David Moenning�s Daily State of the Markets: 05/31
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Holiday Hangover
Those investors who may have been hoping to wander into the office and slowly work their way back into the holiday-shortened week (after several cups of coffee, of course) were rudely awakened yesterday morning. Instead of a dull, post-holiday session, stocks got slammed from the get-go and the bulls spent the morning searching for the Advil.
New Treasury Secretary Hank Paulson, a veteran on Wall Street, wasn�t exactly welcomed by his pals yesterday (but who knows, maybe they were short). One might have thought that the now former CEO of Goldman Sachs would have been greeted with open arms as the White House attempts to bolster its image with the Street. But instead, stocks plunged -184 points and erased the majority of last week�s bounce.
Several issues were cited as being the culprit for the misery. First, there were the surprisingly hawkish comments by Chicago Fed President Michael Moskow. Next, the nation�s largest retailer which is, of course, Wal-Mart, lowered guidance and suggested that higher gasoline prices were beginning to impact sales. Then there was the Consumer Confidence numbers, which actually came in a bit above expectations, but showed that the gang at Wal-Mart may have a point. And finally there was no shortage of reasons for buyers to hesitate in front of this week�s FOMC Minutes, an OPEC meting, and the all-important Jobs report on Friday.
The combination resulted in the buyers standing aside as the bulls were simply overrun by worry. Traders fretted that the Fed would go too far, that the economy was in far worse shape than previously thought, that the dollar would continue to fall, and that inflation would pick up. And by the end of the day, almost every investor wound up being worried about something.
The bears got the ball rolling as their inflation fighting hero; Michael Moskow told the audience on CNBC that it wasn�t enough to simply return rates to a neutral stance. His bold statement that the Fed has a lot more inflation fighting to do certainly got everyone�s attention. Mr. Moskow then whipped the bears into a frenzy by suggesting that the Fed should consider trying to actually push inflation down as opposed to simply attempting to keep it contained.
With the Fed and the market being officially �data dependent,� there is also much trepidation in front of Friday�s Jobs report. This meant the buyers weren�t interested in being run down by the oncoming train and that after a couple days of buying; the bears had clearly regained the upper hand.
So will the bears continue to dominate trading? Have the bulls finally met their match? Or was yesterday�s debacle simply an overreaction on light volume? For some answers, let�s turn to today�s action.
Turning to this morning, overseas markets got some decent economic news as India�s Q4 GDP numbers came in better than expected, Germany�s report on Retail Sales was also above expectations, and France�s equivalent of the PPI report was actually below the consensus estimate. The focal point here in the U.S. will be the release of the minutes from the recent FOMC meeting, which is expected at 2:00 pm.
Running through the rest of the pre-game indicators, Asian markets were lower while European bourses are enjoying modestly green screens across the board. Gold is also moving a down a bit this morning and is currently quoted at $658.60. Interest rates are a little changed this morning with the 2-year currently trading at 4.97% while the 10-yr is quoted at 5.08% right now. And finally, with about 90 minutes before the bell, stock futures in the U.S. are moving higher. The Dow futures are currently ahead by 35 points, the S&Ps are up by 4.50, while the NASDAQ is sporting a gain of 6 points.
The key question of the day is if yesterday�s action will serve as a wake-up call for the bulls, or become a trend for the bears to bank on.
Stay tuned.
Stocks �In Play� This Morning:
F5 Networks (FFIV) � Upgraded at Citigroup
ADC Telecomm (ADCT) � To acquire Andrew Corp
E-Trade (ET) � Upgraded at CRT Capital
Gold Fields (GFI) � Upgraded at Goldman Sachs
Barrick Gold (ABX) � Goldman upgrades gold stocks, favorites are ABX and NEM
Dell Computer (DELL) � Mentioned positively in Barron�s relating to insider buys
Costco Wholesale (COST) � Reported $0.49 vs. $0.50, Revenues $13.0B vs. $13.23B
Semtech (SMTC) � Reported $0.16 vs. $0.14
Mirant (MIR) � Unsolicited bid for NRG Energy rejected
L-3 Communications (LLL) � Downgraded at CIBC
Ingersoll-Rand (IR) � Downgraded at Deutsche Bank
American Standard (ASD) � Downgraded at Deutsche
Research in Motion (RIMM) � Upgraded at JP Morgan
Redback Networks (RBAK) � Initiated with Buy at UBS
Positions in stocks mentioned: ET, GS
** 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.
Those investors who may have been hoping to wander into the office and slowly work their way back into the holiday-shortened week (after several cups of coffee, of course) were rudely awakened yesterday morning. Instead of a dull, post-holiday session, stocks got slammed from the get-go and the bulls spent the morning searching for the Advil.
New Treasury Secretary Hank Paulson, a veteran on Wall Street, wasn�t exactly welcomed by his pals yesterday (but who knows, maybe they were short). One might have thought that the now former CEO of Goldman Sachs would have been greeted with open arms as the White House attempts to bolster its image with the Street. But instead, stocks plunged -184 points and erased the majority of last week�s bounce.
Several issues were cited as being the culprit for the misery. First, there were the surprisingly hawkish comments by Chicago Fed President Michael Moskow. Next, the nation�s largest retailer which is, of course, Wal-Mart, lowered guidance and suggested that higher gasoline prices were beginning to impact sales. Then there was the Consumer Confidence numbers, which actually came in a bit above expectations, but showed that the gang at Wal-Mart may have a point. And finally there was no shortage of reasons for buyers to hesitate in front of this week�s FOMC Minutes, an OPEC meting, and the all-important Jobs report on Friday.
The combination resulted in the buyers standing aside as the bulls were simply overrun by worry. Traders fretted that the Fed would go too far, that the economy was in far worse shape than previously thought, that the dollar would continue to fall, and that inflation would pick up. And by the end of the day, almost every investor wound up being worried about something.
The bears got the ball rolling as their inflation fighting hero; Michael Moskow told the audience on CNBC that it wasn�t enough to simply return rates to a neutral stance. His bold statement that the Fed has a lot more inflation fighting to do certainly got everyone�s attention. Mr. Moskow then whipped the bears into a frenzy by suggesting that the Fed should consider trying to actually push inflation down as opposed to simply attempting to keep it contained.
With the Fed and the market being officially �data dependent,� there is also much trepidation in front of Friday�s Jobs report. This meant the buyers weren�t interested in being run down by the oncoming train and that after a couple days of buying; the bears had clearly regained the upper hand.
So will the bears continue to dominate trading? Have the bulls finally met their match? Or was yesterday�s debacle simply an overreaction on light volume? For some answers, let�s turn to today�s action.
Turning to this morning, overseas markets got some decent economic news as India�s Q4 GDP numbers came in better than expected, Germany�s report on Retail Sales was also above expectations, and France�s equivalent of the PPI report was actually below the consensus estimate. The focal point here in the U.S. will be the release of the minutes from the recent FOMC meeting, which is expected at 2:00 pm.
Running through the rest of the pre-game indicators, Asian markets were lower while European bourses are enjoying modestly green screens across the board. Gold is also moving a down a bit this morning and is currently quoted at $658.60. Interest rates are a little changed this morning with the 2-year currently trading at 4.97% while the 10-yr is quoted at 5.08% right now. And finally, with about 90 minutes before the bell, stock futures in the U.S. are moving higher. The Dow futures are currently ahead by 35 points, the S&Ps are up by 4.50, while the NASDAQ is sporting a gain of 6 points.
The key question of the day is if yesterday�s action will serve as a wake-up call for the bulls, or become a trend for the bears to bank on.
Stay tuned.
Stocks �In Play� This Morning:
F5 Networks (FFIV) � Upgraded at Citigroup
ADC Telecomm (ADCT) � To acquire Andrew Corp
E-Trade (ET) � Upgraded at CRT Capital
Gold Fields (GFI) � Upgraded at Goldman Sachs
Barrick Gold (ABX) � Goldman upgrades gold stocks, favorites are ABX and NEM
Dell Computer (DELL) � Mentioned positively in Barron�s relating to insider buys
Costco Wholesale (COST) � Reported $0.49 vs. $0.50, Revenues $13.0B vs. $13.23B
Semtech (SMTC) � Reported $0.16 vs. $0.14
Mirant (MIR) � Unsolicited bid for NRG Energy rejected
L-3 Communications (LLL) � Downgraded at CIBC
Ingersoll-Rand (IR) � Downgraded at Deutsche Bank
American Standard (ASD) � Downgraded at Deutsche
Research in Motion (RIMM) � Upgraded at JP Morgan
Redback Networks (RBAK) � Initiated with Buy at UBS
Positions in stocks mentioned: ET, GS
** 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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