David Moenning�s Daily State of the Markets: 04/06
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Tipping Their Hand?
With stocks moving higher yesterday, the question of the day was if recent comments from Fed officials were designed to tip off the market as to the Fed�s intentions. Recall that on Monday, Fed governors Fisher and Lacker said that the economy is doing fine and that inflation is not much a concern going forward. Then on Tuesday evening, Fed governor Hoenig said that the Fed is �very close to where we need to be� and that the current Fed Funds rate is �in the upper range of neutrality.�
So, despite higher oil prices and the looming jobs report, traders decided to bet that the Fed is indeed tipping their hand right now. This meant that the bulls were given a green light to buy and stocks enjoyed a second straight day of gains. While the advance was modest, the S&P and NASDAQ finished at new five-year highs, while the NYSE, Russell 2000, S&P Small Cap and Mid Cap indices all once again scored fresh all-time closing highs.
Crude prices attempted to spoil the bulls� fun as an unexpected draw in gasoline inventories helped push oil prices higher. The drop of 4.1 million barrels was more than double the expectation and the decline was the largest deviation from the average inventory level since early 2003. While crude inventories actually increased last week, worries over gasoline supplies for the summer driving season pushed crude up $0.84 to a close of $67.07.
On the economic front, the ISM Non-Manufacturing Business Activity Index rose by 0.4 points in March to a reading of 60.5, which was higher than the expectations of 59.5. The inflation aspect of the report was also a positive as the prices index fell to its lowest reading in more than two years. The only worrisome part of the report was that managers noted a shortage of skilled labor. While not a huge concern, the labor market is one of the Fed�s primary focuses right now.
Traders also wondered if Treasury Secretary Snow was tipping off the market yesterday. It was reported that Snow suggested that the Friday jobs numbers will be good. While everyone knows that the administration gets the data ahead of time, the understanding is that the White House does not receive the numbers until 4:00 p.m., so this remark drew some speculation as to its intent.
All in all, the market sported a good feel to it; however there was some trepidation in front of today�s BOE and ECB meetings and Friday�s employment report. But, at this stage of the game, the bulls will simply smile and take the gains.
Turning to this morning, both the Bank of England and the ECB decided to leave interest rates unchanged. However, the increases in U.S. interest rates and oil futures seem to be weighing on the minds of traders an hour before the bell.
Running through the pre-game indicators, the overseas markets are mixed by region. Asian markets celebrated the solid economic data in the U.S. and both Hong Kong and Japan saw gains in excess of +1.5%. European bourses however are either slightly lower or hovering around breakeven. Oil futures are moving higher this morning and are currently trading up $0.73 to $67.80. Natural Gas is trading higher by $0.11 to $7.11. Gold is pushing the $600 level this morning and is currently up $6.70 to $599.40. Bond yields are also moving up this morning with the 2-yr yield at 4.82% and 10-yr currently trading at 4.88%. And finally, stock futures in the U.S. are doing little before the bell with the Dow futures sporting a drop of 3 points, the S&Ps are down by $1.30, and the NASDAQ futures are losing 0.50.
Stocks �In Play� This Morning:
LM � Upgraded at Keefe, Bruyette
AMD � ThinkEquity reiterates sell on inventory concerns
PFCB � Downgraded at Bear Stearns
BBBY � Reported $0.67 vs. $0.65, Raises guidance, Upgraded at Pru
BP � Reportedly the target of criminal investigation
EBAY � PayPal rolling out wireless payment service
NVDA � To introduce Dual TV tuner for PC
CMX � Initiates dividend of $0.10 per quarter
MRK � Long-term Vioxx user case dropped
JWN � Reports March same-store-sales +4.3% vs. StreetAccount 3.4%
SHLD � Received adequate commitment from shareholders for Sears Canada purchase
MMM � Ups guidance
ANF � March sales comps below StreetAccount estimates
TGT � March sales comps ahead of consensus, guides April higher
KSS � March sales comps +3.7% vs. StreetAccount estimates of +2.6%
WMT � March sales comps +1.4% vs. +1.3%
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: AMD, SHLD, CMX, JWN
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.
With stocks moving higher yesterday, the question of the day was if recent comments from Fed officials were designed to tip off the market as to the Fed�s intentions. Recall that on Monday, Fed governors Fisher and Lacker said that the economy is doing fine and that inflation is not much a concern going forward. Then on Tuesday evening, Fed governor Hoenig said that the Fed is �very close to where we need to be� and that the current Fed Funds rate is �in the upper range of neutrality.�
So, despite higher oil prices and the looming jobs report, traders decided to bet that the Fed is indeed tipping their hand right now. This meant that the bulls were given a green light to buy and stocks enjoyed a second straight day of gains. While the advance was modest, the S&P and NASDAQ finished at new five-year highs, while the NYSE, Russell 2000, S&P Small Cap and Mid Cap indices all once again scored fresh all-time closing highs.
Crude prices attempted to spoil the bulls� fun as an unexpected draw in gasoline inventories helped push oil prices higher. The drop of 4.1 million barrels was more than double the expectation and the decline was the largest deviation from the average inventory level since early 2003. While crude inventories actually increased last week, worries over gasoline supplies for the summer driving season pushed crude up $0.84 to a close of $67.07.
On the economic front, the ISM Non-Manufacturing Business Activity Index rose by 0.4 points in March to a reading of 60.5, which was higher than the expectations of 59.5. The inflation aspect of the report was also a positive as the prices index fell to its lowest reading in more than two years. The only worrisome part of the report was that managers noted a shortage of skilled labor. While not a huge concern, the labor market is one of the Fed�s primary focuses right now.
Traders also wondered if Treasury Secretary Snow was tipping off the market yesterday. It was reported that Snow suggested that the Friday jobs numbers will be good. While everyone knows that the administration gets the data ahead of time, the understanding is that the White House does not receive the numbers until 4:00 p.m., so this remark drew some speculation as to its intent.
All in all, the market sported a good feel to it; however there was some trepidation in front of today�s BOE and ECB meetings and Friday�s employment report. But, at this stage of the game, the bulls will simply smile and take the gains.
Turning to this morning, both the Bank of England and the ECB decided to leave interest rates unchanged. However, the increases in U.S. interest rates and oil futures seem to be weighing on the minds of traders an hour before the bell.
Running through the pre-game indicators, the overseas markets are mixed by region. Asian markets celebrated the solid economic data in the U.S. and both Hong Kong and Japan saw gains in excess of +1.5%. European bourses however are either slightly lower or hovering around breakeven. Oil futures are moving higher this morning and are currently trading up $0.73 to $67.80. Natural Gas is trading higher by $0.11 to $7.11. Gold is pushing the $600 level this morning and is currently up $6.70 to $599.40. Bond yields are also moving up this morning with the 2-yr yield at 4.82% and 10-yr currently trading at 4.88%. And finally, stock futures in the U.S. are doing little before the bell with the Dow futures sporting a drop of 3 points, the S&Ps are down by $1.30, and the NASDAQ futures are losing 0.50.
Stocks �In Play� This Morning:
LM � Upgraded at Keefe, Bruyette
AMD � ThinkEquity reiterates sell on inventory concerns
PFCB � Downgraded at Bear Stearns
BBBY � Reported $0.67 vs. $0.65, Raises guidance, Upgraded at Pru
BP � Reportedly the target of criminal investigation
EBAY � PayPal rolling out wireless payment service
NVDA � To introduce Dual TV tuner for PC
CMX � Initiates dividend of $0.10 per quarter
MRK � Long-term Vioxx user case dropped
JWN � Reports March same-store-sales +4.3% vs. StreetAccount 3.4%
SHLD � Received adequate commitment from shareholders for Sears Canada purchase
MMM � Ups guidance
ANF � March sales comps below StreetAccount estimates
TGT � March sales comps ahead of consensus, guides April higher
KSS � March sales comps +3.7% vs. StreetAccount estimates of +2.6%
WMT � March sales comps +1.4% vs. +1.3%
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: AMD, SHLD, CMX, JWN
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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