David Moenning�s Daily State of the Markets: 04/13
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Ignoring the Obvious
The story of the day on Wednesday actually took place in the bond pits, yet went almost unnoticed. Bond yields moved up to 4.976% and closed at their highest yield since June 11, 2002. But for some reason, stock traders completely ignored the move and pushed the indices modestly higher.
Perhaps the thinking was that earnings will continue to come in strong, and in reality, that�s where the focus is right now. Perhaps traders remain upbeat over the idea of the Fed being almost done. Perhaps traders see the increase in yields as simply a catch-up move. Or perhaps the realization is that historically speaking, 5% is not a threat to economic growth. But, in any event, the bottom line is that the move up in bonds, which seemed to cause a great deal of concern last Friday, was simply ignored by the stock market yesterday.
Traders seemed far more interested in company-specific news such as the 65% improvement in earnings from Circuit City, the view from Vice Chairman Robert Lutz that GM will not see a strike, and the confirmation of China�s $5 Billion aircraft order with Boeing. GM�s spurt of more than 4% and Boeing�s romp to a new high helped push the Dow to a gain of 40 points.
The bulls also got a hand from the oil pits, where crude actually fell for a change and closed down -$0.38 to $68.62. The impetus for the move was the inventory data, which, for some reason, was viewed as a positive � or � perhaps not necessarily as a negative. Crude oil stockpiles rose by 3.2 million barrels, which was well above the expected increase of 1.2 million. Overall inventories rose to 346 million barrels, which was the highest level since May 1998.
However, the inventory report wasn�t all rosy. Another week of large drawdowns in refined products may keep the oil market on edge. Gasoline stocks fell by 3.9 million barrels, which was nearly double the expectations. And unfortunately, despite the increase in price, demand for gasoline continues to increase. And finally, distillate fuel inventories dropped by 4.2 million barrels, which was the most since last season�s hurricanes and more than three times the expectations. However, stock traders simply ignored this data as well.
There is little doubt that the upcoming holiday (the markets will be closed tomorrow in observance of Good Friday), had a lot to do with the action in the stock market. The day had a lackluster feel to it and volume remained light. So while the bulls will take the credit for their handiwork, the jury is still out on whether the minor rebound will be able to get legs.
Turning to this morning, the big story is that the 10-yr bond yield hit 5% in overnight trading. On the economic front, we finally have some data to sift through today. The report on Import Prices came in better than expected as prices fell -0.4% versus an expectation for an increase of +0.2%. March Retail Sales also came in a bit better than expected as sales rose by +0.6% versus expectation of +0.5% and last month�s numbers were revised higher. Stripping out autos, the numbers were not quite as strong with sales rising +0.4% versus expectations for +0.5%. Both the stock and bond markets had little immediate reaction to the numbers.
Running through the rest of the pre-game indicators, in overseas action, stock markets were up in Asia, but are down slightly in Europe. Oil futures are currently trading lower by $0.51 to $68.11. Natural Gas is trading down by $0.07 to $6.74. Bond yields are up so far this morning with the 2-yr yield at 4.92% and 10-yr is currently trading at 5.02%. And finally, an hour before the bell, stock futures in the U.S. are doing little with the Dow futures sporting a gain of +4 points, the S&Ps are up by 0.20, and the NASDAQ futures are higher by 1.80
Stocks �In Play� This Morning:
AMD � Reported $0.38 vs. $0.29, Guided flat to higher
LRCX � Reported $0.60 vs. $0.62, Guided higher
SNDK � To replace CHIR in S&P 500
HBC � Positive article in Barron�s
LEXR � SNDK considering unsolicited bid
JWN � Added to Focus List at AG Edwards
CC � Upgraded at Banc of America
CSCO � UBS raises target
GOOG � To launch online calendar today
INTC � Teamed with BIDU to develop search in China, Positive Comments from BofA
TSM � DigiTimes reports pricing heading higher at foundries
MO � Reiterated overweight at Morgan Stanley
GE � Reported $0.39 vs. $0.39, Revenues $37.8B vs. $37.4B
BK � Upgraded at Morgan Stanley
VMC � Guides higher
PHG � Upgraded at Lehman
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: LEH, MS, CC, CSCO, VMC
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.
The story of the day on Wednesday actually took place in the bond pits, yet went almost unnoticed. Bond yields moved up to 4.976% and closed at their highest yield since June 11, 2002. But for some reason, stock traders completely ignored the move and pushed the indices modestly higher.
Perhaps the thinking was that earnings will continue to come in strong, and in reality, that�s where the focus is right now. Perhaps traders remain upbeat over the idea of the Fed being almost done. Perhaps traders see the increase in yields as simply a catch-up move. Or perhaps the realization is that historically speaking, 5% is not a threat to economic growth. But, in any event, the bottom line is that the move up in bonds, which seemed to cause a great deal of concern last Friday, was simply ignored by the stock market yesterday.
Traders seemed far more interested in company-specific news such as the 65% improvement in earnings from Circuit City, the view from Vice Chairman Robert Lutz that GM will not see a strike, and the confirmation of China�s $5 Billion aircraft order with Boeing. GM�s spurt of more than 4% and Boeing�s romp to a new high helped push the Dow to a gain of 40 points.
The bulls also got a hand from the oil pits, where crude actually fell for a change and closed down -$0.38 to $68.62. The impetus for the move was the inventory data, which, for some reason, was viewed as a positive � or � perhaps not necessarily as a negative. Crude oil stockpiles rose by 3.2 million barrels, which was well above the expected increase of 1.2 million. Overall inventories rose to 346 million barrels, which was the highest level since May 1998.
However, the inventory report wasn�t all rosy. Another week of large drawdowns in refined products may keep the oil market on edge. Gasoline stocks fell by 3.9 million barrels, which was nearly double the expectations. And unfortunately, despite the increase in price, demand for gasoline continues to increase. And finally, distillate fuel inventories dropped by 4.2 million barrels, which was the most since last season�s hurricanes and more than three times the expectations. However, stock traders simply ignored this data as well.
There is little doubt that the upcoming holiday (the markets will be closed tomorrow in observance of Good Friday), had a lot to do with the action in the stock market. The day had a lackluster feel to it and volume remained light. So while the bulls will take the credit for their handiwork, the jury is still out on whether the minor rebound will be able to get legs.
Turning to this morning, the big story is that the 10-yr bond yield hit 5% in overnight trading. On the economic front, we finally have some data to sift through today. The report on Import Prices came in better than expected as prices fell -0.4% versus an expectation for an increase of +0.2%. March Retail Sales also came in a bit better than expected as sales rose by +0.6% versus expectation of +0.5% and last month�s numbers were revised higher. Stripping out autos, the numbers were not quite as strong with sales rising +0.4% versus expectations for +0.5%. Both the stock and bond markets had little immediate reaction to the numbers.
Running through the rest of the pre-game indicators, in overseas action, stock markets were up in Asia, but are down slightly in Europe. Oil futures are currently trading lower by $0.51 to $68.11. Natural Gas is trading down by $0.07 to $6.74. Bond yields are up so far this morning with the 2-yr yield at 4.92% and 10-yr is currently trading at 5.02%. And finally, an hour before the bell, stock futures in the U.S. are doing little with the Dow futures sporting a gain of +4 points, the S&Ps are up by 0.20, and the NASDAQ futures are higher by 1.80
Stocks �In Play� This Morning:
AMD � Reported $0.38 vs. $0.29, Guided flat to higher
LRCX � Reported $0.60 vs. $0.62, Guided higher
SNDK � To replace CHIR in S&P 500
HBC � Positive article in Barron�s
LEXR � SNDK considering unsolicited bid
JWN � Added to Focus List at AG Edwards
CC � Upgraded at Banc of America
CSCO � UBS raises target
GOOG � To launch online calendar today
INTC � Teamed with BIDU to develop search in China, Positive Comments from BofA
TSM � DigiTimes reports pricing heading higher at foundries
MO � Reiterated overweight at Morgan Stanley
GE � Reported $0.39 vs. $0.39, Revenues $37.8B vs. $37.4B
BK � Upgraded at Morgan Stanley
VMC � Guides higher
PHG � Upgraded at Lehman
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: LEH, MS, CC, CSCO, VMC
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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