David Moenning�s Daily State of the Markets: 10/13
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Another Hoopla Opportunity
Good morning and a happy Friday the 13th to all. Don�t look now, but CNBC�s newest ticker tells us that the DJIA is just 52.30 points shy of the 12,000 level. The reason we bring this up is these nice, round numbers have a tendency to provide resistance, or an excuse to sell, when the market is in an overbought condition. But then again, during the late 1990�s, when the market was in a rip-roaring Bull mode, traders took the venerable index through round numbers like a hot knife through butter.
Either way, we thought you should be aware that we�ve got the potential for another hoopla opportunity just ahead.
And although we are always a little cynical whenever the celebrations get too nutty, yesterday�s session was nothing short of impressive. Stocks blasted higher to their fifth record close on the Dow in the last two weeks on increased volume and stellar breadth. All the major indices participated and this time, even the former leaders, the small cap and mid cap indices, put on a nice show.
The reason most often cited for the strength wasn�t related to the price of oil or geopolitical issues. No, this time it was good old fashioned earnings reports that got the bulls movin� on up. Solid results from Costco (COST), Harley-Davidson (HOG), and Yum Brands (YUM), as well as improved sales numbers and earnings guidance from a little company called McDonalds (MCD) appeared to be responsible for the green screens.
The bulls also seemed to get a hand from the Fed�s Beige Book report. And while the report doesn�t carry a lot of weight with the FOMC, it does give those wanna-be economists among us a tidy summary of the state of the economy. In short, the report had a �soft landing� tone to it as growth appears to be moderating and there was little mention of inflation. And in light of the fact that the Fed chatter lately has centered on the issue of inflation risks, the report was music to the bulls� ears.
Speaking of Fed chatter, in a speech last night, Chicago Fed President Michael Moskow said that the risks of inflation being too high outweigh the risks of the economy slowing too far, too fast. This statement seems to be the party line these days and would seem to confirm that the Fed intends to stay on the sidelines unless inflation picks up.
However, the recent comments from Fed Governors coupled with the action in the bond market lately confirms that we can forget about the Fed easing rates any time soon. Until last week, bond traders seemed to embrace the idea that since the Fed has stopped raising rates, the next move would be for them to start cutting rates. But, the rise in 10-year yields from 4.56% to nearly 4.8% over past 5 sessions suggests that this concept was premature.
Turning to this morning, the report on Retail Sales came in a bit weaker than expected. September sales fell by -0.4% which was below the consensus expectations for an increase of +0.2%. When you strip out Autos, the number was equally soft as sales declined by -0.5%. In addition, August�s headline number was revised lower to +0.1%.
Bond yields initially moved lower on the news, but some of the details in the report suggest that the headline number may be a smoke screen. Stocks haven�t really reacted much, but we should keep in mind that stocks have gone a long way in a short amount of time and could be due for a pullback, especially with a nice round number just overhead.
Running through the pre-game indicators, with the exception of France, the major overseas markets followed Wall Street higher. Gold futures are rebounding nicely this morning and are quoted at $592.50 right now. Crude oil futures are also moving higher so far and are currently ahead by $0.91 at $58.77. Interest rates are little changed at the moment with the 2-year currently quoted at 4.82% while the 10-yr is trading with a yield of 4.77% right now. And finally, with an hour before the bell, stock futures in the U.S. are a trading just below value. The Dow futures are currently off by
11 points, the S&Ps are down -1.40, and the NASDAQ is sporting a loss of about a point.
Stocks �In Play� This Morning:
General Electric (GE) � Reported $0.49 vs. $0.49, Revenues $40.9B vs. $39.8B
Heineken (HINKY) � Mentioned positively in Business Week, Also NUS, NAL
Altera (ALTR) � Downgraded at Bear Stearns
Safeway (SWY) � Downgraded at CIBC Capital Markets
Transocean (RIG) � Mentioned as LBO candidate
Consol Energy (CNX) � Downgraded at Citigroup
Massey Energy (MEE) � Downgraded at Citigroup
Credit Suisse (CS) � Downgraded at Deutsche Bank
Harley-Davidson (HOG) � Downgraded at Goldman Sachs
Yum Brands (YUM) � Downgraded at JP Morgan, UBS, Target raised at Morgan Stanley
Varian Semiconductor (VSEA) � Downgraded at JP Morgan
Genworth Financial (GNW) � Downgraded at Merrill Lynch
Ericsson (ERIC) � Downgraded at Merrill Lynch
Sony (SNE) � Upgraded at Morgan Stanley
Yahoo (YHOO) � Downgraded at Thomas Weisel
Werner Enterprises (WERN) � Downgraded at UBS, Also HTLD
Wendy�s (WEN) � Downgraded at UBS
Altria (MO) � Upgraded at UBS
Long positions in stocks mentioned: MO, MER, MS
** 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.
www.TopGunsTrading.com
Good morning and a happy Friday the 13th to all. Don�t look now, but CNBC�s newest ticker tells us that the DJIA is just 52.30 points shy of the 12,000 level. The reason we bring this up is these nice, round numbers have a tendency to provide resistance, or an excuse to sell, when the market is in an overbought condition. But then again, during the late 1990�s, when the market was in a rip-roaring Bull mode, traders took the venerable index through round numbers like a hot knife through butter.
Either way, we thought you should be aware that we�ve got the potential for another hoopla opportunity just ahead.
And although we are always a little cynical whenever the celebrations get too nutty, yesterday�s session was nothing short of impressive. Stocks blasted higher to their fifth record close on the Dow in the last two weeks on increased volume and stellar breadth. All the major indices participated and this time, even the former leaders, the small cap and mid cap indices, put on a nice show.
The reason most often cited for the strength wasn�t related to the price of oil or geopolitical issues. No, this time it was good old fashioned earnings reports that got the bulls movin� on up. Solid results from Costco (COST), Harley-Davidson (HOG), and Yum Brands (YUM), as well as improved sales numbers and earnings guidance from a little company called McDonalds (MCD) appeared to be responsible for the green screens.
The bulls also seemed to get a hand from the Fed�s Beige Book report. And while the report doesn�t carry a lot of weight with the FOMC, it does give those wanna-be economists among us a tidy summary of the state of the economy. In short, the report had a �soft landing� tone to it as growth appears to be moderating and there was little mention of inflation. And in light of the fact that the Fed chatter lately has centered on the issue of inflation risks, the report was music to the bulls� ears.
Speaking of Fed chatter, in a speech last night, Chicago Fed President Michael Moskow said that the risks of inflation being too high outweigh the risks of the economy slowing too far, too fast. This statement seems to be the party line these days and would seem to confirm that the Fed intends to stay on the sidelines unless inflation picks up.
However, the recent comments from Fed Governors coupled with the action in the bond market lately confirms that we can forget about the Fed easing rates any time soon. Until last week, bond traders seemed to embrace the idea that since the Fed has stopped raising rates, the next move would be for them to start cutting rates. But, the rise in 10-year yields from 4.56% to nearly 4.8% over past 5 sessions suggests that this concept was premature.
Turning to this morning, the report on Retail Sales came in a bit weaker than expected. September sales fell by -0.4% which was below the consensus expectations for an increase of +0.2%. When you strip out Autos, the number was equally soft as sales declined by -0.5%. In addition, August�s headline number was revised lower to +0.1%.
Bond yields initially moved lower on the news, but some of the details in the report suggest that the headline number may be a smoke screen. Stocks haven�t really reacted much, but we should keep in mind that stocks have gone a long way in a short amount of time and could be due for a pullback, especially with a nice round number just overhead.
Running through the pre-game indicators, with the exception of France, the major overseas markets followed Wall Street higher. Gold futures are rebounding nicely this morning and are quoted at $592.50 right now. Crude oil futures are also moving higher so far and are currently ahead by $0.91 at $58.77. Interest rates are little changed at the moment with the 2-year currently quoted at 4.82% while the 10-yr is trading with a yield of 4.77% right now. And finally, with an hour before the bell, stock futures in the U.S. are a trading just below value. The Dow futures are currently off by
11 points, the S&Ps are down -1.40, and the NASDAQ is sporting a loss of about a point.
Stocks �In Play� This Morning:
General Electric (GE) � Reported $0.49 vs. $0.49, Revenues $40.9B vs. $39.8B
Heineken (HINKY) � Mentioned positively in Business Week, Also NUS, NAL
Altera (ALTR) � Downgraded at Bear Stearns
Safeway (SWY) � Downgraded at CIBC Capital Markets
Transocean (RIG) � Mentioned as LBO candidate
Consol Energy (CNX) � Downgraded at Citigroup
Massey Energy (MEE) � Downgraded at Citigroup
Credit Suisse (CS) � Downgraded at Deutsche Bank
Harley-Davidson (HOG) � Downgraded at Goldman Sachs
Yum Brands (YUM) � Downgraded at JP Morgan, UBS, Target raised at Morgan Stanley
Varian Semiconductor (VSEA) � Downgraded at JP Morgan
Genworth Financial (GNW) � Downgraded at Merrill Lynch
Ericsson (ERIC) � Downgraded at Merrill Lynch
Sony (SNE) � Upgraded at Morgan Stanley
Yahoo (YHOO) � Downgraded at Thomas Weisel
Werner Enterprises (WERN) � Downgraded at UBS, Also HTLD
Wendy�s (WEN) � Downgraded at UBS
Altria (MO) � Upgraded at UBS
Long positions in stocks mentioned: MO, MER, MS
** 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.
www.TopGunsTrading.com
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