David Moenning's Daily State of the Markets: 11/29

The bulls got exactly what they wanted from Fed Vice Chairman Donald Kohn yesterday and celebrated with a gain of 331 points or +2.6%, which was the biggest percentage gain in almost five years. In short, Mr. Kohn expressed concern toward economic uncertainties and said that market activity would be a factor in the next Fed decision on December 11th. In English, Vice Chairman Kohn’s comments were taken to mean that the Bernanke Cavalry is mounting up and ready to ride to the rescue again in a couple of weeks.

Kohn's remarks were in direct contrast to Tuesday's comments from Philly Fed President Charles Plosser's, which focused on the idea that the current rate cuts were sufficient and that any further action by the Fed to reduce rates increased the risks of inflation. Kohn noted that lending conditions have deteriorated since the Fed’s last meeting and, more importantly, that the economy should not be held hostage to “prove a moral hazard point.” The remarks were immediately hailed as a step back from the recent rather hawkish Fed-speak.

Stocks took off to the upside after Kohn’s remarks and never looked back.
There were other stories yesterday and even some economic data. However, the bulls chose to focus on the fact that the Fed would not abandon them in their time of need and stocks went into melt-up mode into the close.

The Dow managed to produce its first back-to-back gains of the month and has advanced a handsome 500 points in just two days. The only fly in the ointment was the fact that volume was not exactly stellar at just 1.3 million shares.

Turning to this morning, we've got some economic data to sift through; however, it is primarily old news. The government just reported that the third quarter GDP numbers came in largely in-line with expectations. Q3 GDP grew at an annualized rate of +4.9%, which was spot on with expectations. The Price Index was a bit stronger at +0.9% vs. +0.8% and the all-important Core PCE came in right at the consensus expectations of +1.8%.

In the early going, stocks appear to be giving back some of yesterday’s gains. An oil pipeline problem is causing some concern. However, the bigger issue is that Ben Bernanke is speaking tonight at 7:00pm Eastern, so there may be some trepidation in front of the chairman’s remarks. Dell also reports after the close.

Running through the rest of the pre-game indicators; the overseas markets are mixed as Asia followed the U.S. higher while Europe is doing little so far. Crude futures are significantly higher this morning with the latest quote showing the futures contract up $2.67 to $93.29. Interest rates are a little lower this morning with the 10-yr trading at a yield of 3.99% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open a bit lower. The Dow futures are currently off by about 45 points; the S&Ps are down by about 6 points, while the NASDAQ looks to be about 11 points below fair value at the moment.

Stocks "In Play" This Morning:

Today’s Earnings Before the Bell:
Heinz (NYSE: HNZ) – Reported $0.71 vs. $0.67
Sears Holdings (Nasdaq: SHLD) – Reported $0.50 vs. $0.50

News, Upgrades/Downgrades/Brokerage Research:
USG Corp (NYSE: USG) – Estimates reduced at BofA
Rogers Communications (NYSE: RCI) – Downgraded at Bear Stearns, CIBC
General Motors (NYSE: GM) – Upgraded at Bear Stearns
National Oilwell Varco (NYSE: NOV) – Upgraded at Citi
Dollar Tree Stores (Nasdaq: DLTR) – Upgraded at Friedman Billings
Tivo Inc (Nasdaq: TIVO) – Upgraded at JP Morgan
Patterson Companies (Nasdaq: PDCO) – Upgraded at Lehman
Interactive Corp (Nasdaq: IACI) – Upgraded at Piper


Mr. Moenning holds Long positions in stocks mentioned: None

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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