David Moenning's Daily State of the Markets: 2/4

Geithner Gets Aggressive

With the DJIA sitting right smack on top of its all-important line in the sand on the charts, the bulls could not have been happier to see some good news cross the tape for a change. And while there were some upbeat reports on a couple of fronts yesterday, the real cause of the upside surprise in stock prices was a report that Timothy Geithner says the US needs to get aggressive from a fiscal standpoint – and soon.

Although, in our humble opinion, it was the Geithner news that seemed to spur the market on, the fact that Pending Home Sales came in well above expectations got most of the press yesterday. Since the decline in home prices has played a major role in the foreclosure problem, any good news on the topic is welcome. Looking at the numbers, Pending Home sales rose by 6.3% in December, which easily exceeded the expectations for a drop of -0.5%. It appears that buyers may have taken advantage of the recent drop in mortgage rates and the abundant supply of distressed homes on the market. The National Association of Realtors noted, however, that significant housing stimulus and improved mortgage availability will be needed in order to have a sustained recovery.

In addition, the Fed announced that it would extend its emergency-lending programs by six months. And the flow of earnings reports was actually fairly positive yesterday. All of which were welcomed by those in the beaten down bull camp.

As for Mr. Geithner, he told the Wall Street Journal that “monetary policy has been very aggressive and that fiscal policy is about to get very aggressive.” This, of course, refers to the massive amount of government spending that should be coming down the pike in the next couple weeks. Geithner went on to say that the US does not want to repeat the mistakes made by Japan and will not “dither” long before making a move.

These were encouraging words after the recent confusion about the bad bank idea and the political wrangling that is taking place over the stimulus package. In short, the fact that people in the administration recognize that this is a time to get aggressive was viewed as a good thing.

Unfortunately however, the gain of 142 points on the Dow did not have much of an impact on the charts. While the Dow bounced up off the recent lows and lived to fight another day, neither the DJIA nor the S&P 500 managed to even break above their respective short-term moving averages. But then again, another nice day might just do the trick.

Turning to this morning, believe it or not, we got another decent economic number, this time from the January ADP Employment report. Well, in reality, it really wasn’t a good number; the job loss totals were simply less lousy than had been expected. ADP says the private sector lost 522,000 jobs last month, which was below the consensus expectations for a loss of 535,000. In addition, the December numbers were revised slightly higher.

Running through the rest of the pre-game indicators, the major foreign markets followed Wall Street higher. Crude futures are up with the latest quote showing oil trading higher by $0.49 to $41.27. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.87%, while overnight LIBOR is at 0.32%, 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 slightly lower open. The Dow futures are currently off by about 30 points; the S&P’s are about even, while the NASDAQ looks to be about 5 points below fair value at the moment.

Stocks “In Play” This Morning:

Yesterday’s Earnings After the Bell:

ACE Limited (NYSE: ACE) – Reported $1.87 vs. $1.87
Alliance Date (NYSE: ADS) – Reported $1.19 vs. $1.16
Arthur J Gallagher (NYSE: AJG) – Reported $0.12 vs. $0.38
Centex (NYSE: CTX) – Reported -$5.34 vs. -$4.25

Walt Disney (NYSE: DIS) – Reported $0.45 vs. $0.51

Electronic Arts (Nasdaq: ERTS) – Reported $0.56 vs. $0.88
Illumina (Nasdaq: ILMN) – Reported $0.22 vs. $0.17
Jones Lang LaSalle (NYSE: JLL) – Reported $1.17 vs. $1.21
Massey Energy (NYSE: MEE) – Reported $0.63 vs. $0.78
MetLife (NYSE: MET) – Reported $0.19 vs. $0.14
Pioneer Natural (NYSE: PXD) – Reported -$0.15 vs. $0.07
Tupperware (NYSE: TUP) – Reported $0.90 vs. $0.78
Unum Group (NYSE: UNM) – Reported $0.63 vs. $0.62
YUM Brands (NYSE: YUM) – Reported $0.46 vs. $0.45

Today’s Earnings Before the Bell:

Goodrich Corp (NYSE: GR) – Reported $1.23 vs. $1.02
ITT Corp (NYSE: ITT) – Reported $0.82 vs. $0.77
Kraft (NYSE: KFT) – Reported $0.43 vs. $0.44
Lazard (NYSE: LAZ) – Reported $0.50 vs. $0.43
NiSource (NYSE: NI) – Reported $0.46 vs. $0.43
New Jersey Resources (NYSE: NJR) – Reported $0.77 vs. $0.85
National Oilwell Varco (NYSE: NOV) – Reported $1.44 vs. $1.33
Sara Lee (NYSE: SLE) – Reported $0.21 vs. $0.21
Snap-On (NYSE: SNA) – Reported $1.01 vs. $1.02
Thermo Fisher Scientific (NYSE: TMO) – Reported $0.88 vs. $0.83
Time Warner (NYSE: TWX) – Reported $0.23 vs. $0.26
Windstream (NYSE: WIN) – Reported $0.26 vs. $0.25

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

OSI Pharmaceuticals (Nasdaq: OSIP) – Downgraded at Goldman
Motorola (NYSE: MOT) – Removed from Conviction Buy list at Goldman
Public Service (NYSE: PEG) – Downgraded at Jefferies
El Paso Electric (NYSE: EE) – Upgraded at Jefferies
Archer Daniels Midland (NYSE: ADM) – Downgraded at JP Morgan
Dollar Tree Stores (Nasdaq: DLTR) – Downgraded at JP Morgan
WMS Industries (NYSE: WMS) – Downgraded at JP Morgan
MGM Mirage (NYSE: MGM) – Target reduced at Oppenheimer
WYNN Resorts (Nasdaq: WYNN) – Target reduced at Oppenheimer
Ensco Intl (NYSE: ESV) – Downgraded at Oppenheimer
Palm Inc (PALM) – Estimates and Target reduced at Thomas Weisel
Priceline.com (Nasdaq: PCLN) – Estimates reduced at Thomas Weisel
Abbott Labs (NYSE: ABT) – Target increased at UBS
Agnico Mines (NYSE: AEM) – Target increased at UBS
Goldcorp (NYSE: GG) – Target increased at UBS
Newmont Mining (NYSE: NEM) – Target increased at UBS

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

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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