David Moenning's Daily State of the Markets: 11/30

Bernanke Concurs

With Dell (DELL) reporting after the close and Ben Bernanke speaking in North Carolina later in the evening, it is fair to say that there may have been some trepidation during Thursday’s stock market session. And after a furious two-day rally of 500 points on the Dow, it wasn’t exactly surprising to see the bulls take a breather yesterday.

Stocks wavered back and forth above the break even line for much of the session as concerns over credit writedowns and a weak report from Sears Holdings (SHLD) kept the bears on the prowl. However, given the intensity of this week’s rally, you’ve got to give the bulls some credit for not giving up any ground at all yesterday.

At the end of the day, it was the hope that Fed Chairman Ben Bernanke would concur with Vice Chairman Donald Kohn’s view on the economy that kept the bulls from succumbing to some profit taking. And although a gain of 22 points isn’t much to write home about, the fact that stocks didn’t revert back to the bearish last-hour action that had been prevalent recently has to be considered a positive.

Speaking of Mr. Bernanke, his remarks in a speech last evening appears to have been in concert with what Mr. Kohn had said on Wednesday. Bernanke noted that the Fed is monitoring financial conditions closely and there is risk of further restraint on housing and credit. The Fed Chairman also mentioned that the economic data has been mixed since the FOMC’s October meeting and that the Fed will judge whether the balance of risks between inflation and the economy has shifted.

Traders around the world viewed the speech as an indication that the Bernanke Cavalry will ride on December 11th with another rate cut. So now, the primary question the markets are dealing with is if the cut will be
0.25 or 0.50%.

Turning to this morning, the Bernanke speech, lower oil, and higher markets around the globe appear to be a good mix for the bulls here in the U.S.

It is also a positive that this morning’s economic data came in supportive of the rate cut view. The government reported that Personal Income rose by +0.2% in October, which was below the +0.4% consensus and that Spending increased by just +0.2%, which, was also below expectations. On the inflation side of the equation, the PCE Deflator was reported a tenth higher than the estimates at 2.9% while the Core PCE came in right on target at +0.2%.

Running through the rest of the pre-game indicators; the overseas markets are higher across the board. Crude futures are significantly lower this morning with the latest quote showing the January futures contract down $1.98 to $89.03. Interest rates are a little higher this morning with the 10-yr trading at a yield of 4.03% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently ahead by about 110 points; the S&Ps are up by about 15 points, while the NASDAQ looks to be about 16 points above fair value at the moment.

Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Dell (Nasdaq: DELL) – Reported $0.34 vs. $0.35

Today’s Earnings Before the Bell:
Big Lots (NYSE: BIG) – Reported $0.14 vs. $0.12
Tiffanys (NYSE: TIF) – Reported $0.75 vs. $0.25

News, Upgrades/Downgrades/Brokerage Research:
Valero (NYSE: VLO) – Upgraded at BofA
Mohawk (NYSE: MHK) – Downgraded at BofA
Credit Suisse (NYSE: CS) – Downgraded at Bear Stearns
UBS (NYSE: UBS) – Downgraded at Bear Stearns
Deutsche Bank (NYSE: DB) – Downgraded at Bear Stearns
General Motors (NYSE: GM) – Target reduced at Deutsche Bank
Broadcom (Nasdaq: BRCM) – Target reduced at Goldman Sachs
Marvel (Nasdaq: MRVL) – Target reduced at Goldman Sachs
Sandisk (Nasdaq: SNDK) – Target reduced at Goldman Sachs
MasterCard (NYSE: MA) – Target increased at Goldman Sachs
Paychex (Nasdaq: PAYX) – Target reduced at Goldman Sachs
Electronic Data Sys (NYSE: EDS) – Target reduced at Goldman Sachs
Cisco Systems (Nasdaq: CSCO) – Target reduced at Goldman Sachs
Dell (Nasdaq: DELL) – Target reduced at Goldman Sachs
Intl Bus Machines (NYSE: IBM) – Target reduced at Goldman Sachs
Lexmark (NYSE: LXK) – Target reduced at Goldman Sachs
Kraft (NYSE: KFT) – Downgraded at JP Morgan
Telefonos de Mexico (NYSE: TMX) – Upgraded at JP Morgan


Mr. Moenning holds Long positions in stocks mentioned: MA

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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