David Moenning�s Daily State of the Markets: 11/27
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Dollar Debacle?
Good morning. Friday�s session was supposed to be a sleepy affair where, in keeping with tradition, stocks would drift higher into the close on thin volume. And although volume was indeed incredibly light, an unexpected plunge in the US Dollar created a completely different outcome.
A sharp sell off in the greenback got most of the attention on Friday as the dollar broke important technical levels against the Euro. The root of the problem appears to stem from the White House�s update on economic growth for 2007, which was reduced from 3.6% down to 2.9%. And although a 2.9% rate of growth is still a decent number, we need to remember that currencies trade on expectations of interest rates.
At issue is the expectation that the Fed�s next move will be to cut rates while the ECB is likely to continue to increase rates a couple more times this year � thanks in part to the recent positive data out of Germany. This obviously makes the dollar less attractive and brings out the sellers en masse.
Taking things one step further, we should remember that a falling dollar, while great for investing overseas, is inflationary here in the U.S. In short, a drop in the greenback means it takes more dollars to buy foreign goods. And as long as we�re in projection mode, rising inflation and a falling rate of economic growth isn�t exactly a good combination.
But, before you run out and sell everything based on this outlook, do take note of the fact that the big move took place during a holiday-shortened session where almost no one was home. So the real question of the day is whether Friday�s drop of 47 points was due to a debacle in the dollar or simply the result of extremely thin trading?
While the dollar is getting a lot of attention at the moment, the primary focal point right now is the state of the shopping season. The early numbers from the weekend are fairly upbeat as shoppers appeared to be out in force at the malls as well as online this weekend. ShopperTrak estimated that Black Friday sales were up 6.6% from last year while ComScore reports that e-commerce was up +42% year-over-year. Estimates show that over 140 million shoppers were in stores over the weekend and spent an average of $360, which is up +18.9% from last year. In addition, the National Retail Federation expects that nearly 61 million consumers will shop online today, which is also known as �Cyber Monday.�
Turning to this morning, there is no economic news scheduled for release today to interfere with your online shopping. However, the data will begin to flow again tomorrow morning.
- Tuesday: October Durable Goods, Consumer Confidence, Existing Homes Sales, Richmond Fed Index
- Wednesday: Preliminary Q3 GDP, New Home Sales
- Thursday: Personal Income and Spending, Chicago Purchasing Managers Index
- Friday: Construction Spending, ISM Manufacturing
In looking at the pre-market activity, the dollar continues to be a concern as does the trading in the oil pits. The greenback remains weak against the Euro while crude futures broke back above $60 this morning on word that the Saudis may support another production cut at the next OPEC meeting.
Running through the rest of the pre-game indicators, with the exception of Japan, the major overseas markets are all lower. Gold futures are up this morning in response to the lower dollar and are quoted at $637.50 right now. Crude futures are also moving higher this morning, with the latest quote showing the December contract up $0.33 to $59.57. Interest rates are moving up a little, with the 2-year currently quoted at 4.75% while the 10-yr is trading at a yield of 4.57% right now. And finally, with a little more than an hour before the bell, stock futures in the U.S. are looking a bit lower. The Dow futures are currently off by 8 points, the S&Ps are down about 1 point, and the NASDAQ looks to be about 4 points below fair value at the moment.
Stocks �In Play� This Morning:
Pactiv (PTV) � Downgraded at BofA
Lowes (LOW) � Upgraded at BofA
Hilton (HLT) � Downgraded at AG Edwards, Also MAR, HOT
NYMEX Holdings (NMX) � Citigroup starts with Underweight
Valueclick (VCLK) � Downgraded at Citigroup
Affiliated Computer Services (ACS) � Mentioned positively at Cowen
RH Donnelly (RHD) � Upgraded at Deutsche Bank
Dicks Sporting Goods (DKS) � Mentioned positively at Deutsche Bank
Air Products (APD) � Removed from Conviction Buy list at Goldman Sachs
Celanese Corp (CE) � Added to Conviction Buy list at Goldman Sachs
Dollar General � Mentioned cautiously at Goldman Sachs
Las Vegas Sands (LVS) � Target increased at Jeffries
NII Holdings (NIHD) � Downgraded at JP Morgan
Airgas (ARG) � Upgraded at KeyBanc
Cerner (CERN) � Merrill Lynch starts with Buy
United Dominion Realty (UDR) � Downgraded at RBC
Apple Computer (AAPL) � Price target increased at Think Equity
Long positions in stocks mentioned: ACS, GS, JPM, MER, MAR
** 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. Friday�s session was supposed to be a sleepy affair where, in keeping with tradition, stocks would drift higher into the close on thin volume. And although volume was indeed incredibly light, an unexpected plunge in the US Dollar created a completely different outcome.
A sharp sell off in the greenback got most of the attention on Friday as the dollar broke important technical levels against the Euro. The root of the problem appears to stem from the White House�s update on economic growth for 2007, which was reduced from 3.6% down to 2.9%. And although a 2.9% rate of growth is still a decent number, we need to remember that currencies trade on expectations of interest rates.
At issue is the expectation that the Fed�s next move will be to cut rates while the ECB is likely to continue to increase rates a couple more times this year � thanks in part to the recent positive data out of Germany. This obviously makes the dollar less attractive and brings out the sellers en masse.
Taking things one step further, we should remember that a falling dollar, while great for investing overseas, is inflationary here in the U.S. In short, a drop in the greenback means it takes more dollars to buy foreign goods. And as long as we�re in projection mode, rising inflation and a falling rate of economic growth isn�t exactly a good combination.
But, before you run out and sell everything based on this outlook, do take note of the fact that the big move took place during a holiday-shortened session where almost no one was home. So the real question of the day is whether Friday�s drop of 47 points was due to a debacle in the dollar or simply the result of extremely thin trading?
While the dollar is getting a lot of attention at the moment, the primary focal point right now is the state of the shopping season. The early numbers from the weekend are fairly upbeat as shoppers appeared to be out in force at the malls as well as online this weekend. ShopperTrak estimated that Black Friday sales were up 6.6% from last year while ComScore reports that e-commerce was up +42% year-over-year. Estimates show that over 140 million shoppers were in stores over the weekend and spent an average of $360, which is up +18.9% from last year. In addition, the National Retail Federation expects that nearly 61 million consumers will shop online today, which is also known as �Cyber Monday.�
Turning to this morning, there is no economic news scheduled for release today to interfere with your online shopping. However, the data will begin to flow again tomorrow morning.
- Tuesday: October Durable Goods, Consumer Confidence, Existing Homes Sales, Richmond Fed Index
- Wednesday: Preliminary Q3 GDP, New Home Sales
- Thursday: Personal Income and Spending, Chicago Purchasing Managers Index
- Friday: Construction Spending, ISM Manufacturing
In looking at the pre-market activity, the dollar continues to be a concern as does the trading in the oil pits. The greenback remains weak against the Euro while crude futures broke back above $60 this morning on word that the Saudis may support another production cut at the next OPEC meeting.
Running through the rest of the pre-game indicators, with the exception of Japan, the major overseas markets are all lower. Gold futures are up this morning in response to the lower dollar and are quoted at $637.50 right now. Crude futures are also moving higher this morning, with the latest quote showing the December contract up $0.33 to $59.57. Interest rates are moving up a little, with the 2-year currently quoted at 4.75% while the 10-yr is trading at a yield of 4.57% right now. And finally, with a little more than an hour before the bell, stock futures in the U.S. are looking a bit lower. The Dow futures are currently off by 8 points, the S&Ps are down about 1 point, and the NASDAQ looks to be about 4 points below fair value at the moment.
Stocks �In Play� This Morning:
Pactiv (PTV) � Downgraded at BofA
Lowes (LOW) � Upgraded at BofA
Hilton (HLT) � Downgraded at AG Edwards, Also MAR, HOT
NYMEX Holdings (NMX) � Citigroup starts with Underweight
Valueclick (VCLK) � Downgraded at Citigroup
Affiliated Computer Services (ACS) � Mentioned positively at Cowen
RH Donnelly (RHD) � Upgraded at Deutsche Bank
Dicks Sporting Goods (DKS) � Mentioned positively at Deutsche Bank
Air Products (APD) � Removed from Conviction Buy list at Goldman Sachs
Celanese Corp (CE) � Added to Conviction Buy list at Goldman Sachs
Dollar General � Mentioned cautiously at Goldman Sachs
Las Vegas Sands (LVS) � Target increased at Jeffries
NII Holdings (NIHD) � Downgraded at JP Morgan
Airgas (ARG) � Upgraded at KeyBanc
Cerner (CERN) � Merrill Lynch starts with Buy
United Dominion Realty (UDR) � Downgraded at RBC
Apple Computer (AAPL) � Price target increased at Think Equity
Long positions in stocks mentioned: ACS, GS, JPM, MER, MAR
** 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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