David Moenning's Daily State of the Markets: 12/22
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Ebenezer�s >From Philly
Good morning. Historically speaking, stocks have a tendency to lift in the last few sessions before Christmas and then enjoy a repeat performance in the sessions following. And in the early going yesterday, it appeared that traders were interested in keeping tradition alive. But, unfortunately, Ebenezer Scrooge showed up to ruin the mood in the form of the Philly Fed report.
Although there was ongoing M&A activity and a good deal of economic data to sift through yesterday morning, the action quickly settled down into what felt like pre-holiday doldrums. Traders reviewed the final revisions to the Q3 GDP as well as the Index of Leading Economic Indicators and concluded that there wasn�t much of anything new in the reports.
However, the noontime Philly Fed report was anything but more of the same. The Philadelphia Fed�s Business Activity Index fell below zero in December, which is an indication of contracting economic activity in the region. The index dropped 9.4 points to -4.3, which was the lowest level since early 2003. In addition, the Future Activity Index also declined, but the reading of 6.7 would seem to indicate that the future is somewhat more hopeful than the present.
While this report is historically volatile and there was some good news from the inflation component, there was no mistaking the message that the economy is contracting in the Philadelphia area. Stocks and bonds reacted to the news in kind with the former diving on growth concerns while the latter celebrated the possibility of rate cuts being put back on the Fed�s table.
I guess the good news is that since trading desks weren�t exactly full, the bears could have had a field day yesterday. But instead of a solid thrashing, stocks stabilized and the indices finished with only modest losses on the day.
Turning to this morning, while there is likely some shopping still to be done, we�ve got another boatload of economic data to be digested before traders begin heading to the malls. So, here we go. Perhaps the most important number was the PCE Deflator, which is an important measure of inflation. The number came in unchanged for November and is up 1.9% on a year-over-year basis, which remains at the top end of the Fed�s stated comfort zone.
Next, Personal Income came in a tenth weaker than expectations at +0.3% while Personal Spending was reported a tenth higher at +0.5%. We also got revisions to both numbers for October, but nothing substantial.
The other big news from the data was buried in the Durable Goods report. While the headline Durable Goods number was stronger than expectations at +1.9%, the number on orders for Durable Goods Ex-Transportation fell by -1.1%, which was far below the expectations for an increase of 1%.
Market reaction has been mildly positive so far as the message seems to more of the same: slower growth, low inflation, and no reason for interest rates to rise.
Running through the rest of the pre-game indicators, the overseas markets are mixed by region as Asia was higher and Europe is modestly lower. Gold futures are down a little this morning with the last trade at $621.50. Crude futures are moving up a bit this morning with the latest quote showing the February futures contract up $0.24 to $62.90. Interest rates are little changed on the economic data as the yield on the 10-year currently stands at 4.57%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are looking to open a little higher. The Dow futures are currently ahead by 17 points; the S&Ps are about 2 points above breakeven, and the NASDAQ looks to be about 4 points ahead of fair value at the moment.
Stocks �In Play� This Morning:
Research in Motion (RIMM) � Reported $0.93 vs. $0.93, Upgraded at Bear Stearns, Estimates increased at Goldman
Micron Technologies (MU) � Reported $0.25 vs. $0.21, Upgraded at First Albany
Walgreen (WAG) � Reported $0.43 vs. $0.41
MGM Mirage (MGM) � Downgraded at CIBC
Station Casinos (STN) � Downgraded at CIBC
Wynn Resorts (WYNN) � Downgraded at CIBC
Sepracor (SEPR) � Upgraded at Credit Suisse
Red Hat (RHT) � Upgraded at First Albany, Citigroup
Qualcomm (QCOM) � Downgraded at JP Morgan
Washington Mutual (WM) � Downgraded at Keefe, Bruyette, Woods
Countrywide Financial (CFC) � Downgraded at Keefe, Bruyette, Woods
Adtran (ADTN) � Downgraded at Merrill
Chipotle Mexican Grill (CMG) � Upgraded at RBC Capital
Applied Materials (AMAT) � Mentioned positively at UBS
Lam Research (LRCX) � Mentioned positively at UBS
Long positions in stocks mentioned: GS, MER, AMAT, BSC, QCOM
** 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. Historically speaking, stocks have a tendency to lift in the last few sessions before Christmas and then enjoy a repeat performance in the sessions following. And in the early going yesterday, it appeared that traders were interested in keeping tradition alive. But, unfortunately, Ebenezer Scrooge showed up to ruin the mood in the form of the Philly Fed report.
Although there was ongoing M&A activity and a good deal of economic data to sift through yesterday morning, the action quickly settled down into what felt like pre-holiday doldrums. Traders reviewed the final revisions to the Q3 GDP as well as the Index of Leading Economic Indicators and concluded that there wasn�t much of anything new in the reports.
However, the noontime Philly Fed report was anything but more of the same. The Philadelphia Fed�s Business Activity Index fell below zero in December, which is an indication of contracting economic activity in the region. The index dropped 9.4 points to -4.3, which was the lowest level since early 2003. In addition, the Future Activity Index also declined, but the reading of 6.7 would seem to indicate that the future is somewhat more hopeful than the present.
While this report is historically volatile and there was some good news from the inflation component, there was no mistaking the message that the economy is contracting in the Philadelphia area. Stocks and bonds reacted to the news in kind with the former diving on growth concerns while the latter celebrated the possibility of rate cuts being put back on the Fed�s table.
I guess the good news is that since trading desks weren�t exactly full, the bears could have had a field day yesterday. But instead of a solid thrashing, stocks stabilized and the indices finished with only modest losses on the day.
Turning to this morning, while there is likely some shopping still to be done, we�ve got another boatload of economic data to be digested before traders begin heading to the malls. So, here we go. Perhaps the most important number was the PCE Deflator, which is an important measure of inflation. The number came in unchanged for November and is up 1.9% on a year-over-year basis, which remains at the top end of the Fed�s stated comfort zone.
Next, Personal Income came in a tenth weaker than expectations at +0.3% while Personal Spending was reported a tenth higher at +0.5%. We also got revisions to both numbers for October, but nothing substantial.
The other big news from the data was buried in the Durable Goods report. While the headline Durable Goods number was stronger than expectations at +1.9%, the number on orders for Durable Goods Ex-Transportation fell by -1.1%, which was far below the expectations for an increase of 1%.
Market reaction has been mildly positive so far as the message seems to more of the same: slower growth, low inflation, and no reason for interest rates to rise.
Running through the rest of the pre-game indicators, the overseas markets are mixed by region as Asia was higher and Europe is modestly lower. Gold futures are down a little this morning with the last trade at $621.50. Crude futures are moving up a bit this morning with the latest quote showing the February futures contract up $0.24 to $62.90. Interest rates are little changed on the economic data as the yield on the 10-year currently stands at 4.57%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are looking to open a little higher. The Dow futures are currently ahead by 17 points; the S&Ps are about 2 points above breakeven, and the NASDAQ looks to be about 4 points ahead of fair value at the moment.
Stocks �In Play� This Morning:
Research in Motion (RIMM) � Reported $0.93 vs. $0.93, Upgraded at Bear Stearns, Estimates increased at Goldman
Micron Technologies (MU) � Reported $0.25 vs. $0.21, Upgraded at First Albany
Walgreen (WAG) � Reported $0.43 vs. $0.41
MGM Mirage (MGM) � Downgraded at CIBC
Station Casinos (STN) � Downgraded at CIBC
Wynn Resorts (WYNN) � Downgraded at CIBC
Sepracor (SEPR) � Upgraded at Credit Suisse
Red Hat (RHT) � Upgraded at First Albany, Citigroup
Qualcomm (QCOM) � Downgraded at JP Morgan
Washington Mutual (WM) � Downgraded at Keefe, Bruyette, Woods
Countrywide Financial (CFC) � Downgraded at Keefe, Bruyette, Woods
Adtran (ADTN) � Downgraded at Merrill
Chipotle Mexican Grill (CMG) � Upgraded at RBC Capital
Applied Materials (AMAT) � Mentioned positively at UBS
Lam Research (LRCX) � Mentioned positively at UBS
Long positions in stocks mentioned: GS, MER, AMAT, BSC, QCOM
** 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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