David Moenning�s Daily State of the Markets: 08/23
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Not Done Yet?
Good morning. Neither team could claim a clear victory yesterday as stocks basically continued to hang around at the high end of the range. The market initially moved higher on word that Iran wants to begin negotiations on their nuclear program. Although Iran dismissed all of the U.N.�s primary demands, the desire to negotiate was thought to be a first step in a peaceful settlement of the issue.
However, the good mood didn�t last long as Chicago Fed President Michael Moskow put a wet blanket on the bulls� fun by intimating that the Fed may not be done just yet. Moskow said that "some additional firming of policy may yet be necessary to bring inflation back into the comfort zone within a reasonable period of time." Moskow went on to say that the inflation outlook "poses a number of concerns," and that an increase in inflation expectations would be very costly. The remarks managed to unnerve investors and the Dow dropped about 70 points following the release.
We also heard from Atlanta President Jack Guynn yesterday, who said that the Fed remains committed to fighting inflation. Mr. Guynn also mentioned that an inflation target may be in the offing and that the Fed will continue try to find new ways to be more transparent.
In short, the market took the Fedspeak as a reminder that the Fed has NOT officially abandoned the hiking trail and that the FOMC continues to be �data dependent� in terms of its monetary policy. Until yesterday, traders had basically dismissed the idea of another rate hike in September as the Fed Funds Futures were pricing in just at 20% probability of an increase.
While yesterday�s comments don�t necessarily increase the likelihood of more rate increases in the near future, they did remind us that the Fed DOES want to retain some flexibility going forward. So while no one REALLY expects Mr. Bernanke to lace up the hiking boots next month, he has made it clear that he wants to keep his options open. Therefore, many believe yesterday�s statements were simply a gentle reminder that future policy has yet to be determined and an effort to retain the Fed�s newfound credibility.
After the initial move lower on the Fed comments, stock traders recognized that the bond market had shown little movement to the news and thus, perhaps they had overreacted. Stocks managed to recover some into the close and finish the day little changed.
Turning to this morning, stocks appear to be heading slightly lower in pre-market trading. There is news of renewed violence in Lebanon, an interest rate hike in Russia, the threat of a worker pullout in Nigeria, and more talk about a negotiated settlement with Iran. Overseas markets are all modestly lower at the moment and oil is pulling back a bit with an hour before the bell.
Stocks �In Play� This Morning:
NASDAQ Stock Market (NDAQ) � Prudential begins coverage with Overweight rating
Intercontinental Exchange (ICE) � Prudential begins coverage with Overweight rating
BP (BP) � Mentioned positively in Barron�s
National Semi (NSM) � Reduces guidance for quarter, Target reduced at Morgan Stanley
XCEL Energy (XEL) � Downgraded at AG Edwards
Mills Corp (MLS) � Upgraded at BofA
Pepsi Bottling Group (PBG) � Upgraded at Bear Stearns
Intl Sec Exchange (ISE) � Downgraded at Bear Stearns
Logitech (LOGI) � Downgraded at Merrill Lynch
Campbell Soup (CPB) � Downgraded at Prudential
Archstone Smith Trust (ASN) � Upgraded at RBC Capital Mkts
Monster Intl (MNST) � Upgraded at Wachovia
Motorola (MOT) � Upgraded at ThinkEquity
Medtronic (MDT) � Reported $0.55 vs. $0.54, Guides higher
Long positions in stocks mentioned: MER, MS, BSC, ASN
** 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. Neither team could claim a clear victory yesterday as stocks basically continued to hang around at the high end of the range. The market initially moved higher on word that Iran wants to begin negotiations on their nuclear program. Although Iran dismissed all of the U.N.�s primary demands, the desire to negotiate was thought to be a first step in a peaceful settlement of the issue.
However, the good mood didn�t last long as Chicago Fed President Michael Moskow put a wet blanket on the bulls� fun by intimating that the Fed may not be done just yet. Moskow said that "some additional firming of policy may yet be necessary to bring inflation back into the comfort zone within a reasonable period of time." Moskow went on to say that the inflation outlook "poses a number of concerns," and that an increase in inflation expectations would be very costly. The remarks managed to unnerve investors and the Dow dropped about 70 points following the release.
We also heard from Atlanta President Jack Guynn yesterday, who said that the Fed remains committed to fighting inflation. Mr. Guynn also mentioned that an inflation target may be in the offing and that the Fed will continue try to find new ways to be more transparent.
In short, the market took the Fedspeak as a reminder that the Fed has NOT officially abandoned the hiking trail and that the FOMC continues to be �data dependent� in terms of its monetary policy. Until yesterday, traders had basically dismissed the idea of another rate hike in September as the Fed Funds Futures were pricing in just at 20% probability of an increase.
While yesterday�s comments don�t necessarily increase the likelihood of more rate increases in the near future, they did remind us that the Fed DOES want to retain some flexibility going forward. So while no one REALLY expects Mr. Bernanke to lace up the hiking boots next month, he has made it clear that he wants to keep his options open. Therefore, many believe yesterday�s statements were simply a gentle reminder that future policy has yet to be determined and an effort to retain the Fed�s newfound credibility.
After the initial move lower on the Fed comments, stock traders recognized that the bond market had shown little movement to the news and thus, perhaps they had overreacted. Stocks managed to recover some into the close and finish the day little changed.
Turning to this morning, stocks appear to be heading slightly lower in pre-market trading. There is news of renewed violence in Lebanon, an interest rate hike in Russia, the threat of a worker pullout in Nigeria, and more talk about a negotiated settlement with Iran. Overseas markets are all modestly lower at the moment and oil is pulling back a bit with an hour before the bell.
Stocks �In Play� This Morning:
NASDAQ Stock Market (NDAQ) � Prudential begins coverage with Overweight rating
Intercontinental Exchange (ICE) � Prudential begins coverage with Overweight rating
BP (BP) � Mentioned positively in Barron�s
National Semi (NSM) � Reduces guidance for quarter, Target reduced at Morgan Stanley
XCEL Energy (XEL) � Downgraded at AG Edwards
Mills Corp (MLS) � Upgraded at BofA
Pepsi Bottling Group (PBG) � Upgraded at Bear Stearns
Intl Sec Exchange (ISE) � Downgraded at Bear Stearns
Logitech (LOGI) � Downgraded at Merrill Lynch
Campbell Soup (CPB) � Downgraded at Prudential
Archstone Smith Trust (ASN) � Upgraded at RBC Capital Mkts
Monster Intl (MNST) � Upgraded at Wachovia
Motorola (MOT) � Upgraded at ThinkEquity
Medtronic (MDT) � Reported $0.55 vs. $0.54, Guides higher
Long positions in stocks mentioned: MER, MS, BSC, ASN
** 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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