David Moenning�s Daily State of the Markets: 07/07
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Has Goldilocks Returned?
Good morning. Traders continued to play on the see-saw yesterday as the trend of prices being down one day and then up the next, held up for a fourth straight session. However, the bulls have to be pleased with their handiwork as stocks were able to advance in front of the all-important jobs data. Normally there might be some hesitancy in front a report of this magnitude, but this time, the Dow managed to push on to higher ground.
But to be fair, the Dow�s gain was a bit misleading. Much of the move can be traced to a $4.43 advance from Altria, which received a favorable ruling from Florida�s Supreme Court. In fact, the rest of the major indices sported returns that were much less impressive than the 73 point (0.66%) gain on the venerable DJIA. The NASDAQ closed with a gain of less than 0.1%, while the S&P 500, Small Caps, and Mid Caps rose just about 0.25%.
It was a mixture of economic data that provided the backdrop for yesterday�s price improvement. We should remember that the bulls are looking for Goldilocks at every turn and yesterday�s numbers seem to have provided a not-too-hot but not-too-cold view of the economy.
For example, the ISM Non-Manufacturing Index fell 3.1 points in June to 57.0, which indicates a slower but still healthy rate of growth. Analysts had been looking for a decline of about a point to a reading of 59.0. And while the Prices Index (inflation) fell by 3.6 points, it remained at a fairly high level and members remain concerned about raw material prices.
Next up, the report on Pending Home Sales actually came in a bit better than expected. This definitely falls into the not-too-cold category as economists are watching the housing data closely for signs of a collapse. However, the 1.3% increase in May, which was led by a strong increase of 10% in the West, suggests the home sales may be stabilizing.
And finally, the Chain Store Sales data from June came in modestly higher, but were definitely not indicative of an overheating economy. Chain store sales rose 2.6% in June, but were hurt by tough comparisons and some crummy weather in the Northeast.
Turning to this morning, it�s all about jobs. The ADP report had prepared the market for a better-than expected number (to the tune of 368,000 new jobs), but the actual report came in weaker than expected. June Nonfarm payrolls increased by just 121,000, which was lower than the 200,000 new jobs that analysts had been looking for. The rest of the report was pretty much in line with expectations as the Unemployment Rate held steady at 4.6%, Average Hourly Earnings came in at +0.5% versus +0.3%, and the average workweek was reported at 33.9 vs. expectations for 33.8.
Stocks and bonds are both rallying on this Goldilocks report with the yield on the ten-year, as well as the expectations for further rate hikes, on the decline. Stocks have perked up nicely on the news as traders now assume that the chances of a pause in August have increased significantly.
Running through the rest of the pre-game indicators, overseas markets made fractional moves in front of the data here in the U.S. Gold is moving a little higher this morning and is currently ahead by $1.70 to $638 at the moment. Oil is moving up this morning with the August crude contract trading higher by $0.46 to $75.60 right now. Interest rates are moving down after the jobs report with the 2-year currently trading at 5.18% while the 10-yr is quoted at 5.15% right now. And finally, with about an hour before the bell, stock futures in the U.S. are heading higher. The Dow futures are currently ahead by 36 points; the S&Ps are up by 4.50, and the NASDAQ is sporting a gain of about 5 points.
Stocks �In Play� This Morning:
Advanced Micro Devices (AMD) � Guides Q2 revenues below consensus
Disney (DIS) � Mentioned positively at Goldman Sachs
Openwave (OPWV) � Downgraded at Piper, Thomas Weisel
Qwest (Q) � Downgraded at Goldman Sachs
General Motors (GM) � Upgraded at Deutsche
3M (MMM) � Upgraded at JP Morgan
Intel (INTC) � Prudential reduces estimates
XTO Energy (XTO) � Upgraded at Citigroup
Vivendi (V) � Downgraded at Lehman
Lowes (LOW) - � Downgraded at AG Edwards
Michaels Stores (MIK) � Downgraded at AG Edwards
Parker Hannifan (PH) � Upgraded at Citigroup
Business Objects (BOBJ) � Downgraded at JMP Securities, JP Morgan, RBC Capital
Compass Minerals (CMP) � Upgraded at Credit Suisse
Google (GOOG) � Added to Buy List at Goldman
Positions in stocks mentioned: Q, 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.
Good morning. Traders continued to play on the see-saw yesterday as the trend of prices being down one day and then up the next, held up for a fourth straight session. However, the bulls have to be pleased with their handiwork as stocks were able to advance in front of the all-important jobs data. Normally there might be some hesitancy in front a report of this magnitude, but this time, the Dow managed to push on to higher ground.
But to be fair, the Dow�s gain was a bit misleading. Much of the move can be traced to a $4.43 advance from Altria, which received a favorable ruling from Florida�s Supreme Court. In fact, the rest of the major indices sported returns that were much less impressive than the 73 point (0.66%) gain on the venerable DJIA. The NASDAQ closed with a gain of less than 0.1%, while the S&P 500, Small Caps, and Mid Caps rose just about 0.25%.
It was a mixture of economic data that provided the backdrop for yesterday�s price improvement. We should remember that the bulls are looking for Goldilocks at every turn and yesterday�s numbers seem to have provided a not-too-hot but not-too-cold view of the economy.
For example, the ISM Non-Manufacturing Index fell 3.1 points in June to 57.0, which indicates a slower but still healthy rate of growth. Analysts had been looking for a decline of about a point to a reading of 59.0. And while the Prices Index (inflation) fell by 3.6 points, it remained at a fairly high level and members remain concerned about raw material prices.
Next up, the report on Pending Home Sales actually came in a bit better than expected. This definitely falls into the not-too-cold category as economists are watching the housing data closely for signs of a collapse. However, the 1.3% increase in May, which was led by a strong increase of 10% in the West, suggests the home sales may be stabilizing.
And finally, the Chain Store Sales data from June came in modestly higher, but were definitely not indicative of an overheating economy. Chain store sales rose 2.6% in June, but were hurt by tough comparisons and some crummy weather in the Northeast.
Turning to this morning, it�s all about jobs. The ADP report had prepared the market for a better-than expected number (to the tune of 368,000 new jobs), but the actual report came in weaker than expected. June Nonfarm payrolls increased by just 121,000, which was lower than the 200,000 new jobs that analysts had been looking for. The rest of the report was pretty much in line with expectations as the Unemployment Rate held steady at 4.6%, Average Hourly Earnings came in at +0.5% versus +0.3%, and the average workweek was reported at 33.9 vs. expectations for 33.8.
Stocks and bonds are both rallying on this Goldilocks report with the yield on the ten-year, as well as the expectations for further rate hikes, on the decline. Stocks have perked up nicely on the news as traders now assume that the chances of a pause in August have increased significantly.
Running through the rest of the pre-game indicators, overseas markets made fractional moves in front of the data here in the U.S. Gold is moving a little higher this morning and is currently ahead by $1.70 to $638 at the moment. Oil is moving up this morning with the August crude contract trading higher by $0.46 to $75.60 right now. Interest rates are moving down after the jobs report with the 2-year currently trading at 5.18% while the 10-yr is quoted at 5.15% right now. And finally, with about an hour before the bell, stock futures in the U.S. are heading higher. The Dow futures are currently ahead by 36 points; the S&Ps are up by 4.50, and the NASDAQ is sporting a gain of about 5 points.
Stocks �In Play� This Morning:
Advanced Micro Devices (AMD) � Guides Q2 revenues below consensus
Disney (DIS) � Mentioned positively at Goldman Sachs
Openwave (OPWV) � Downgraded at Piper, Thomas Weisel
Qwest (Q) � Downgraded at Goldman Sachs
General Motors (GM) � Upgraded at Deutsche
3M (MMM) � Upgraded at JP Morgan
Intel (INTC) � Prudential reduces estimates
XTO Energy (XTO) � Upgraded at Citigroup
Vivendi (V) � Downgraded at Lehman
Lowes (LOW) - � Downgraded at AG Edwards
Michaels Stores (MIK) � Downgraded at AG Edwards
Parker Hannifan (PH) � Upgraded at Citigroup
Business Objects (BOBJ) � Downgraded at JMP Securities, JP Morgan, RBC Capital
Compass Minerals (CMP) � Upgraded at Credit Suisse
Google (GOOG) � Added to Buy List at Goldman
Positions in stocks mentioned: Q, 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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