David Moenning's Daily State of the Markets: 12/20
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Oops, Never Mind!
Good morning. After roiling the financial markets with their new currency control legislation, Thailand quickly amended the capital lockup rules to exempt investments in stocks. The three-month old government, which came to power the old fashioned way � via military coup � apparently has a lot to learn with regard to the global nature of the markets. So, after a swift drop of -15% for the Thai SET 50 stock index on Tuesday, the new Thai Finance Minister effectively said, �Oops, never mind!�
The other big story in the market here in the U.S. was the surprisingly strong numbers from the PPI report yesterday. Since analysts had been looking for an uptick of +0.6% in the headline PPI and an increase of +0.2% in the Core rate, the moves of 2.0% and 1.3% respectively certainly got everyone�s attention. The increase in the PPI was the most since November 1974 while the Core Rate�s move was the biggest since July 1980.
As expected, the futures markets sank on the news and one might have expected a modest panic at the open on the appearance of a sudden resumption of inflation at the producer level. However, since the report was so out of character with the recent data, the validity of the data was quickly called into question. And while everyone enjoys picking on the government�s methods for gathering data, the real story was in the details of the report.
Although the data was more than a little surprising, upon further review, it was also completely understandable. And this was the primary reason that stocks didn�t get slammed on the news. For example, the PPI did indeed soar 2% in November, but as a result of a 6.1% increase in energy prices. And since everyone knows that oil fell hard and then experienced a modest rebound, this is certainly acceptable. In addition, the Core Rate�s big pop was driven by higher prices for vehicle sales, which were coming off of the big fall discount season. So, again, this is understandable. And on a year-over-year basis, price pressures remain subdued with the PPI at +0.9% and the Core at +1.8%.
It was also interesting to note that Mr. Baseball, Dallas Fed President Richard Fisher attempted to stir things up yesterday afternoon by stating that the risk of high inflation outweighs the risk of a slowing economy.
But, at the end of the day, traders apparently wanted nothing to do with the whole inflation theme as, at least from a big-picture standpoint, there really wasn�t anything new presented. So with the inflation and global crises off the table, investors did a little buying and pushed the Dow to another new record high. So, while it certainly an interesting ride, I guess all�s well that ends well.
Turning to this morning, there is no economic data scheduled for release today. However, the last minute rush to complete M&A deals before year-end is continuing to give the market a buoyant feel.
Running through the rest of the pre-game indicators, the overseas markets rebounded across the board on Thailand�s change in thinking. Gold futures are up a little this morning with the last trade at $626.20. Crude futures are also moving a bit higher this morning with the latest quote showing the futures contract up $0.23 to $63.67. Interest rates are little changed as the yield on the 10-year currently stands at 4.59%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open modestly higher. The Dow futures are currently ahead by 8 points; the S&Ps are about 2 points above breakeven, and the NASDAQ looks to be about 2 points ahead of fair value at the moment.
Stocks �In Play� This Morning:
Carmax (KMX) � Reported $0.42 vs. $0.25
FedEx (FDX) � Reported $1.89 vs. $1.76, guides quarter lower
Redback Networks (RBAK) � To be acquired by Ericsson (ERIC)
Simon Property Group (SPG) � Named Top Pick at BofA in Regional Mall REITs
CBL & Assoc (CBL) � Upgraded at BofA
Health Care Reit (HCN) � Upgraded at BofA
Harrah�s Ent (HET) � Downgraded at BMO, Davenport
Juniper Networks (JNPR) � Downgraded at CIBC
Coach (COH) � Citigroup starts coverage at Buy
Knight Capital Group (NITE) � Deutsche Bank starts coverage at Buy
Genentech (DNA) � Removed from Conviction Buy list at Goldman
Medimmune (MEDI) � Added to Conviction Buy list at Goldman
Symantec (SYMC) � Upgraded at Goldman
Ford (F) � Upgraded at Keybanc/McDonald
BCE Inc (BCE) � Upgraded at Merrill
Caremark Rx (CMX) � Downgraded at Morgan Stanley
Kohls (KSS) � Downgraded at RW Baird
Long positions in stocks mentioned: GS, MER, MS, KSS, NITE
** 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. After roiling the financial markets with their new currency control legislation, Thailand quickly amended the capital lockup rules to exempt investments in stocks. The three-month old government, which came to power the old fashioned way � via military coup � apparently has a lot to learn with regard to the global nature of the markets. So, after a swift drop of -15% for the Thai SET 50 stock index on Tuesday, the new Thai Finance Minister effectively said, �Oops, never mind!�
The other big story in the market here in the U.S. was the surprisingly strong numbers from the PPI report yesterday. Since analysts had been looking for an uptick of +0.6% in the headline PPI and an increase of +0.2% in the Core rate, the moves of 2.0% and 1.3% respectively certainly got everyone�s attention. The increase in the PPI was the most since November 1974 while the Core Rate�s move was the biggest since July 1980.
As expected, the futures markets sank on the news and one might have expected a modest panic at the open on the appearance of a sudden resumption of inflation at the producer level. However, since the report was so out of character with the recent data, the validity of the data was quickly called into question. And while everyone enjoys picking on the government�s methods for gathering data, the real story was in the details of the report.
Although the data was more than a little surprising, upon further review, it was also completely understandable. And this was the primary reason that stocks didn�t get slammed on the news. For example, the PPI did indeed soar 2% in November, but as a result of a 6.1% increase in energy prices. And since everyone knows that oil fell hard and then experienced a modest rebound, this is certainly acceptable. In addition, the Core Rate�s big pop was driven by higher prices for vehicle sales, which were coming off of the big fall discount season. So, again, this is understandable. And on a year-over-year basis, price pressures remain subdued with the PPI at +0.9% and the Core at +1.8%.
It was also interesting to note that Mr. Baseball, Dallas Fed President Richard Fisher attempted to stir things up yesterday afternoon by stating that the risk of high inflation outweighs the risk of a slowing economy.
But, at the end of the day, traders apparently wanted nothing to do with the whole inflation theme as, at least from a big-picture standpoint, there really wasn�t anything new presented. So with the inflation and global crises off the table, investors did a little buying and pushed the Dow to another new record high. So, while it certainly an interesting ride, I guess all�s well that ends well.
Turning to this morning, there is no economic data scheduled for release today. However, the last minute rush to complete M&A deals before year-end is continuing to give the market a buoyant feel.
Running through the rest of the pre-game indicators, the overseas markets rebounded across the board on Thailand�s change in thinking. Gold futures are up a little this morning with the last trade at $626.20. Crude futures are also moving a bit higher this morning with the latest quote showing the futures contract up $0.23 to $63.67. Interest rates are little changed as the yield on the 10-year currently stands at 4.59%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open modestly higher. The Dow futures are currently ahead by 8 points; the S&Ps are about 2 points above breakeven, and the NASDAQ looks to be about 2 points ahead of fair value at the moment.
Stocks �In Play� This Morning:
Carmax (KMX) � Reported $0.42 vs. $0.25
FedEx (FDX) � Reported $1.89 vs. $1.76, guides quarter lower
Redback Networks (RBAK) � To be acquired by Ericsson (ERIC)
Simon Property Group (SPG) � Named Top Pick at BofA in Regional Mall REITs
CBL & Assoc (CBL) � Upgraded at BofA
Health Care Reit (HCN) � Upgraded at BofA
Harrah�s Ent (HET) � Downgraded at BMO, Davenport
Juniper Networks (JNPR) � Downgraded at CIBC
Coach (COH) � Citigroup starts coverage at Buy
Knight Capital Group (NITE) � Deutsche Bank starts coverage at Buy
Genentech (DNA) � Removed from Conviction Buy list at Goldman
Medimmune (MEDI) � Added to Conviction Buy list at Goldman
Symantec (SYMC) � Upgraded at Goldman
Ford (F) � Upgraded at Keybanc/McDonald
BCE Inc (BCE) � Upgraded at Merrill
Caremark Rx (CMX) � Downgraded at Morgan Stanley
Kohls (KSS) � Downgraded at RW Baird
Long positions in stocks mentioned: GS, MER, MS, KSS, NITE
** 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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