David Moenning�s Daily State of the Markets: 08/21
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Ignore the Negatives?
Good Monday morning and welcome back. Stocks notched their fifth straight day of gains on Friday as traders decided to ignore any and all negatives and simply go with the flow. Although it wasn�t a straight-up affair and volume was noticeably light, at the end of the day, the bulls could be heard crowing about the market�s ability to ignore anything even remotely negative on Friday.
Traders were able to shake off a rate hike in China, surprisingly weak consumer sentiment numbers, an increase in oil prices, and disappointing earnings from Dell. Instead of focusing on the negatives, investors instead kept their eye on the prize � a Fed-engineered soft landing for the economy. With stocks continuing to advance, it is becoming obvious that investors are betting that the Fed has quit raising rates for good, and has done so just in time.
However, consumers may not be sharing traders� optimism at the moment. The University of Michigan�s Consumer Sentiment Index fell a surprising 6 points on Friday to a reading of just 78.7. This was well below the consensus level of 83.9 and last month�s reading of 84.7, and the August numbers were the lowest since last October. But perhaps what is more disconcerting is the fact that the Expectations component plunged 8 points to 64.5. These numbers represent a massive decline for the UofM data series and are clear indications that consumers are beginning to react to both higher oil prices and higher interest rates.
But the bad news didn�t stop there on Friday. Just a month ago, word of a rate hike in China would have sent shivers down the market�s spine as such a move would have caused worry that the �growth story� in China might be in jeopardy. In addition, a big jump in the price of oil and Dell�s big miss would have both cast a larger shadow on the overall market. But for now at least, it�s all about the soft landing � until of course, some data shows that the landing might get bumpy.
And don�t look now, but the bond market DOES seem to be having some concerns about the state of the economy. While the move on Friday wasn�t dramatic, it is hard to ignore that the yield on the 10-year has fallen 40 basis points in less than 2 months, and is now at its lowest levels since early April. This is something that definitely bears watching going forward.
Turning to this morning, it is a rather light week in terms of economic data (but watch for housing numbers mid-week and Bernanke�s speech in Jackson on Friday) and there are no reports scheduled for release before the bell. On the news front, oil is moving higher this morning on Iran�s pronouncement that it will continue to enrich uranium. President Bush has scheduled a news conference for 10:00 a.m. ET, presumably to discuss this development.
Running through the rest of the pre-game indicators, the overseas markets are mostly lower. Gold futures are moving a good bit higher this morning and are currently exchanging hands up +$10.80 to $632.50. Crude futures are trading higher at the moment and are up by $0.69 to $71.83 so far. Interest rates are a smidge lower this morning with the 2-year currently quoted at 4.87% while the 10-yr is trading with a yield of 4.83% right now. And finally, with about an hour before the bell, stock futures in the U.S. are moving a little lower. The Dow futures are currently off by 24, the S&Ps are down 3.80, and the NASDAQ is sporting a decline of more than 11 points at the moment.
Stocks �In Play� This Morning:
Aetna (AET) � Mentioned positively in Barron�s
Medimmune (MEDI) � Upgraded at Thomas Weisel
Merrill Lynch (MER) � Added to model portfolio at BofA
Ameriprise Financial (AMP) � Mentioned positively in Barron�s
Morgan Stanley (MS) � Estimates increased at Citigroup
Lehman (LEH) � Estimates increased at Citigroup
Ford (F) � Downgraded at Deutsche Bank, Estimates reduced at Goldman
Avaya (AV) - � Upgraded at Piper Jaffray
Ann Taylor (ANN) � Downgraded at Prudential
Dollar General (DG) � Downgraded at Raymond James, Merrill Lynch
Camden Property Trust (CPT) � Upgraded at UBS
Equity Residential (EQR) � Upgraded at UBS
Lowes (LOW) � Reported $0.60 vs. $0.61
Shuffle Master (SHFL) � Upgraded at Morgan Joseph
National Semiconductor (NSM) � Lehman downgrades NSM, ISIL, and FCS
Merck (MRK) � Upgraded at Lehman
Long positions in stocks mentioned: MER, MS, GS, CPT
** 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 Monday morning and welcome back. Stocks notched their fifth straight day of gains on Friday as traders decided to ignore any and all negatives and simply go with the flow. Although it wasn�t a straight-up affair and volume was noticeably light, at the end of the day, the bulls could be heard crowing about the market�s ability to ignore anything even remotely negative on Friday.
Traders were able to shake off a rate hike in China, surprisingly weak consumer sentiment numbers, an increase in oil prices, and disappointing earnings from Dell. Instead of focusing on the negatives, investors instead kept their eye on the prize � a Fed-engineered soft landing for the economy. With stocks continuing to advance, it is becoming obvious that investors are betting that the Fed has quit raising rates for good, and has done so just in time.
However, consumers may not be sharing traders� optimism at the moment. The University of Michigan�s Consumer Sentiment Index fell a surprising 6 points on Friday to a reading of just 78.7. This was well below the consensus level of 83.9 and last month�s reading of 84.7, and the August numbers were the lowest since last October. But perhaps what is more disconcerting is the fact that the Expectations component plunged 8 points to 64.5. These numbers represent a massive decline for the UofM data series and are clear indications that consumers are beginning to react to both higher oil prices and higher interest rates.
But the bad news didn�t stop there on Friday. Just a month ago, word of a rate hike in China would have sent shivers down the market�s spine as such a move would have caused worry that the �growth story� in China might be in jeopardy. In addition, a big jump in the price of oil and Dell�s big miss would have both cast a larger shadow on the overall market. But for now at least, it�s all about the soft landing � until of course, some data shows that the landing might get bumpy.
And don�t look now, but the bond market DOES seem to be having some concerns about the state of the economy. While the move on Friday wasn�t dramatic, it is hard to ignore that the yield on the 10-year has fallen 40 basis points in less than 2 months, and is now at its lowest levels since early April. This is something that definitely bears watching going forward.
Turning to this morning, it is a rather light week in terms of economic data (but watch for housing numbers mid-week and Bernanke�s speech in Jackson on Friday) and there are no reports scheduled for release before the bell. On the news front, oil is moving higher this morning on Iran�s pronouncement that it will continue to enrich uranium. President Bush has scheduled a news conference for 10:00 a.m. ET, presumably to discuss this development.
Running through the rest of the pre-game indicators, the overseas markets are mostly lower. Gold futures are moving a good bit higher this morning and are currently exchanging hands up +$10.80 to $632.50. Crude futures are trading higher at the moment and are up by $0.69 to $71.83 so far. Interest rates are a smidge lower this morning with the 2-year currently quoted at 4.87% while the 10-yr is trading with a yield of 4.83% right now. And finally, with about an hour before the bell, stock futures in the U.S. are moving a little lower. The Dow futures are currently off by 24, the S&Ps are down 3.80, and the NASDAQ is sporting a decline of more than 11 points at the moment.
Stocks �In Play� This Morning:
Aetna (AET) � Mentioned positively in Barron�s
Medimmune (MEDI) � Upgraded at Thomas Weisel
Merrill Lynch (MER) � Added to model portfolio at BofA
Ameriprise Financial (AMP) � Mentioned positively in Barron�s
Morgan Stanley (MS) � Estimates increased at Citigroup
Lehman (LEH) � Estimates increased at Citigroup
Ford (F) � Downgraded at Deutsche Bank, Estimates reduced at Goldman
Avaya (AV) - � Upgraded at Piper Jaffray
Ann Taylor (ANN) � Downgraded at Prudential
Dollar General (DG) � Downgraded at Raymond James, Merrill Lynch
Camden Property Trust (CPT) � Upgraded at UBS
Equity Residential (EQR) � Upgraded at UBS
Lowes (LOW) � Reported $0.60 vs. $0.61
Shuffle Master (SHFL) � Upgraded at Morgan Joseph
National Semiconductor (NSM) � Lehman downgrades NSM, ISIL, and FCS
Merck (MRK) � Upgraded at Lehman
Long positions in stocks mentioned: MER, MS, GS, CPT
** 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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