David Moenning�s Daily State of the Markets: 07/18
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The Elephant in the Room
Good morning. While stocks did at least attempt to rebound yesterday and oil prices did retreat a bit, the situation between Israel and Lebanon remains the elephant in the room. And while no one REALLY wants to talk about it, everyone knows it is there. In short, until there is some clarity on when the conflict will end and whether or not other players will officially become involved, it is widely believed that stocks may not have a lot of upside.
Despite a $1.73 drop in oil prices and word out of Israel that the conflict could end within a matter of days, stocks couldn�t really advance. The major indices all opened higher but with rockets still being fired hourly and the PPI/CPI data looming, most traders decided to wait it out on the sidelines.
While geopolitical news continues to capture the headlines and the attention of traders, let�s remember that until Israel and Hezbollah started shooting at each other, it was the Fed, the economic data, and company earnings that were traders� primary focal points.
On subjects not pertaining to open warfare, the results were mixed yesterday. The economic data supported both teams� arguments as the Industrial Production and Capacity Utilization numbers came in better than expected while the Empire State Manufacturing Survey supported a slower growth scenario.
The news was mixed as well on the earnings front. Citigroup became the latest big name company to post mildly disappointing earnings as they missed by a penny. However, McDonalds helped support the theory that it is time to own defensive issues by posting stronger than expected sales numbers.
But at the end of the day, the elephant in the room and all the conflicting data meant that stocks were unable to make any progress in either direction. While the bulls will argue that the cessation of the recent triple digit declines was a moral victory, in reality, the bears may have simply taken a break in front of the inflation data.
Turning to this morning, it�s all about inflation. The headline PPI number came in with an increase of +0.5%, which was much stronger than the consensus of +0.3%. The Core Rate however, was reported in line with expectations at +0.2%. On a year-over year basis, headline PPI now shows a somewhat disturbing gain of +4.9%, while the Core number remains contained with an increase of +1.9%. The annual Core number, while it did come in higher than last month�s reading of +1.5%, remains within the Fed�s tolerance range. However, with a headline number very close to 5%, it may become harder to simply ignore the effects of food and energy.
Traders have had little reaction to the PPI numbers so far as they are undoubtedly waiting for the CPI data tomorrow and for all of the geopolitical issues to resolve themselves.
Running through the rest of the pre-game indicators, overseas markets are again down across the board. Gold is moving up a little this morning and is currently ahead by $2 to $654. Oil is also rebounding after yesterday�s profit taking and is currently trading higher by $0.90 to $76.20. Interest rates are moving a little higher with the 2-year currently at 5.15% while the 10-yr is trading with a yield at 5.10% right now. And finally, with about an hour before the bell, stock futures in the U.S. are little changed. The Dow futures are currently off by 7 points; the S&Ps are down by a fraction and the NASDAQ is actually unchanged.
Stocks �In Play� This Morning:
Merrill Lynch (MER) � Reported $1.63 vs. $1.53, Revenues of $8.16B vs. $7.59B
Freeport McMoRan (FCX) � Reported $1.70 vs. $1.45, Revenues $1.43B vs. $1.25
Johnson & Johnson (JNJ) � Reported $0.98 vs. $0.97, Rev $13.36B vs. $13.29
Blackrock (BLK) � Reported $1.19 vs. $1.17
Coca Cola (KO) � Reported $0.74 vs. $0.72
US Bancorp (USB) � Reported $0.66 vs. $0.64
UST Inc (UST) � Upgraded at UBS
Yum Brands (YUM) � Upgraded at Goldman Sachs
McDonalds (MCD) � Upgraded at Goldman Sachs
Coca-Cola Femsa (KOF) � Upgraded at UBS
Sanmina (SANM) � Guides current quarter lower
Target (TGT) � Downgraded at AG Edwards
BellSouth (BLS) � Mentioned positively at Prudential
UnitedHealth (UNH) � WSJ says price decline is buying opportunity
Texas Instruments (TXN) � Downgraded at Friedman Billings
Palm Inc (PALM) � Upgraded at Bear Stearns
Owens Illinois (OI) � Upgraded at Citigroup
Noble Energy (NBL) � Upgraded at Credit Suisse
Entergy Corp (ETR) � Added to buy list at Goldman Sachs
Corning (GLW) � Debt upgraded at Moodys
Positions in stocks mentioned: GS, BSC, BLS, JNJ
** 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. While stocks did at least attempt to rebound yesterday and oil prices did retreat a bit, the situation between Israel and Lebanon remains the elephant in the room. And while no one REALLY wants to talk about it, everyone knows it is there. In short, until there is some clarity on when the conflict will end and whether or not other players will officially become involved, it is widely believed that stocks may not have a lot of upside.
Despite a $1.73 drop in oil prices and word out of Israel that the conflict could end within a matter of days, stocks couldn�t really advance. The major indices all opened higher but with rockets still being fired hourly and the PPI/CPI data looming, most traders decided to wait it out on the sidelines.
While geopolitical news continues to capture the headlines and the attention of traders, let�s remember that until Israel and Hezbollah started shooting at each other, it was the Fed, the economic data, and company earnings that were traders� primary focal points.
On subjects not pertaining to open warfare, the results were mixed yesterday. The economic data supported both teams� arguments as the Industrial Production and Capacity Utilization numbers came in better than expected while the Empire State Manufacturing Survey supported a slower growth scenario.
The news was mixed as well on the earnings front. Citigroup became the latest big name company to post mildly disappointing earnings as they missed by a penny. However, McDonalds helped support the theory that it is time to own defensive issues by posting stronger than expected sales numbers.
But at the end of the day, the elephant in the room and all the conflicting data meant that stocks were unable to make any progress in either direction. While the bulls will argue that the cessation of the recent triple digit declines was a moral victory, in reality, the bears may have simply taken a break in front of the inflation data.
Turning to this morning, it�s all about inflation. The headline PPI number came in with an increase of +0.5%, which was much stronger than the consensus of +0.3%. The Core Rate however, was reported in line with expectations at +0.2%. On a year-over year basis, headline PPI now shows a somewhat disturbing gain of +4.9%, while the Core number remains contained with an increase of +1.9%. The annual Core number, while it did come in higher than last month�s reading of +1.5%, remains within the Fed�s tolerance range. However, with a headline number very close to 5%, it may become harder to simply ignore the effects of food and energy.
Traders have had little reaction to the PPI numbers so far as they are undoubtedly waiting for the CPI data tomorrow and for all of the geopolitical issues to resolve themselves.
Running through the rest of the pre-game indicators, overseas markets are again down across the board. Gold is moving up a little this morning and is currently ahead by $2 to $654. Oil is also rebounding after yesterday�s profit taking and is currently trading higher by $0.90 to $76.20. Interest rates are moving a little higher with the 2-year currently at 5.15% while the 10-yr is trading with a yield at 5.10% right now. And finally, with about an hour before the bell, stock futures in the U.S. are little changed. The Dow futures are currently off by 7 points; the S&Ps are down by a fraction and the NASDAQ is actually unchanged.
Stocks �In Play� This Morning:
Merrill Lynch (MER) � Reported $1.63 vs. $1.53, Revenues of $8.16B vs. $7.59B
Freeport McMoRan (FCX) � Reported $1.70 vs. $1.45, Revenues $1.43B vs. $1.25
Johnson & Johnson (JNJ) � Reported $0.98 vs. $0.97, Rev $13.36B vs. $13.29
Blackrock (BLK) � Reported $1.19 vs. $1.17
Coca Cola (KO) � Reported $0.74 vs. $0.72
US Bancorp (USB) � Reported $0.66 vs. $0.64
UST Inc (UST) � Upgraded at UBS
Yum Brands (YUM) � Upgraded at Goldman Sachs
McDonalds (MCD) � Upgraded at Goldman Sachs
Coca-Cola Femsa (KOF) � Upgraded at UBS
Sanmina (SANM) � Guides current quarter lower
Target (TGT) � Downgraded at AG Edwards
BellSouth (BLS) � Mentioned positively at Prudential
UnitedHealth (UNH) � WSJ says price decline is buying opportunity
Texas Instruments (TXN) � Downgraded at Friedman Billings
Palm Inc (PALM) � Upgraded at Bear Stearns
Owens Illinois (OI) � Upgraded at Citigroup
Noble Energy (NBL) � Upgraded at Credit Suisse
Entergy Corp (ETR) � Added to buy list at Goldman Sachs
Corning (GLW) � Debt upgraded at Moodys
Positions in stocks mentioned: GS, BSC, BLS, JNJ
** 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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