David Moenning�s Daily State of the Markets: 03/16
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Beige Is The New Green
For much of the session yesterday, it looked like the market couldn�t decide which way to go. The major indices had broken above important resistance the day before, but had done so on light volume. The morning economic news was solid, but nothing to get charged up about - especially with today�s CPI looming. Oil was a bit lower on the inventory data, but the move was attracting little attention. There were several positive data points on the earnings front, but rates were rising again. So by mid day, traders were left wondering, �Now what?�
But just after lunch, the bulls got exactly what they were looking for. Providing more evidence that Goldilocks is alive and well, the Fed�s Beige Book report showed that the economy was in good shape and that inflation pressures remain muted. And although the Fed itself doesn�t put much stock in this particular report, the idea of a growing economy without increasing inflation was music to traders� ears.
At this stage, it is apparent that the markets are comfortable with the idea of another hike or two and any evidence which suggests that the Fed will soon cease and desist (or at least pause) is considered positive. Most participants believe that the economy and the market have held up remarkably well during the combination rate hikes, the surge in oil, and the onslaught of hurricane season. Thus, the thinking is that the economy will still be standing tall in June when the Fed finally calls it a day.
The fact that economic stalwarts such as DuPont, Union Pacific, and GE all either raised earnings guidance for the current quarter or had it done for them by analysts, was certainly well received. Now toss in lower oil prices in response to the inventory numbers, and the equation results in higher stock prices.
The Dow and S&P moved up to another new cycle high while the NYSE and Russell 2000 marched to fresh all-time highs. Breadth was solid and volume did improve, but remained on the light side. The bulls will argue that we needn�t worry about the volume due to the fact that there was likely some hesitancy in front of this morning�s CPI numbers. Their thinking is that once we get the inflation numbers out of the way, it�s up, up and away from here. The bears, well, they�re still skeptical. But that�s nothing new.
Turning to this morning, the primary focus is on the economic data. So without further adieu, let�s get to it. The headline CPI number was expected to show little change at +0.1%, while the consensus on the Core Rate was for an increase of +0.2%. What we got from the report was just that, as both numbers came in right around consensus. CPI was reported at +0.1 while the Core Rate was also at +0.1, which was a smidge below estimates. The year-over-year Core number came in at +2.1%. In short, these numbers confirm the presence of Goldilocks and can be considered a positive.
In addition, both the Housing Starts and Permit numbers were a little better than expected. And finally, the weekly jobless claims number was a bit higher than anticipated. In response, the markets have improved with bond yields a bit lower and stock futures a little higher.
Running through the rest of the pre-game indicators about 45 minutes before the bell, overseas markets are a mixed bag. Oil futures are little changed this morning with crude currently trading at $62.17. Natural Gas is trading down -$0.03 at $7.14 right now. Gold futures are higher by +$0.30 to $554.70. Bond yields are a little lower this morning with the 2-yr yield currently quoted at 4.65% while the 10-yr is at 4.70%. And finally, stock futures in the U.S. have moved up nicely after the inflation report and are pointing higher at the moment. The Dow futures are currently +18, the S&Ps are +3.30, and the NASDAQ is ahead by +5.50.
Stocks "In Play" This Morning:
AAPL � Price target reduced at Bear Stearns
MOT � Oppenheimer reiterates Buy rating
QCOM � Upgraded at Merrill
XOM � WSJ reports Venezuela planning a retroactive production tax. Also affects CVS, BP, COP and TOT
GOOG � Financial Times reports company planning online retail platform
CAG � Reduces dividend as part of restructured growth strategy
WYNN � To restate earnings for 2003, 2004, and first 9 mos of 2005
RIMM � Testing Blackberry service in China
BSC � Reports $3.54 vs. $2.96 Revenues $2.82B vs. $2.06B
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: MOT, QCOM, BSC
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
For much of the session yesterday, it looked like the market couldn�t decide which way to go. The major indices had broken above important resistance the day before, but had done so on light volume. The morning economic news was solid, but nothing to get charged up about - especially with today�s CPI looming. Oil was a bit lower on the inventory data, but the move was attracting little attention. There were several positive data points on the earnings front, but rates were rising again. So by mid day, traders were left wondering, �Now what?�
But just after lunch, the bulls got exactly what they were looking for. Providing more evidence that Goldilocks is alive and well, the Fed�s Beige Book report showed that the economy was in good shape and that inflation pressures remain muted. And although the Fed itself doesn�t put much stock in this particular report, the idea of a growing economy without increasing inflation was music to traders� ears.
At this stage, it is apparent that the markets are comfortable with the idea of another hike or two and any evidence which suggests that the Fed will soon cease and desist (or at least pause) is considered positive. Most participants believe that the economy and the market have held up remarkably well during the combination rate hikes, the surge in oil, and the onslaught of hurricane season. Thus, the thinking is that the economy will still be standing tall in June when the Fed finally calls it a day.
The fact that economic stalwarts such as DuPont, Union Pacific, and GE all either raised earnings guidance for the current quarter or had it done for them by analysts, was certainly well received. Now toss in lower oil prices in response to the inventory numbers, and the equation results in higher stock prices.
The Dow and S&P moved up to another new cycle high while the NYSE and Russell 2000 marched to fresh all-time highs. Breadth was solid and volume did improve, but remained on the light side. The bulls will argue that we needn�t worry about the volume due to the fact that there was likely some hesitancy in front of this morning�s CPI numbers. Their thinking is that once we get the inflation numbers out of the way, it�s up, up and away from here. The bears, well, they�re still skeptical. But that�s nothing new.
Turning to this morning, the primary focus is on the economic data. So without further adieu, let�s get to it. The headline CPI number was expected to show little change at +0.1%, while the consensus on the Core Rate was for an increase of +0.2%. What we got from the report was just that, as both numbers came in right around consensus. CPI was reported at +0.1 while the Core Rate was also at +0.1, which was a smidge below estimates. The year-over-year Core number came in at +2.1%. In short, these numbers confirm the presence of Goldilocks and can be considered a positive.
In addition, both the Housing Starts and Permit numbers were a little better than expected. And finally, the weekly jobless claims number was a bit higher than anticipated. In response, the markets have improved with bond yields a bit lower and stock futures a little higher.
Running through the rest of the pre-game indicators about 45 minutes before the bell, overseas markets are a mixed bag. Oil futures are little changed this morning with crude currently trading at $62.17. Natural Gas is trading down -$0.03 at $7.14 right now. Gold futures are higher by +$0.30 to $554.70. Bond yields are a little lower this morning with the 2-yr yield currently quoted at 4.65% while the 10-yr is at 4.70%. And finally, stock futures in the U.S. have moved up nicely after the inflation report and are pointing higher at the moment. The Dow futures are currently +18, the S&Ps are +3.30, and the NASDAQ is ahead by +5.50.
Stocks "In Play" This Morning:
AAPL � Price target reduced at Bear Stearns
MOT � Oppenheimer reiterates Buy rating
QCOM � Upgraded at Merrill
XOM � WSJ reports Venezuela planning a retroactive production tax. Also affects CVS, BP, COP and TOT
GOOG � Financial Times reports company planning online retail platform
CAG � Reduces dividend as part of restructured growth strategy
WYNN � To restate earnings for 2003, 2004, and first 9 mos of 2005
RIMM � Testing Blackberry service in China
BSC � Reports $3.54 vs. $2.96 Revenues $2.82B vs. $2.06B
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: MOT, QCOM, BSC
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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