-year has plunged from 4.82% to 4.61% at yesterday�s close. The big drop in yields and pop in prices can be attributed to the recent weakness in the economic data and lack of any real inflation threats.
In looking at this morning�s pre-market activity, stocks are moving higher in response to the ADP Employment change numbers. The report showed an increase of 128,000 jobs, which was much higher than the consensus expectations for 108,000 new jobs, but not high enough to spark concerns about the economy overheating.
Running through the rest of the pre-game indicators, the major overseas markets are mostly higher this morning. Gold futures are rebounding a bit and are quoted at $612.20 right now. Crude futures are in decline once again this morning with the latest quote showing oil down $0.18 to $58.58. Interest rates are little changed this morning with the 2-year currently quoted at 4.70% while the 10-yr is trading with a yield of 4.61% right now. And finally, with about an hour before the bell, stock futures in the U.S. are trading higher. The Dow futures are currently almost 40 points above fair value, the S&Ps are ahead by 3.40, and the NASDAQ is sporting a gain of about 6 point at the moment.
Stocks �In Play� This Morning:
Cigna (CI) � Reported $2.48 vs. $2.17
Time Warner (TWX) � Reported $0.19 vs. $0.20
Caremark Rx (CMX) � NY Times reports CVS in talks to buy CMX
AT&T (T) � WJS reports Cingular readying music service
Circuit City (CC) � Mentioned positively at Piper Jaffray
Honda Motor (HMC) � Upgraded at BofA
Plantronics (PLT) � Downgraded at Bear Stearns
Sara Lee (SLE) � Downgraded at Bernstein
Charter Comm (CHTR) � Upgraded at Citigroup
Abercrombie & Fitch (ANF) � Downgraded at Credit Suisse
Martha Stewart Living (MSO) � Upgraded at Credit Suisse
Cardinal Health (CAH) � Added to Conviction Buy list at Goldman Sachs
Baidu (BIDU) � Upgraded at Goldman Sachs
Trammell Crow (TCC) � Downgraded at Morgan Stanley
Omnicare (OCR) � Downgraded at Morgan Stanley, Upgraded at Stifel Nicolaus
Qwest (Q) � Upgraded at Raymond James
Chipotle Mexican Grill (CMG) � Upgraded at Wachovia
Long positions in stocks mentioned: Q, MS, CC, 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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