David Moenning�s Daily State of the Markets: 05/11
Tweet
Share
E-mail
Pausing the Game
Like a parent asking their son or daughter to hit the pause button on the video game so that they can eat dinner or heaven forbid, do their homework, Mr. Bernanke appeared to ask the FOMC yesterday to pause their little game long enough to do some homework of their own on the incoming economic data.
The much anticipated Fed meeting was actually a bit of a letdown. Since �Gentle Ben� had done a decent job of telegraphing the Fed�s intentions, there wasn�t all that much reaction to the statement accompanying the announcement. As everyone on the planet expected, the FOMC raised rates for the sixteenth straight time, which took the Fed Funds rate to an even 5% and the Discount Rate to 6%. But the FOMC then deftly avoided tipping their hand in the accompanying statement.
As everybody knows, the statement was the key to the day. Both the bulls and the bears were hoping that the Fed would give them an indication of their intentions for the June meeting and beyond. But instead they got mostly a repeat of last meeting�s statement.
The statement noted that economic growth was surprisingly strong in the first quarter but is likely to moderate to a more sustainable pace as the housing market cools off and the previous rate hikes and higher energy prices work their way through the system. The FOMC noted that as of yet, increases in energy prices have had only a modest impact on inflation, which remains well contained at the moment.
The statement reinforced the idea that the Fed has now shifted its focus from removing excess accommodation to containing inflation going forward and they reiterated that �some further policy firming may yet be needed.� The word �yet� was the subject of much discussion as it was the only change to the commentary on the subject of inflation.
Most analysts now expect the Fed to pause the game in order to review the incoming data. Of course the length of the pause is the subject of much speculation. But unless there is an unexpected surge in inflation, it looks like the game will remain paused at the June meeting.
Stocks did little with the report, primarily because the result was already baked into the cake. There were the obligatory sell programs, which knocked that Dow down a quick 40 points, but after that, the indices steadily recovered back to breakeven levels. And in short, the bulls appeared to also have hit the pause button in their current race to new highs game.
Gold and oil were also in the spotlight yesterday. Neither was in pause mode as Gold continued to march higher, gaining $4.20 to 705.70, which was the 9th up day in the last 10. Oil moved higher on increasing tensions with Iran despite bearish inventory numbers. Crude futures finished the day up $1.44 to $72.13, a number which definitely got some attention.
So with the Fed pausing to look around, the Dow closing in on the old highs, and commodity prices refusing to take a break, it will be very interesting to see if the bears can find a way to hit the pause button and interrupt the bulls� current dominance of the game.
Turning to this morning, we�ve finally got economic news before the bell and while it isn�t exactly what the Fed is looking for, you can bet that every single economic report is going to be placed under intense scrutiny over the coming weeks.
The report on Retail Sales came in a bit weaker than expected with sales increasing by +0.5%, which was less than Reuters� consensus estimate of +0.8%. Stripping out sales of autos, the numbers were also a bit below expectations with an increase of +0.7% vs. +0.9%. Stocks and bonds have both improved slightly on the report but not in any meaningful way.
Running through the rest of the pre-game indicators, with the exception of Japan, most major overseas markets are sporting green screens. Oil futures are continuing to move higher and at the moment are currently trading up $0.52 to $72.65. Gold is climbing again this morning with the futures currently quoted higher by $4.30 to $710.00. Interest rates are off their lows of the morning with the 2-year currently trading at 4.97% and the 10-yr is at 5.12%. And finally, with an hour before the bell, stock futures in the U.S. are doing very little. The Dow futures about 8 points above fair value, the S&Ps are about 2.5 points to the good, and the NASDAQ futures are sporting a gain of about 2 points.
Stocks �In Play� This Morning:
Johnson & Johnson (JNJ) � Upgraded at BofA
Ericsson (ERICY) � Upgraded at West LB
Intersil (ISIL) � Announces buyback
UnitedHealth (UNH) � Confirms SEC inquiry into options granting practice
American Intl Group (AIG) � Downgraded at Friedman, Billings
Aeroflex (ARXX) � Upgraded at Deutsche
Basic Energy Svcs (BAS) � Upgraded at UBS
Cumulus Media (CMLS) � Downgraded at RBC
Federated Dept Stores (FD) � Upgraded at Oppenheimer
General Motors (GM) � Mentioned cautiously at Prudential
Office Depot (ODP) � Upgraded at Citigroup
Affiliated Computer Svcs (ACS) � Delays filing 10-Q, Acknowledges backdating options
Echostar Comm (DISH) � Reports $0.33 vs. $0.41, Revenues $2.29 vs. $2.30
Urban Outfitters (URBN) � Reports $0.12 vs. $0.15
Disclosure: Long positions in stocks mentioned: JNJ, CHL, ACS
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.
Like a parent asking their son or daughter to hit the pause button on the video game so that they can eat dinner or heaven forbid, do their homework, Mr. Bernanke appeared to ask the FOMC yesterday to pause their little game long enough to do some homework of their own on the incoming economic data.
The much anticipated Fed meeting was actually a bit of a letdown. Since �Gentle Ben� had done a decent job of telegraphing the Fed�s intentions, there wasn�t all that much reaction to the statement accompanying the announcement. As everyone on the planet expected, the FOMC raised rates for the sixteenth straight time, which took the Fed Funds rate to an even 5% and the Discount Rate to 6%. But the FOMC then deftly avoided tipping their hand in the accompanying statement.
As everybody knows, the statement was the key to the day. Both the bulls and the bears were hoping that the Fed would give them an indication of their intentions for the June meeting and beyond. But instead they got mostly a repeat of last meeting�s statement.
The statement noted that economic growth was surprisingly strong in the first quarter but is likely to moderate to a more sustainable pace as the housing market cools off and the previous rate hikes and higher energy prices work their way through the system. The FOMC noted that as of yet, increases in energy prices have had only a modest impact on inflation, which remains well contained at the moment.
The statement reinforced the idea that the Fed has now shifted its focus from removing excess accommodation to containing inflation going forward and they reiterated that �some further policy firming may yet be needed.� The word �yet� was the subject of much discussion as it was the only change to the commentary on the subject of inflation.
Most analysts now expect the Fed to pause the game in order to review the incoming data. Of course the length of the pause is the subject of much speculation. But unless there is an unexpected surge in inflation, it looks like the game will remain paused at the June meeting.
Stocks did little with the report, primarily because the result was already baked into the cake. There were the obligatory sell programs, which knocked that Dow down a quick 40 points, but after that, the indices steadily recovered back to breakeven levels. And in short, the bulls appeared to also have hit the pause button in their current race to new highs game.
Gold and oil were also in the spotlight yesterday. Neither was in pause mode as Gold continued to march higher, gaining $4.20 to 705.70, which was the 9th up day in the last 10. Oil moved higher on increasing tensions with Iran despite bearish inventory numbers. Crude futures finished the day up $1.44 to $72.13, a number which definitely got some attention.
So with the Fed pausing to look around, the Dow closing in on the old highs, and commodity prices refusing to take a break, it will be very interesting to see if the bears can find a way to hit the pause button and interrupt the bulls� current dominance of the game.
Turning to this morning, we�ve finally got economic news before the bell and while it isn�t exactly what the Fed is looking for, you can bet that every single economic report is going to be placed under intense scrutiny over the coming weeks.
The report on Retail Sales came in a bit weaker than expected with sales increasing by +0.5%, which was less than Reuters� consensus estimate of +0.8%. Stripping out sales of autos, the numbers were also a bit below expectations with an increase of +0.7% vs. +0.9%. Stocks and bonds have both improved slightly on the report but not in any meaningful way.
Running through the rest of the pre-game indicators, with the exception of Japan, most major overseas markets are sporting green screens. Oil futures are continuing to move higher and at the moment are currently trading up $0.52 to $72.65. Gold is climbing again this morning with the futures currently quoted higher by $4.30 to $710.00. Interest rates are off their lows of the morning with the 2-year currently trading at 4.97% and the 10-yr is at 5.12%. And finally, with an hour before the bell, stock futures in the U.S. are doing very little. The Dow futures about 8 points above fair value, the S&Ps are about 2.5 points to the good, and the NASDAQ futures are sporting a gain of about 2 points.
Stocks �In Play� This Morning:
Johnson & Johnson (JNJ) � Upgraded at BofA
Ericsson (ERICY) � Upgraded at West LB
Intersil (ISIL) � Announces buyback
UnitedHealth (UNH) � Confirms SEC inquiry into options granting practice
American Intl Group (AIG) � Downgraded at Friedman, Billings
Aeroflex (ARXX) � Upgraded at Deutsche
Basic Energy Svcs (BAS) � Upgraded at UBS
Cumulus Media (CMLS) � Downgraded at RBC
Federated Dept Stores (FD) � Upgraded at Oppenheimer
General Motors (GM) � Mentioned cautiously at Prudential
Office Depot (ODP) � Upgraded at Citigroup
Affiliated Computer Svcs (ACS) � Delays filing 10-Q, Acknowledges backdating options
Echostar Comm (DISH) � Reports $0.33 vs. $0.41, Revenues $2.29 vs. $2.30
Urban Outfitters (URBN) � Reports $0.12 vs. $0.15
Disclosure: Long positions in stocks mentioned: JNJ, CHL, ACS
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.
You May Also Be Interested In
- After-Hours Movers: AMAT, DLO, GLOB, YSS, ETON
- After-Hours Movers: CRWV, NBIS, SMCI, LITE, CAVA, HRB
- After-Hours Movers: P, RIOT, BW, RKLB, HIMS, UPWK
Create E-mail Alert Related Categories
Contributors, Special ReportsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
