David Moenning's Daily State of the Markets: 2/12

A Deal, 8 Bankers, And Still No Deal

After dropping nearly 400 points on Wednesday and breaking to its lowest close since November 20th, the DJIA managed to claw its way back into the trading range yesterday with a gain of 50 points. But to be sure, this was not a rousing rally and the final outcome was in question for most of the day. In short, yesterday’s gain was probably more a case of traders recognizing that the prior day’s temper tantrum may have been a little overdone.

However, this is not to say that the session didn’t have stories worthy of note. In fact, it was a very busy day for the newswires as we got word that Congress and the White House had finally reached deal on the now $790 billion Obama stimulus plan; we enjoyed a full seven hours of Congressional hearings/grillings from the heads of the nation’s eight biggest banking institutions; and we heard that Timothy Geithner still doesn’t have a plan on just how to achieve his grand plan.

In reality, the only thing that is important about the Obama stimulus plan is that the deal gets done in a timely fashion. Since most economists agree that the plan isn’t all that stimulative to begin with, we should recognize that the key aspect of the plan is that it is intended to boost confidence – and a timely passage will definitely help toward this end.

Next up, while we’re not sure exactly what the purpose was for dragging the CEO’s of the nation’s banks before a Congressional panel, we will admit that the hearings did make for some good TV. Although the idea behind the hearings was to get information on how the banks spent the $165 billion they had gotten from the TARP, it appears that the session was really more about Congressional leaders extracting their pound of flesh from a group of very wealthy bankers.

In the end, we learned that the CEO’s have heard the public loud and clear with regard to Wall Street’s excesses and are intent on making amends going forward. We learned that contrary to popular belief, the banks ARE lending money – lots of money. We learned that at least Morgan Stanley plans to change its executive compensation structure. We learned that the group agrees that there needs to be more oversight and more transparency of banks’ activities. And finally, we learned that after some rather poignant criticism, accusations, and flat-out anger, this group knows how to take a beating.

Speaking of taking a beating, Timothy Geithner was also in the news again yesterday as he testified before the Senate Budget Committee. The bottom line here is the Secretary still doesn’t have a plan, a timetable, or any answers on whether or not Treasury will be asking for more money any time soon. However, Senator Kent Conrad of North Dakota suggested that there is little doubt that more money will be needed.

As the saying goes, it’s not the news, it’s how the market reacts to the news that counts. And while the U.S. Market finished up in a warm-and-fuzzy fashion yesterday, the foreign markets are expressing their doubts and perhaps a distinct lack of confidence about the U.S.’s plans.

Turning to this morning, we got some surprisingly good news on the economic front. The government reported U.S. Retail Sales for January rose by 1%, which was a far cry from the estimates for drop of -0.7%. Next up, the Jobless Claims numbers were weak once again as claims increased to 623K and Continuing Claims are now at 4.81 million.

Running through the rest of the pre-game indicators, the major foreign markets are down hard. Crude futures are lower with the latest quote showing oil trading down by $0.78 to $35.16. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.81%, while overnight LIBOR is at 0.30% and the yield on the 3-month T-Bill is trading at 0.29%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 50 points; the S&P’s are down about 7 points, while the NASDAQ looks to be about 6 points below fair value at the moment.

Stocks “In Play” This Morning:

Yesterday’s Earnings After the Bell:

Activision Blizzard (Nasdaq: ATVI) – Reported $0.31 vs. $0.29
Buffalo Wild Wings (Nasdaq: BWLD) – Reported $0.43 vs. $0.39
Chipotle Mexican Grill (NYSE: CMG) – Reported $0.52 vs. $0.48
Foundation Coal (NYSE: FCL) – Reported $0.52 vs. $0.48
Las Vegas Sands (NYSE: LVS) – Reported -$0.04 vs. $0.03
Masco (NYSE: MAS) – Reported -$0.18 vs. -$0.05
NetApp (Nasdaq: NTAP) – Reported $0.28 vs. $0.28
Realty Income (NYSE: O) – Reported $0.46 vs. $0.45
Everest Re (NYSE: RE) – Reported $2.93 vs. $2.78
Questar (NYSE: STR) – Reported $0.99 vs. $0.84
Taubman Centers (NYSE: TCO) – Reported $1.00 vs. $0.81


Today’s Earnings Before the Bell:

Aetna (NYSE: AET) – Reported $0.96 vs. $0.94
Alexion Pharmaceuticals (Nasdaq: ALXN) – Reported $0.17 vs. $0.08
Coca Cola (NYSE: KO) – Reported $0.64 vs. $0.61
Laboratory Corp (NYSE: LH) – Reported $1.10 vs. $1.09
Marriott Intl (NYSE: MAR) – Reported $0.34 vs. $0.40
NRG Energy (NYSE: NRG) – Reported $0.28 vs. $0.46
Patterson-UTI (Nasdaq: PTEN) – Reported $0.64 vs. $0.56
Sun Life (NYSE: SLF) – Reported -$1.25 vs. -$0.05
Strayer Education (Nasdaq: STRA) – Reported $1.71 vs. $1.70
Viacom (NYSE: VIA.B) – Reported $0.76 vs. $0.78
Waste Management (NYSE: WMI) – Reported $0.49 vs. $0.49

Today’s Corporate News, Upgrades/Downgrades/Brokerage Research

China Unicom (NYSE: CHU) – Downgraded at BAC/MER
Continental Airlines (NYSE: CAL) – Upgraded at BAC/MER
Northrop Grumman (NYSE: NOC) – Upgraded at Bernstein
Raytheon (NYSE: RTN) – Downgraded at Bernstein
Petro Brasil (NYSE: PBR) – Downgraded at Citi
NYSE Euronext (NYSE: NYX) – Downgraded at Citi
Burger King Holdings (NYSE: BKC) – Added to Conviction Buy list at Goldman
Air Products (NYSE: APD) – Added to Conviction Buy list at Goldman
Kohls (NYSE: KSS) – Added to Conviction Sell list at Goldman
Praxair (NYSE: PX) – Removed from Conviction Buy list at Goldman
Mobile TeleSystems (NYSE: MBT) – Upgraded at ING
Vimpel Communications (NYSE: VIP) – Upgraded at ING
Level 3 Communications (Nasdaq: LVLT) – Downgraded at JP Morgan
Portugal Telecom (NYSE: PT) – Downgraded at Morgan Stanley

Disclosure: Mr. Moenning and/or related firms hold long positions in: STRA

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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