David Moenning�s Daily State of the Markets: 06/02
Tweet
Share
E-mail
All About the Data
Good morning. Stocks advanced smartly yesterday as the market continued to respond to any and all economic data. Thursday�s session was brimming with information on manufacturing, labor, oil, retail sales, and inflation; however, today�s employment report remains the Big Kahuna data point for the week.
Overall, the data was well received by the markets and helped the bulls to continue pushing back from Tuesday�s drubbing. The Dow, which tacked on 92 points, was actually the laggard on the session as all the other major indices managed to finish with gains of 1% or more. In fact, all the major indices except for the DJIA have recovered Tuesday�s entire decline and now stand higher than last Friday�s close.
With traders being afflicted with a serious case of data dependency, the slew of information provided yesterday presented a solid backdrop for gains. While the markets are becoming more comfortable with perhaps one more rate hike in June, the data does not seem to make a case for additional rate increases after that.
Before the bell yesterday, the government reported that Nonfarm Productivity in the first quarter was actually weaker than expectations and compensation was revised lower. These data points suggest that the Fed�s work is having an impact on the economy and that wage inflation is not a concern at the present time.
Another report which confirmed the view that the previous rate hikes are affecting the economy came from the ISM report. The Manufacturing Index showed a larger than expected decline to 54.4 with nearly all indicators showing slower activity. However, the Prices Index rose 5.5 points to 77.0, which may have held up the celebration just a bit.
Yesterday�s report on Pending Home Sales continued to confirm that higher interest rates are slowing the housing market. Home sales fell 3.7% in April, which represented the biggest drop in 3 years and are now off by 11.7% from year ago levels. In addition, price appreciation continues to slow as home prices rose just 2% in the first quarter. Finally, the report on Construction Spending also came in a bit below expectations.
On the oil front, crude futures fell for the second straight day to close at $70.34 as the weekly inventory numbers showed a larger than expected build. Stockpiles of gasoline actually rose a bit less than expectations, but the third highest level ever for weekly imports helped support the idea that supplies are currently sufficient to meet the increasing demand. OPEC also helped out by leaving production quotas unchanged stating that it believes that $70 would slow global economic growth.
Surprisingly, the bond market had little reaction to the slew of data and yields were little changed on the session. The reality for the boys in the bond pits is that the Fed is focused on inflation and yesterday�s data provided no incremental data to move the market in either direction.
Turning to this morning, while yesterday�s data largely favored the bulls, the employment report was exactly what the bull camp was looking for. This is largely a case of bad news being good news for stocks and the jobs report was much weaker than the consensus was looking for.
May Nonfarm Payrolls increased by just 75,000, which was far below the expectations for gains in the 170,000 range and even below the �whisper numbers� in the 125,000 zone. In addition, the Labor Department revised both the March and April numbers lower with the net result being 37,000 fewer jobs.
The Unemployment rate fell to 4.6%, which is the lowest level since July 2001. And finally, Hourly Earnings came in with a gain of just 0.1%, which was again below expectations for an increase of +0.3%.
Stocks and bonds have both rallied strongly on the news, while the dollar is falling. But perhaps the biggest takeaway is that the Fed Funds futures market now projects just a 50% chance of another rate hike at the June Fed meeting, which is down from 68% prior to the release of the jobs data.
Running through the pre-game indicators, there were green screens all over the world overnight in response to Wall Street�s rebound. Oil futures are bouncing this morning on word that Iran is less than enthused with the latest incentives being offered up to stop enriching uranium. Oil is trading higher by $0.86 to $71.40 right now. Gold is also moving higher this morning in response to the lower dollar and is currently quoted up $5.00 to $639.50. Interest rates are moving lower on the jobs data with the 2-year currently trading at 4.96% while the 10-yr is quoted at 5.05% right now. And finally, with about 45 minutes before the bell, stock futures in the U.S. are moving on up. The Dow futures are currently higher by 48 points; the S&Ps are up by 7, while the NASDAQ is sporting a gain of almost 14 points.
Stocks �In Play� This Morning:
Research in Motion (RIMM) � Mentioned positively at Goldman Sachs
Qualcomm (QCOM) � Mentioned positively at Goldman Sachs
Ciena (CIEN) � Upgraded at Goldman
NYSE Group (NYX) � Confirms merger agreement with Euronext
Motorola � Mentioned positively at Oppenheimer
Bausch & Lomb (BOL) � Upgraded at Goldman
Gannett (GCI) � Downgraded at Morgan Stanley
Tribune (TRB) � Downgraded at Morgan Stanley
Union Pacific (UNP) � Upgraded at UBS
Pulte Homes (PHM) � Guides $0.85 to $0.95 vs. $1.09
Starbucks (SBUX) � May same store sales +7% vs. Street Account estimate +7.8%
Caremark Rx (CMX) � Mentioned positively at UBS
Medco Health (MHS) � Mentioned positively at UBS
Freeport McMoRan (FCX) � Upgraded at BMO Nesbitt
Electronic Arts (ERTS) � Upgraded at Wedbush
Positions in stocks mentioned: GS, MS, UNP, FCX
** 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.
Good morning. Stocks advanced smartly yesterday as the market continued to respond to any and all economic data. Thursday�s session was brimming with information on manufacturing, labor, oil, retail sales, and inflation; however, today�s employment report remains the Big Kahuna data point for the week.
Overall, the data was well received by the markets and helped the bulls to continue pushing back from Tuesday�s drubbing. The Dow, which tacked on 92 points, was actually the laggard on the session as all the other major indices managed to finish with gains of 1% or more. In fact, all the major indices except for the DJIA have recovered Tuesday�s entire decline and now stand higher than last Friday�s close.
With traders being afflicted with a serious case of data dependency, the slew of information provided yesterday presented a solid backdrop for gains. While the markets are becoming more comfortable with perhaps one more rate hike in June, the data does not seem to make a case for additional rate increases after that.
Before the bell yesterday, the government reported that Nonfarm Productivity in the first quarter was actually weaker than expectations and compensation was revised lower. These data points suggest that the Fed�s work is having an impact on the economy and that wage inflation is not a concern at the present time.
Another report which confirmed the view that the previous rate hikes are affecting the economy came from the ISM report. The Manufacturing Index showed a larger than expected decline to 54.4 with nearly all indicators showing slower activity. However, the Prices Index rose 5.5 points to 77.0, which may have held up the celebration just a bit.
Yesterday�s report on Pending Home Sales continued to confirm that higher interest rates are slowing the housing market. Home sales fell 3.7% in April, which represented the biggest drop in 3 years and are now off by 11.7% from year ago levels. In addition, price appreciation continues to slow as home prices rose just 2% in the first quarter. Finally, the report on Construction Spending also came in a bit below expectations.
On the oil front, crude futures fell for the second straight day to close at $70.34 as the weekly inventory numbers showed a larger than expected build. Stockpiles of gasoline actually rose a bit less than expectations, but the third highest level ever for weekly imports helped support the idea that supplies are currently sufficient to meet the increasing demand. OPEC also helped out by leaving production quotas unchanged stating that it believes that $70 would slow global economic growth.
Surprisingly, the bond market had little reaction to the slew of data and yields were little changed on the session. The reality for the boys in the bond pits is that the Fed is focused on inflation and yesterday�s data provided no incremental data to move the market in either direction.
Turning to this morning, while yesterday�s data largely favored the bulls, the employment report was exactly what the bull camp was looking for. This is largely a case of bad news being good news for stocks and the jobs report was much weaker than the consensus was looking for.
May Nonfarm Payrolls increased by just 75,000, which was far below the expectations for gains in the 170,000 range and even below the �whisper numbers� in the 125,000 zone. In addition, the Labor Department revised both the March and April numbers lower with the net result being 37,000 fewer jobs.
The Unemployment rate fell to 4.6%, which is the lowest level since July 2001. And finally, Hourly Earnings came in with a gain of just 0.1%, which was again below expectations for an increase of +0.3%.
Stocks and bonds have both rallied strongly on the news, while the dollar is falling. But perhaps the biggest takeaway is that the Fed Funds futures market now projects just a 50% chance of another rate hike at the June Fed meeting, which is down from 68% prior to the release of the jobs data.
Running through the pre-game indicators, there were green screens all over the world overnight in response to Wall Street�s rebound. Oil futures are bouncing this morning on word that Iran is less than enthused with the latest incentives being offered up to stop enriching uranium. Oil is trading higher by $0.86 to $71.40 right now. Gold is also moving higher this morning in response to the lower dollar and is currently quoted up $5.00 to $639.50. Interest rates are moving lower on the jobs data with the 2-year currently trading at 4.96% while the 10-yr is quoted at 5.05% right now. And finally, with about 45 minutes before the bell, stock futures in the U.S. are moving on up. The Dow futures are currently higher by 48 points; the S&Ps are up by 7, while the NASDAQ is sporting a gain of almost 14 points.
Stocks �In Play� This Morning:
Research in Motion (RIMM) � Mentioned positively at Goldman Sachs
Qualcomm (QCOM) � Mentioned positively at Goldman Sachs
Ciena (CIEN) � Upgraded at Goldman
NYSE Group (NYX) � Confirms merger agreement with Euronext
Motorola � Mentioned positively at Oppenheimer
Bausch & Lomb (BOL) � Upgraded at Goldman
Gannett (GCI) � Downgraded at Morgan Stanley
Tribune (TRB) � Downgraded at Morgan Stanley
Union Pacific (UNP) � Upgraded at UBS
Pulte Homes (PHM) � Guides $0.85 to $0.95 vs. $1.09
Starbucks (SBUX) � May same store sales +7% vs. Street Account estimate +7.8%
Caremark Rx (CMX) � Mentioned positively at UBS
Medco Health (MHS) � Mentioned positively at UBS
Freeport McMoRan (FCX) � Upgraded at BMO Nesbitt
Electronic Arts (ERTS) � Upgraded at Wedbush
Positions in stocks mentioned: GS, MS, UNP, FCX
** 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.
You May Also Be Interested In
- After-Hours Movers: AMAT, DLO, GLOB, YSS, ETON
- After-Hours Movers: CSCO, COHR, HLIT, CBRS, STUB, ENS
- After-Hours Movers: CRWV, NBIS, SMCI, LITE, CAVA, HRB
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!
