David Moenning's Daily State of the Markets: 12/19
Tweet
Share
E-mail
�Tis the Season
Good morning. As the song goes, �Tis the season to be jolly.� But on Wall Street, it�s also the season where investors do some selling to brighten up their tax returns. During the rest of the year, investors generally abhor losses in their portfolio. But once Santa�s reindeer have been spotted, the public remembers that it�s time to start rounding up some red numbers to offset their gains. And while I�ve got little to no empirical evidence to back this up, there wasn�t any other real explanation for yesterday�s selling.
Stocks once again started higher on the back of the usual �merger Monday� activity. However, the gains proved fleeting as the indices steadily deteriorated after the first hour. There was no real catalyst for the decline and the red ink was definitely more noticeable in the broader indices than in the Dow and S&P. For example, while the Dow finished with a drop of just 4 points (or -0.03%), the NASDAQ tumbled -0.9% and the small cap and mid cap indices fell more than -1%.
For those of us who require an explanation for such moves, the answers were difficult to come by. There was no economic news to speak of and the bond market barely budged. Thus, reasons for the pullback other than tax-loss selling and profit-taking remain elusive.
However, over in four-letter-land, it appears that Google (GOOG) was a fairly large drag as the NASDAQ�s poster child tumbled $17.50 or -3.6% on concerns over the sustainability of the company�s earnings growth. (Insert eye-roll here.)
It also appears that falling oil prices were actually a negative yesterday. Although oil declined for the first time in four sessions, the drop of -$1.22 seemed to pull down the oil sector in a pretty big way. For example, the Oil Services sector was hit hard and finished with a drop of -3.9%. And given the magnitude of the declines in the sector, there is also a distinct possibility that there may have been some rotation going on among the hedgie crowd.
Turning to this morning, it looks like the bears finally have something to growl about. Overnight, Thailand�s Central Bank imposed new capital controls on foreign investors. The new law requires that foreign money remain in the country for a minimum of one year. Foreign investors were NOT pleased and predictably, headed for the exits en masse. The selling created havoc as the Thailand market finished with a decline of almost -15%.
The selling in Thailand then spread throughout the region as speculation was rampant as to which countries might follow suit. The major markets fared significantly better, but still finished with losses exceeding -1%.
On the economic front, this morning, the government offered up the latest data on the Producer Price Index. The headline PPI came in as a HUGE surprise with a whopping gain of +2.0% and the Core Rate soared +1.3%. Both were way above the consensus expectations for increases of +0.6% and +0.2% respectively. And while the futures initially responded negatively to the news, the credibility of the numbers have immediately been called into question and the damage seems to have abated for now.
Running through the rest of the pre-game indicators, as we mentioned, the overseas markets are lower across the board. Gold futures are up this morning with the last trade at $620.10. Crude futures are falling again this morning with the latest quote showing the January contract off $0.41 to $61.80. Interest rates are obviously moving higher on the PPI news but not dramatically so as the yield on the 10-year currently stands at 4.62%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are looking to open lower. The Dow futures are currently off by more than 30 points; the S&Ps are about 4.5 point below breakeven, and the NASDAQ looks to be about 16 points below fair value at the moment.
Stocks �In Play� This Morning:
Oracle (ORCL) � Reported $0.22 vs. $0.22
Morgan Stanley (MS) � Reports $1.81 vs. $1.77, Announces it will spin off their Discover unit
Monster Worldwide (MNST) � BofA starts coverage with Buy
Circuit City (CC) � Reported -$0.09 vs. $0.05, Reduces guidance
Linear Technology (LLTC) � Downgraded at CIBC
Intersil (ISIL) � Upgraded at CIBC
Harrah�s Ent (HET) � Downgraded at Citigroup
Station Casinos (STN) � Downgraded at Citigroup
Anadarko Petroleum (APC) � Downgraded at Citigroup
Devon Energy (DVN) � Downgraded at Citigroup
Motorola (MOT) � Downgraded at Cowen
L-3 Communications (LLL) � Downgraded at Cowen
Deutsche Telekom (DT) � Upgraded at Deutsche Bank
Prudential (PRU) � Upgraded at Goldman Sachs
ITT Corp (ITT) � Upgraded at JP Morgan
Precision Castparts (PCP) � Upgraded at Merrill
Ford (F) � Upgraded at Morgan Stanley
Goldman Sachs (GS) � Downgraded at Rochdale
Micron Technology (MU) � Downgraded at WR Hambrecht
Long positions in stocks mentioned: GS, MER, MS, CC
** 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. As the song goes, �Tis the season to be jolly.� But on Wall Street, it�s also the season where investors do some selling to brighten up their tax returns. During the rest of the year, investors generally abhor losses in their portfolio. But once Santa�s reindeer have been spotted, the public remembers that it�s time to start rounding up some red numbers to offset their gains. And while I�ve got little to no empirical evidence to back this up, there wasn�t any other real explanation for yesterday�s selling.
Stocks once again started higher on the back of the usual �merger Monday� activity. However, the gains proved fleeting as the indices steadily deteriorated after the first hour. There was no real catalyst for the decline and the red ink was definitely more noticeable in the broader indices than in the Dow and S&P. For example, while the Dow finished with a drop of just 4 points (or -0.03%), the NASDAQ tumbled -0.9% and the small cap and mid cap indices fell more than -1%.
For those of us who require an explanation for such moves, the answers were difficult to come by. There was no economic news to speak of and the bond market barely budged. Thus, reasons for the pullback other than tax-loss selling and profit-taking remain elusive.
However, over in four-letter-land, it appears that Google (GOOG) was a fairly large drag as the NASDAQ�s poster child tumbled $17.50 or -3.6% on concerns over the sustainability of the company�s earnings growth. (Insert eye-roll here.)
It also appears that falling oil prices were actually a negative yesterday. Although oil declined for the first time in four sessions, the drop of -$1.22 seemed to pull down the oil sector in a pretty big way. For example, the Oil Services sector was hit hard and finished with a drop of -3.9%. And given the magnitude of the declines in the sector, there is also a distinct possibility that there may have been some rotation going on among the hedgie crowd.
Turning to this morning, it looks like the bears finally have something to growl about. Overnight, Thailand�s Central Bank imposed new capital controls on foreign investors. The new law requires that foreign money remain in the country for a minimum of one year. Foreign investors were NOT pleased and predictably, headed for the exits en masse. The selling created havoc as the Thailand market finished with a decline of almost -15%.
The selling in Thailand then spread throughout the region as speculation was rampant as to which countries might follow suit. The major markets fared significantly better, but still finished with losses exceeding -1%.
On the economic front, this morning, the government offered up the latest data on the Producer Price Index. The headline PPI came in as a HUGE surprise with a whopping gain of +2.0% and the Core Rate soared +1.3%. Both were way above the consensus expectations for increases of +0.6% and +0.2% respectively. And while the futures initially responded negatively to the news, the credibility of the numbers have immediately been called into question and the damage seems to have abated for now.
Running through the rest of the pre-game indicators, as we mentioned, the overseas markets are lower across the board. Gold futures are up this morning with the last trade at $620.10. Crude futures are falling again this morning with the latest quote showing the January contract off $0.41 to $61.80. Interest rates are obviously moving higher on the PPI news but not dramatically so as the yield on the 10-year currently stands at 4.62%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are looking to open lower. The Dow futures are currently off by more than 30 points; the S&Ps are about 4.5 point below breakeven, and the NASDAQ looks to be about 16 points below fair value at the moment.
Stocks �In Play� This Morning:
Oracle (ORCL) � Reported $0.22 vs. $0.22
Morgan Stanley (MS) � Reports $1.81 vs. $1.77, Announces it will spin off their Discover unit
Monster Worldwide (MNST) � BofA starts coverage with Buy
Circuit City (CC) � Reported -$0.09 vs. $0.05, Reduces guidance
Linear Technology (LLTC) � Downgraded at CIBC
Intersil (ISIL) � Upgraded at CIBC
Harrah�s Ent (HET) � Downgraded at Citigroup
Station Casinos (STN) � Downgraded at Citigroup
Anadarko Petroleum (APC) � Downgraded at Citigroup
Devon Energy (DVN) � Downgraded at Citigroup
Motorola (MOT) � Downgraded at Cowen
L-3 Communications (LLL) � Downgraded at Cowen
Deutsche Telekom (DT) � Upgraded at Deutsche Bank
Prudential (PRU) � Upgraded at Goldman Sachs
ITT Corp (ITT) � Upgraded at JP Morgan
Precision Castparts (PCP) � Upgraded at Merrill
Ford (F) � Upgraded at Morgan Stanley
Goldman Sachs (GS) � Downgraded at Rochdale
Micron Technology (MU) � Downgraded at WR Hambrecht
Long positions in stocks mentioned: GS, MER, MS, CC
** 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.
Create E-mail Alert Related Categories
Contributors, Special ReportsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
