David Moenning�s Daily State of the Markets: 03/06

Still Conflicted

Given the sporadic behavior lately, it is safe to say that the market continues to be conflicted on just about every topic. Last week�s up-down-up-down action made this point perfectly clear as traders weren�t sure what to make of the outlook on the economy, the consumer, inflation, and the Fed.

Stocks opened lower Friday morning on news that things are not going so well at Intel. The world�s largest chipmaker lowered the midpoint of its revenue projections and said that sales may be lower than expected. Interest rates also put pressure on stocks in the early going as the 10-yr moved up near the highest level in a year. But then the cavalry arrived in the form of a couple statements from Fed officials.

Fed Vice Chairman Roger Ferguson said that inflation at the core level remains in check and hinted that FOMC policy may soon moderate. Traders were also encouraged by a statement from Minneapolis Fed President Stern, who said that he is comfortable with the view that the Fed does not need to go beyond neutral at the present time.

So with the feeling that the Fed may not become public enemy number one anytime soon, the bulls quickly recognized an opportunity and moved the S&P 500 up to the highest point of the year. And with the Dow sporting a gain of 80 points after lunch, it looked like the market�s game of reversing the prior day�s result was alive and well.

But the combination of uncertainty over Iran and higher oil prices ruined the mood and, in short, the bulls lost yet another golden opportunity for a breakout. While it was disappointing to see the day�s gains evaporate, the move didn�t really do much to change the current picture. The major indices remain stuck in neutral and yet very near recent highs. Thus, it would appear that traders are waiting for either a positive catalyst to move stocks up and out of the range or a reason to revisit the lower end.

In looking ahead, market players may choose to look to this week�s economic data for direction once again. While last week�s numbers didn�t provide a clear picture, this week we get the big Kahuna, the jobs report, on Friday. Coming this week:

Monday: Pending Home Sales and Factory Orders at 10:00 a.m.

Tuesday: Q4 Productivity and Consumer Credit

Thursday: Trade Balance and Weekly Jobless Claims

Friday: Employment Report, Wholesale Inventories, and Monthly Budget Statement

Turning to this morning, the settlement of the RIMM case after the bell on Friday afternoon seems to have lifted the spirits of tech traders and Blackberry users everywhere. Traders are also cognizant of the fact that the IAEA meets today regarding the Iran nuclear issue. The situation looks hopeful this morning as talks with the EU are reportedly making progress. In addition, the bulls love a good Monday morning takeover deal and they�ve got one today in the AT&T-BellSouth deal. This, of course, is spurring speculation on who�s next in the industry as it appears that consolidation will continue until the old AT&T is put back together again. And finally, it doesn�t hurt that Citigroup upgraded Intel this morning.

Running through the pre-market indicators, overseas markets are a mixed bag. Japan was up nicely while Hong Kong was lower. France is up, Germany is down, and the U.K. is up nicely. Oil futures are lower this morning with crude currently trading -$0.58 to $63.09. Natural Gas is quoted lower by $0.20 at $6.59 right now. Gold futures are down -$1.00 to $567. Bond yields are moving up strongly again this morning and could pose a problem later on. The 2-yr yield is currently quoted at 4.76% while the 10-yr is at 4.71%, which is the highest level since June 2004. And finally, stock futures in the U.S. are pointing higher at the moment with the Dow currently +4, the S&P�s are up by about +2.50, and the NASDAQ is ahead by +7.

Stocks "In Play" This Morning:
INTC � Upgraded at Citigroup
BLS � Deal with T for $67B
RIMM � Settled case with NTP for $612.5M
AMAT � Upgraded at CIBC
GM � Plans to sell portion of Suzuki
AMD � To announce new Operon models
NEM � Downgraded at CIBC
ANF � Downgraded at AG Edwards

Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: AMD, INTC, AMAT

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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