David Moenning�s Daily State of the Markets: 05/19
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Lacker Steals the Ball
After a quick 450 drop on the Dow and 7 straight down days over on the NASDAQ, most everyone woke up yesterday looking for some sort of rally to commence. Things looked solid early on thanks to some positive earnings and traders were anxious to see what the bulls would be able to do with this possession.
But with no fewer than five Fed officials speaking publicly and reports on the LEI and Philly Fed looming, there was a good bit of trepidation on the part of the bulls and it appeared that buyers were few and far between. The angst displayed by the bulls was apparently well deserved as the Fed Governor Lacker got everyone�s attention by saying that inflation is a bit above the Fed�s comfort zone and that concerns over future inflation makes a pause �less likely.�
While the comment was not widely publicized by the media, it was obvious that Mr. Lacker had managed to come up with a big steal for the bears. Everybody expected a rally try from the bull camp, but the Lacker comment simply handed the ball right back to the sellers. And although the bears took their sweet time before making a move, they did wind up with another score by the end of the day.
On the economic front, the news was mixed and appeared to offer something to both teams. The Philly Fed Report showed modest strength in the economy but provided more fuel for inflation worries. However, the picture was less than rosy as the employment index dropped a record 20.6 points to its lowest level since late 2003. In addition, the outlook for the economy going forward was muted with the Future Activity Index dropping 5.7 points. But, the pricing components of the report continued to support an argument for higher inflation, which will most likely keep the Fed in play.
The other bit of economic data proved to be of little value to either team. The Index of Leading Economic Indicators actually fell -0.1% in April. Over the past six months, the index has risen by 1.5% with 80% of the indicators advancing, which indicates a modest growth rate for the economy overall.
Bond traders apparently liked what they heard yesterday, as the yield on the 10-year fell precipitously to close at 5.073%. This move seemed to be counterintuitive to all the worries over inflation, but stock traders are not known for looking at things as objectively as the boys in the bond pits.
So with the Dow dropping another 77 points and the NASDAQ making it 8 straight losses, it would appear that we have a �waterfall decline� on our hands. The good news is that, unless we are about to crash, these �bad news panics� are usually relatively short-lived.
The problem at the moment is the new and purportedly more �transparent� Fed continues to provide mixed signals. For example, while the Fed has said it wants to pause to see the impact of the last 16 rate hikes, yesterday you had Fed officials saying, �maybe, maybe not� with regard to the plan. In short, this is causing uncertainty, and we all know how the market loves that.
Turning to this morning, it looks once again as if the bulls will attempt to circle the wagons. Stocks are clearly oversold, sentiment has become overly negative, and in short, the bulls are due. There is a generally positive reaction to Dell�s earnings and the announcement that they will begin using AMD chips later this year.
In other news this morning, Iran appears to be looking for ways to settle the current standoff with the U.N. over its nuclear ambitions and we learned that Japan�s economy grew faster than expected in the first quarter.
Running through the pre-game indicators, overseas markets in Asia were higher while European markets are mixed at the moment. Oil futures are trading up by $0.18 right now to $66.58. Gold is lower again this morning and is quoted down $10.40 to $670.50 right now. Interest rates are little changed this morning and the 2-year is currently trading at 4.95% while the 10-yr is at 5.07%. And finally, with about an hour before the bell, stock futures in the U.S. are trying to move higher. The Dow futures are currently up by 46 points, the S&Ps are higher by 4.70, and the NASDAQ is sporting a gain of 7.5 points.
Stocks �In Play� This Morning:
Advanced Micro Devices (AMD) � Dell announce it will begin using AMD chips, Upgraded at CIBC
Dell Computer (DELL) � Reported $0.33 vs. $0.33, Revenues $14.22B vs. $14.21B, Downgraded at Credit Suisse, Upgraded at Citigroup
Abercrombie & Fitch (ANF) � Upgraded at Suntrust
Advance Auto Parts (AAP) � Upgraded at Goldman Sachs
Genentech (DNA) � Upgraded at Morgan Stanley
Imclone (IMCL) � Downgraded at Morgan Stanley
AT&T (T) � Will offer TV services by year end in major markets
Brocade Comm (BRCD) � Reported $0.10 vs. $0.06, Revenues $182.7 vs. $160.7, Guides higher
Gap Inc (GPS) � Reported $0.28 vs. $0.27
Nordstrom Inc (JWN) � Reported $0.48 vs. $0.45
Marvell Technology (MRVL) � Reported $0.44 vs. $0.42, Revenues $521.2M vs. 516.7M, Upgraded at Kaufman Bros
Vitesse Semiconductor (VTSS) � Receives subpoena regarding stock option grants
Western Digital (WDC) � Mentioned as takeover at Bear Stearns
Midwest Air (MEH) � Downgraded at Raymond James
Chartered Semi (CHRT) � Positive mention at Bear Stearns
Arbitron (ARB) � Upgraded at Stifel
Motorola (MOT) � Mentioned positively at Citigroup
For More of David Moenning�s Market Analysis, Stock Portfolios, and Trading Ideas, visit: www.TopGunsTrading.com
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management and Co-Founder of TopGunsTrading.com 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.
After a quick 450 drop on the Dow and 7 straight down days over on the NASDAQ, most everyone woke up yesterday looking for some sort of rally to commence. Things looked solid early on thanks to some positive earnings and traders were anxious to see what the bulls would be able to do with this possession.
But with no fewer than five Fed officials speaking publicly and reports on the LEI and Philly Fed looming, there was a good bit of trepidation on the part of the bulls and it appeared that buyers were few and far between. The angst displayed by the bulls was apparently well deserved as the Fed Governor Lacker got everyone�s attention by saying that inflation is a bit above the Fed�s comfort zone and that concerns over future inflation makes a pause �less likely.�
While the comment was not widely publicized by the media, it was obvious that Mr. Lacker had managed to come up with a big steal for the bears. Everybody expected a rally try from the bull camp, but the Lacker comment simply handed the ball right back to the sellers. And although the bears took their sweet time before making a move, they did wind up with another score by the end of the day.
On the economic front, the news was mixed and appeared to offer something to both teams. The Philly Fed Report showed modest strength in the economy but provided more fuel for inflation worries. However, the picture was less than rosy as the employment index dropped a record 20.6 points to its lowest level since late 2003. In addition, the outlook for the economy going forward was muted with the Future Activity Index dropping 5.7 points. But, the pricing components of the report continued to support an argument for higher inflation, which will most likely keep the Fed in play.
The other bit of economic data proved to be of little value to either team. The Index of Leading Economic Indicators actually fell -0.1% in April. Over the past six months, the index has risen by 1.5% with 80% of the indicators advancing, which indicates a modest growth rate for the economy overall.
Bond traders apparently liked what they heard yesterday, as the yield on the 10-year fell precipitously to close at 5.073%. This move seemed to be counterintuitive to all the worries over inflation, but stock traders are not known for looking at things as objectively as the boys in the bond pits.
So with the Dow dropping another 77 points and the NASDAQ making it 8 straight losses, it would appear that we have a �waterfall decline� on our hands. The good news is that, unless we are about to crash, these �bad news panics� are usually relatively short-lived.
The problem at the moment is the new and purportedly more �transparent� Fed continues to provide mixed signals. For example, while the Fed has said it wants to pause to see the impact of the last 16 rate hikes, yesterday you had Fed officials saying, �maybe, maybe not� with regard to the plan. In short, this is causing uncertainty, and we all know how the market loves that.
Turning to this morning, it looks once again as if the bulls will attempt to circle the wagons. Stocks are clearly oversold, sentiment has become overly negative, and in short, the bulls are due. There is a generally positive reaction to Dell�s earnings and the announcement that they will begin using AMD chips later this year.
In other news this morning, Iran appears to be looking for ways to settle the current standoff with the U.N. over its nuclear ambitions and we learned that Japan�s economy grew faster than expected in the first quarter.
Running through the pre-game indicators, overseas markets in Asia were higher while European markets are mixed at the moment. Oil futures are trading up by $0.18 right now to $66.58. Gold is lower again this morning and is quoted down $10.40 to $670.50 right now. Interest rates are little changed this morning and the 2-year is currently trading at 4.95% while the 10-yr is at 5.07%. And finally, with about an hour before the bell, stock futures in the U.S. are trying to move higher. The Dow futures are currently up by 46 points, the S&Ps are higher by 4.70, and the NASDAQ is sporting a gain of 7.5 points.
Stocks �In Play� This Morning:
Advanced Micro Devices (AMD) � Dell announce it will begin using AMD chips, Upgraded at CIBC
Dell Computer (DELL) � Reported $0.33 vs. $0.33, Revenues $14.22B vs. $14.21B, Downgraded at Credit Suisse, Upgraded at Citigroup
Abercrombie & Fitch (ANF) � Upgraded at Suntrust
Advance Auto Parts (AAP) � Upgraded at Goldman Sachs
Genentech (DNA) � Upgraded at Morgan Stanley
Imclone (IMCL) � Downgraded at Morgan Stanley
AT&T (T) � Will offer TV services by year end in major markets
Brocade Comm (BRCD) � Reported $0.10 vs. $0.06, Revenues $182.7 vs. $160.7, Guides higher
Gap Inc (GPS) � Reported $0.28 vs. $0.27
Nordstrom Inc (JWN) � Reported $0.48 vs. $0.45
Marvell Technology (MRVL) � Reported $0.44 vs. $0.42, Revenues $521.2M vs. 516.7M, Upgraded at Kaufman Bros
Vitesse Semiconductor (VTSS) � Receives subpoena regarding stock option grants
Western Digital (WDC) � Mentioned as takeover at Bear Stearns
Midwest Air (MEH) � Downgraded at Raymond James
Chartered Semi (CHRT) � Positive mention at Bear Stearns
Arbitron (ARB) � Upgraded at Stifel
Motorola (MOT) � Mentioned positively at Citigroup
For More of David Moenning�s Market Analysis, Stock Portfolios, and Trading Ideas, visit: www.TopGunsTrading.com
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management and Co-Founder of TopGunsTrading.com 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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