David Moenning�s Daily State of the Markets: 03/03
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Down, But Not Out
Since stocks were up on Monday, down on Tuesday, then up again on Wednesday, it was natural to expect to see the market continue the trend and fall on Thursday. However, at the end of the day, the bulls appear to be happy with the result as it could have been a lot worse.
Uninspiring sales from the nation�s retailers, higher oil prices due to geopolitical issues and increasing interest rates both across the pond and here at home, presented a formula that the bears should have enjoyed.
Frankly, you couldn�t really blame traders for being pessimistic. In reviewing this week�s economic data, analysts are left with the impression that the economy may be slowing down just a touch. And if one focuses on the slower consumer spending and the lackluster retail sales, it isn�t much of a stretch to assume the consumer may be �doing less� right now. Now toss in what appears to be the start of a tightening campaign in Europe and its little wonder stocks weren�t overly chipper.
The rate hike by the ECB yesterday is problematic in that, without a corresponding increase in rates here in the U.S., our currency falls in value. The problem is that a falling currency makes foreign goods more expensive and is thus, inflationary. The bond pits know this all too well and responded to the ECB move by taking the yield on 10-yr to the highest point of the year.
But the bigger problem for stocks is the uncertainty that is presented here. With Europe now potentially in a tightening mode and talk of Japan about to enter one, this could pose some problems on the inflation front. And in light of the fact that Mr. Bernanke and company seem to have their eyes fixed squarely on anything related to inflation at the moment, one can easily argue that higher global rates could mean more rate hikes in the U.S. And the combination of a slowing economy, higher inflation, and increasing rates is not exactly what the bulls are looking for this year.
However, traders decided to not go down that road yesterday afternoon and instead focused on the fact that the Law of Large Numbers may not be impacting Google just yet. The spike rebound in GOOG seemed to lift traders� spirits across the board and helped the indices finish just mildly lower. So while stocks were indeed down on the day, they were far from out.
Turning to this morning, in the early going there are concerns about both the potential for higher rates in Japan and the ongoing mess in Iran. In Japan overnight, the country�s CPI report came in much higher than anticipated, which of course, prompted fears of higher rates. Japan has maintained an ultra-easy monetary policy for years and the fear now is that the BOJ might decide to tighten up a little when they meet next week.
In addition, the March 6th deadline for the IAEA�s decision on whether to refer Iran to the UN Security Council is causing some consternation in the energy pits. Today�s Iran-EU talks ended without any measurable result and Iran has threatened to end talks with Russia concerning the joint venture to enrich uranium for peaceful purposes if it is referred to the UN (which would undoubtedly result in sanctions). And while oil is not moving substantially higher this morning, prices are holding above $63.
Running through the pre-market indicators, overseas markets saw red in Asia thanks to the higher inflation report in Japan. Oil futures are steady this morning with crude currently trading +$0.10 to $63.46. Natural Gas is quoted lower by $0.08 at $6.68 right now. Gold futures are down -$1.70 to $568.50 and would appear to be range bound at the present time. Bond yields are moving slightly higher this morning with the 2-yr yield currently quoted at 4.73% while the 10-yr is at 4.64%. And finally, stock futures in the U.S. are pointing lower at the moment with the Dow currently -13, the S&P�s are down by about -2, and the NASDAQ is off by -4.
Stocks "In Play" This Morning:
AMZN � Judge rules company violated exclusivity rights with Toyrsus
GOOG � Trading higher after analyst meeting where CEO said international growth is not slowing
DELL � Barron�s says PC business could weaken near term
TOT � Added to Focus List at ING
SBUX � February comps higher by 8% vs. 6.5%
INTC � DigiTimes reports launch of Santa Rosa notebook may be delayed
AMD � New servers for GOOG to use AMD processors
CIEN � HSB believes demand is strengthening
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: AMD, INTC
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) 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.
Since stocks were up on Monday, down on Tuesday, then up again on Wednesday, it was natural to expect to see the market continue the trend and fall on Thursday. However, at the end of the day, the bulls appear to be happy with the result as it could have been a lot worse.
Uninspiring sales from the nation�s retailers, higher oil prices due to geopolitical issues and increasing interest rates both across the pond and here at home, presented a formula that the bears should have enjoyed.
Frankly, you couldn�t really blame traders for being pessimistic. In reviewing this week�s economic data, analysts are left with the impression that the economy may be slowing down just a touch. And if one focuses on the slower consumer spending and the lackluster retail sales, it isn�t much of a stretch to assume the consumer may be �doing less� right now. Now toss in what appears to be the start of a tightening campaign in Europe and its little wonder stocks weren�t overly chipper.
The rate hike by the ECB yesterday is problematic in that, without a corresponding increase in rates here in the U.S., our currency falls in value. The problem is that a falling currency makes foreign goods more expensive and is thus, inflationary. The bond pits know this all too well and responded to the ECB move by taking the yield on 10-yr to the highest point of the year.
But the bigger problem for stocks is the uncertainty that is presented here. With Europe now potentially in a tightening mode and talk of Japan about to enter one, this could pose some problems on the inflation front. And in light of the fact that Mr. Bernanke and company seem to have their eyes fixed squarely on anything related to inflation at the moment, one can easily argue that higher global rates could mean more rate hikes in the U.S. And the combination of a slowing economy, higher inflation, and increasing rates is not exactly what the bulls are looking for this year.
However, traders decided to not go down that road yesterday afternoon and instead focused on the fact that the Law of Large Numbers may not be impacting Google just yet. The spike rebound in GOOG seemed to lift traders� spirits across the board and helped the indices finish just mildly lower. So while stocks were indeed down on the day, they were far from out.
Turning to this morning, in the early going there are concerns about both the potential for higher rates in Japan and the ongoing mess in Iran. In Japan overnight, the country�s CPI report came in much higher than anticipated, which of course, prompted fears of higher rates. Japan has maintained an ultra-easy monetary policy for years and the fear now is that the BOJ might decide to tighten up a little when they meet next week.
In addition, the March 6th deadline for the IAEA�s decision on whether to refer Iran to the UN Security Council is causing some consternation in the energy pits. Today�s Iran-EU talks ended without any measurable result and Iran has threatened to end talks with Russia concerning the joint venture to enrich uranium for peaceful purposes if it is referred to the UN (which would undoubtedly result in sanctions). And while oil is not moving substantially higher this morning, prices are holding above $63.
Running through the pre-market indicators, overseas markets saw red in Asia thanks to the higher inflation report in Japan. Oil futures are steady this morning with crude currently trading +$0.10 to $63.46. Natural Gas is quoted lower by $0.08 at $6.68 right now. Gold futures are down -$1.70 to $568.50 and would appear to be range bound at the present time. Bond yields are moving slightly higher this morning with the 2-yr yield currently quoted at 4.73% while the 10-yr is at 4.64%. And finally, stock futures in the U.S. are pointing lower at the moment with the Dow currently -13, the S&P�s are down by about -2, and the NASDAQ is off by -4.
Stocks "In Play" This Morning:
AMZN � Judge rules company violated exclusivity rights with Toyrsus
GOOG � Trading higher after analyst meeting where CEO said international growth is not slowing
DELL � Barron�s says PC business could weaken near term
TOT � Added to Focus List at ING
SBUX � February comps higher by 8% vs. 6.5%
INTC � DigiTimes reports launch of Santa Rosa notebook may be delayed
AMD � New servers for GOOG to use AMD processors
CIEN � HSB believes demand is strengthening
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: AMD, INTC
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) 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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