David Moenning�s Daily State of the Markets: 08/14

Encouraging News

Good Monday morning and welcome back. After experiencing a sloppy session on Friday, it looks like traders around the globe are embracing the encouraging news of a cease fire in Lebanon and some additional oil flow today.

On Friday, stocks slogged lower on worries over the economy. Now that the Fed is on hold for a couple of months, every piece of economic data is being reviewed carefully. The thinking is that the Fed is unlikely to raise rates in September since doing so would make it look like the August pause was a mistake. However, if the data continues to come in stronger than expected, we can rest assured that Mr. Bernanke and company won�t hesitate to lace up the hiking boots again.

Friday�s data came in a bit hotter than expected and almost immediately sparked concerns over inflation and the state of the economy. This, in turn, created some fear that the Fed would return from its hiatus sooner rather than later. And in short, this was the story of what wound up being a rather weak session.

It was stronger than expected numbers from the report on July�s Retail Sales that was the culprit for Friday�s widespread pullback. As we reported before the bell, sales in July jumped up by 1.4%, which was well above the expectations. The numbers indicate that the consumer continues to be unfazed by the combination of higher oil prices and increasing mortgage rates. And in short, this was enough to keep a data-driven, light volume market on edge.

So with the market dependent on data and the CPI/PPI reports on the horizon, there was little reason to do any buying. But this morning, the news is a bit more encouraging. A cease fire between Israel and Hezbollah, which went into effect today at 1 a.m. ET, is helping lift stocks around the globe and index futures here in the U.S.

In addition, we�re seeing a decent decline in oil futures based on the decision by British Petroleum to maintain production from the West Prudhoe Bay field. Current production from the western side of the Prudhoe Bay field is approximately 150,000 barrels per day and given that the shutdown of the field was expected to reduce production by 400,000 barrels, this is a small consolation. Crude oil is reacting to both headlines this morning with a decline of more than a dollar.

Looking to the week ahead, we�ve got a decent amount of data for the market to digest this week. While there is no economic data scheduled for release this morning, the rest of the week looks to be fairly active:

Tuesday � Producer Price Index, Empire Region Manufacturing Wednesday � Consumer Price Index, Housing Starts, Industrial Production Thursday � Index of Leading Economic Indicators, Philly Fed Friday � University of Michigan�s Consumer Sentiment

Running through the rest of the pre-game indicators, the overseas markets are up strong across the board. Gold futures are moving lower in reaction to the cease fire and are currently exchanging hands at $636.90 � down $7.50. Crude futures are trading down by $1.11 to $73.24 right now.
Interest rates are a little higher this morning with the 2-year currently quoted at 4.99% while the 10-yr is also trading with a yield of 4.99% right now. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a stronger open on Wall Street. The Dow futures are currently ahead by 56, the S&Ps are up by more than 6 points, and the NASDAQ is sporting a gain of about 9 points.

The question, of course, is will the gains hold?

Stocks �In Play� This Morning:

Ford (F) � Upgraded at Bear Stearns
General Motors (GM) � Downgraded at Bear Stearns
Ciena (CIEN) � Upgraded at BofA
Whole Foods (WFMI) � Upgraded at JP Morgan, Mentioned positively in Barron�s
CSX (CSX) � Mentioned cautiously in Barron�s
Ingersoll-Rand (IR) � Downgraded at Bear Stearns
Barclays (BCS) � Mentioned positively at Merrill Lynch
Neustar (NSR) � Upgraded at Morgan Stanley
Pep Boys (PBY) � Downgraded at Thomas Weisel
Elan PLC (ELN) � Downgraded at UBS
Best Buy (BBY) � Mentioned positively at UBS, also CC
Nordstrom (JWN) � Mentioned positively at UBS

Long positions in stocks mentioned: MER, BSC

** 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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