David Moenning�s Daily State of the Markets: 03/10
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NASDAQ 6-Pack
It would appear that traders are having a hard time making up their minds about the state of the markets lately. Once again yesterday, stocks wound up reversing course from their early morning direction and the NASDAQ now finds itself with a full six-pack of losses.
The market headed higher at the open after being encouraged by the Bank of Japan�s decision to change its official policy stance without actually hiking rates. The move is being called a �Volcker Shift� as the BOJ decided to shift their approach and remove excess liquidity in the system by taking yen out of the money supply instead of raising rates (for now, anyway). The decision marked an end to the Japanese policy of fighting deflation and stands as an official pronouncement that their economy has finally turned the corner.
However, the market surrendered its gains in the afternoon and wound up finishing in the red on light volume. The decline appeared to coincide with the announcement of the Dubai Port deal (or we should say, the death of the deal) and the completion of the Treasury�s auction of 10-year notes. But in reality, the drop had more to do with the bulls �standing aside� in anticipation of this morning�s jobs data. With buyers keeping their hands in their pockets, sellers gained the upper hand and forced the indices modestly lower. And although the move did cause the S&P to pierce its 50-day moving average, the drop did little to impact the current sloppy trend.
Since Mr. Bernanke has made it clear that the Fed�s stance on raising interest rates after the March meeting will be dependent on the data, this morning�s jobs report takes on added importance. Traders are likely going to review the data and quickly make projections on the strength of the economy, the state of inflation, and what the Fed will likely do next.
There has been quite a bit of evidence lately pointing to a strengthening labor market, which, could wind up causing wage inflation. This, of course, is good for workers, but creates concern for central bankers. So the question of the day is if today�s employment data will confirm the indicators.
So without further adieu, let�s get to the report. In the month of February, the economy created 243,000 new jobs, which was much better than the consensus estimate for growth of 210,000. However, January�s job growth number was revised lower by -23K, so the net result is a wash. The unemployment rate ticked up a tenth to 4.8% but can be blamed on Katrina. Finally, average hourly earnings rose by 0.3%, which was in-line with expectations.
The instant analysis of this report is that the numbers were solid and there were no big surprises. The economy is continuing to create jobs, which is a good thing. We did not see a big pickup in earnings, which is also good from a wage-inflation standpoint. In short, since the report probably doesn�t provide the Fed any further ammunition, the thinking is that the economy can survive another rate hike or two. And to put it succinctly, this can be considered a positive for stocks.
Running through the rest of the pre-game indicators about 45 minutes before the bell, overseas markets were lower across the board as traders waited for the jobs numbers. Oil futures are basically unchanged this morning with crude currently trading +$0.10 to $60.57. Natural Gas is up a penny at $6.61 right now. Gold futures are lower by -$6.50 to $540.80. Bond yields are little changed after the report this morning with the 2-yr yield currently quoted at 4.72% while the 10-yr is at 4.74%. Note that the 10-yr remains higher than the 2-yr today. And finally, stock futures in the U.S. have been bouncing around a bit after the jobs data but are pointing higher at the moment with the Dow currently +22, the S&Ps are +2.20, and the NASDAQ is up by +2.0.
Stocks "In Play" This Morning:
AMZN � Reportedly in talks with movie studios to initiate download service
AA � Prudential downgrades Aluminum cos
ANN � Reports $0.43 vs. $0.40
BA � Received orders for 2 747-400 worth $450M
KRI � Bloomberg says company has received 2 buyout offers
CSCO � Goldman reiterates its outperform rating
URBN � Goldman reduces estimates
LECO � To be added to S&P 400
UVN � CNBC reporting a potential bid
AAPL � Credit Suisse is downbeat based on supplier data
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: CSCO
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.
It would appear that traders are having a hard time making up their minds about the state of the markets lately. Once again yesterday, stocks wound up reversing course from their early morning direction and the NASDAQ now finds itself with a full six-pack of losses.
The market headed higher at the open after being encouraged by the Bank of Japan�s decision to change its official policy stance without actually hiking rates. The move is being called a �Volcker Shift� as the BOJ decided to shift their approach and remove excess liquidity in the system by taking yen out of the money supply instead of raising rates (for now, anyway). The decision marked an end to the Japanese policy of fighting deflation and stands as an official pronouncement that their economy has finally turned the corner.
However, the market surrendered its gains in the afternoon and wound up finishing in the red on light volume. The decline appeared to coincide with the announcement of the Dubai Port deal (or we should say, the death of the deal) and the completion of the Treasury�s auction of 10-year notes. But in reality, the drop had more to do with the bulls �standing aside� in anticipation of this morning�s jobs data. With buyers keeping their hands in their pockets, sellers gained the upper hand and forced the indices modestly lower. And although the move did cause the S&P to pierce its 50-day moving average, the drop did little to impact the current sloppy trend.
Since Mr. Bernanke has made it clear that the Fed�s stance on raising interest rates after the March meeting will be dependent on the data, this morning�s jobs report takes on added importance. Traders are likely going to review the data and quickly make projections on the strength of the economy, the state of inflation, and what the Fed will likely do next.
There has been quite a bit of evidence lately pointing to a strengthening labor market, which, could wind up causing wage inflation. This, of course, is good for workers, but creates concern for central bankers. So the question of the day is if today�s employment data will confirm the indicators.
So without further adieu, let�s get to the report. In the month of February, the economy created 243,000 new jobs, which was much better than the consensus estimate for growth of 210,000. However, January�s job growth number was revised lower by -23K, so the net result is a wash. The unemployment rate ticked up a tenth to 4.8% but can be blamed on Katrina. Finally, average hourly earnings rose by 0.3%, which was in-line with expectations.
The instant analysis of this report is that the numbers were solid and there were no big surprises. The economy is continuing to create jobs, which is a good thing. We did not see a big pickup in earnings, which is also good from a wage-inflation standpoint. In short, since the report probably doesn�t provide the Fed any further ammunition, the thinking is that the economy can survive another rate hike or two. And to put it succinctly, this can be considered a positive for stocks.
Running through the rest of the pre-game indicators about 45 minutes before the bell, overseas markets were lower across the board as traders waited for the jobs numbers. Oil futures are basically unchanged this morning with crude currently trading +$0.10 to $60.57. Natural Gas is up a penny at $6.61 right now. Gold futures are lower by -$6.50 to $540.80. Bond yields are little changed after the report this morning with the 2-yr yield currently quoted at 4.72% while the 10-yr is at 4.74%. Note that the 10-yr remains higher than the 2-yr today. And finally, stock futures in the U.S. have been bouncing around a bit after the jobs data but are pointing higher at the moment with the Dow currently +22, the S&Ps are +2.20, and the NASDAQ is up by +2.0.
Stocks "In Play" This Morning:
AMZN � Reportedly in talks with movie studios to initiate download service
AA � Prudential downgrades Aluminum cos
ANN � Reports $0.43 vs. $0.40
BA � Received orders for 2 747-400 worth $450M
KRI � Bloomberg says company has received 2 buyout offers
CSCO � Goldman reiterates its outperform rating
URBN � Goldman reduces estimates
LECO � To be added to S&P 400
UVN � CNBC reporting a potential bid
AAPL � Credit Suisse is downbeat based on supplier data
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: CSCO
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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