David Moenning's Daily State of the Markets: 12/03
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Misery Muted
Despite the impressive rally over the past four days, which pushed the Dow higher by more than 620 points, the major indices finished Friday with their worst monthly performances in five years. For those of you keeping score at home, the Dow dropped -4.01% in November, the S&P fell -4.40%, the NASDAQ declined by -6.93%, and the Russell 2000 lost -7.28%.
The good news, of course, is that things could have been much worse if the Fed’s top dogs hadn’t signaled Wall Street that the Bernanke Cavalry would be mounting up again on December 11th. Although there is obviously some disagreement among the members of the FOMC, it appears that Bernanke’s Boys are a bit more concerned about the economy than inflation at the moment. And in simple terms, this has been reassuring to the markets and allowed the traditional year-end rally to commence right on schedule.
Friday\'s action continued to focus on the Fed as traders initially reacted positively to a Bernanke speech that appeared to support the idea that another rate cut was forthcoming. The bulls also got a hand Friday from a report stating the government was close to agreeing on a plan to temporarily freeze rates on troubled subprime loans. And while this was enough to give stocks a jumpstart to the day, unfortunately, the enthusiasm quickly faded from there.
Perhaps it was the realization that stocks had moved up more than 700 points since Monday’s close that put an end to the melt-up mode. Or perhaps it was yet another batch of hawkish comments from Philly Fed President Charles Plosser. But in any event, the bulls began to look tired almost immediately after the opening bell and finished with a mixed bag of green and red numbers on the indices.
Turning to this morning, we don\'t have any economic data to review before the opening bell, but we will get the ISM Manufacturing report at 10:00 am eastern. In addition, Boston Fed President Rosengren is speaking on the subprime problem this morning and so far has suggested that lenders should consider extending the current rates on subprime loans. Rosengren also mentioned that the human impact of the subprime crisis is likely to worsen as home prices decline and that the foreclosure situation is likely to get worse before it gets better. From an economic standpoint, Rosengren sees growth well below normal for the next 2 quarters and then gradually improving over the next year.
Speaking of a slowing economy, Bear Stearns reduced their 2007 earnings estimates on the S&P 500 this morning to $89 from $95.25 and cut their 2008 forecast to $100 from $104.50.
Running through the rest of the pre-game indicators; the overseas markets are fractionally mixed. Crude futures are lower this morning with the latest quote showing the January contract off $0.83 to $87.88. Interest rates are a little lower this morning with the 10-yr trading at a yield of 3.94% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are waffling around breakeven. The Dow futures are currently ahead by about 20 points; the S&Ps are up by less than a point, while the NASDAQ also looks to be about a point above fair value at the moment.
Stocks "In Play" This Morning:
News, Upgrades/Downgrades/Brokerage Research:
E*Trade Financial (Nasdaq: ETFC) – Downgraded at BofA
General Electric (NYSE: GE) – Target reduced at Citi
Bear Stearns (NYSE: BSC) – Estimates reduced at Deutsche Bank
Lehman Brothers (NYSE: LEH) – Estimates reduced at Deutsche Bank
Morgan Stanley (NYSE: MS) – Estimates reduced at Deutsche Bank
Merrill Lynch (NYSE: MER) – Estimates reduced at Deutsche Bank
Pinnacle Entertainment (NYSE: PNK) – Downgraded at Lehman
Johnson Controls (NYSE: JCI) – Downgraded at Lehman
American Axle (NYSE: AXL) – Downgraded at Lehman
Chesapeake Energy (NYSE: CHK) – Downgraded at Morgan Stanley
Netflix (Nasdaq: NFLX) – Upgraded at Piper Jaffray
LM Ericsson (Nasdaq: ERIC) – Target reduced at UBS
Mr. Moenning holds Long positions in stocks mentioned: MER
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.
Despite the impressive rally over the past four days, which pushed the Dow higher by more than 620 points, the major indices finished Friday with their worst monthly performances in five years. For those of you keeping score at home, the Dow dropped -4.01% in November, the S&P fell -4.40%, the NASDAQ declined by -6.93%, and the Russell 2000 lost -7.28%.
The good news, of course, is that things could have been much worse if the Fed’s top dogs hadn’t signaled Wall Street that the Bernanke Cavalry would be mounting up again on December 11th. Although there is obviously some disagreement among the members of the FOMC, it appears that Bernanke’s Boys are a bit more concerned about the economy than inflation at the moment. And in simple terms, this has been reassuring to the markets and allowed the traditional year-end rally to commence right on schedule.
Friday\'s action continued to focus on the Fed as traders initially reacted positively to a Bernanke speech that appeared to support the idea that another rate cut was forthcoming. The bulls also got a hand Friday from a report stating the government was close to agreeing on a plan to temporarily freeze rates on troubled subprime loans. And while this was enough to give stocks a jumpstart to the day, unfortunately, the enthusiasm quickly faded from there.
Perhaps it was the realization that stocks had moved up more than 700 points since Monday’s close that put an end to the melt-up mode. Or perhaps it was yet another batch of hawkish comments from Philly Fed President Charles Plosser. But in any event, the bulls began to look tired almost immediately after the opening bell and finished with a mixed bag of green and red numbers on the indices.
Turning to this morning, we don\'t have any economic data to review before the opening bell, but we will get the ISM Manufacturing report at 10:00 am eastern. In addition, Boston Fed President Rosengren is speaking on the subprime problem this morning and so far has suggested that lenders should consider extending the current rates on subprime loans. Rosengren also mentioned that the human impact of the subprime crisis is likely to worsen as home prices decline and that the foreclosure situation is likely to get worse before it gets better. From an economic standpoint, Rosengren sees growth well below normal for the next 2 quarters and then gradually improving over the next year.
Speaking of a slowing economy, Bear Stearns reduced their 2007 earnings estimates on the S&P 500 this morning to $89 from $95.25 and cut their 2008 forecast to $100 from $104.50.
Running through the rest of the pre-game indicators; the overseas markets are fractionally mixed. Crude futures are lower this morning with the latest quote showing the January contract off $0.83 to $87.88. Interest rates are a little lower this morning with the 10-yr trading at a yield of 3.94% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are waffling around breakeven. The Dow futures are currently ahead by about 20 points; the S&Ps are up by less than a point, while the NASDAQ also looks to be about a point above fair value at the moment.
Stocks "In Play" This Morning:
News, Upgrades/Downgrades/Brokerage Research:
E*Trade Financial (Nasdaq: ETFC) – Downgraded at BofA
General Electric (NYSE: GE) – Target reduced at Citi
Bear Stearns (NYSE: BSC) – Estimates reduced at Deutsche Bank
Lehman Brothers (NYSE: LEH) – Estimates reduced at Deutsche Bank
Morgan Stanley (NYSE: MS) – Estimates reduced at Deutsche Bank
Merrill Lynch (NYSE: MER) – Estimates reduced at Deutsche Bank
Pinnacle Entertainment (NYSE: PNK) – Downgraded at Lehman
Johnson Controls (NYSE: JCI) – Downgraded at Lehman
American Axle (NYSE: AXL) – Downgraded at Lehman
Chesapeake Energy (NYSE: CHK) – Downgraded at Morgan Stanley
Netflix (Nasdaq: NFLX) – Upgraded at Piper Jaffray
LM Ericsson (Nasdaq: ERIC) – Target reduced at UBS
Mr. Moenning holds Long positions in stocks mentioned: MER
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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