David Moenning�s Daily State of the Markets: 11/29
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A Tasty Econ Stew
Good morning. After a couple of hard down days, the bulls finally managed to put a halt to the red ink yesterday. The mish mash of news and economic data presented during the session actually wound up creating a rather delightful dish for the bulls. While there was nothing that could be considered an outright positive, the combination of ingredients appeared to put the bulls back in business.
The first ingredient in the economic stew was on the bitter side. Stocks opened lower in response to the weaker-than expected report on Durable Goods. A 45% drop in aircraft orders was responsible for the biggest decline in orders in more than six years. And even when you strip out transportation, orders for durable goods slumped -1.7%. The culprit here was the swoon in computer sales, which plunged a record 25.6%. And although this can easily be explained as an indication that consumers are waiting on Vista before buying, the 17% drop in communications equipment wasn�t exactly encouraging.
The next ingredient was also a bit distasteful on its own as the Consumer Confidence Index fell 2.2 points in November. The reading of 102.9 was a bit lighter than the expectations of 105.8. And while the modest deterioration in confidence is a positive in terms of inflation expectations, it added to the worries over the holiday shopping season.
However, the report on Existing Home sales wound up being a tasty addition to the mix. Existing Home Sales rose 0.5% to a 6.24 million annual rate in October, which was the first increase since February. But more importantly, the report was considered a positive surprise as economists had been looking for sales to decline 1% last month.
Another delicious addition to the mix was the fact that the Richmond Fed index also came in better than expected. And while this ingredient doesn�t taste like much by itself, it blended nicely with the other ingredients.
Fed Chairman Ben Bernanke then put the finishing touches on the day�s economic stew by offering a speech dedicated to the state of the economy. Gentle Ben tried to talk tough on the economy and inflation, but basically wound up reiterating the Fed�s stance that the economy will continue to grow, albeit at a slower pace. He also mentioned that the gang at the FOMC remains concern about inflation risks � but then again, traders understand that worrying about inflation is their primary job.
So after everything was stirred properly and the ingredients had been given chance to simmer for a while, the bulls decided that the day�s economic stew wound up being a rather tasty dish. And while a gain of 15 points isn�t exactly worthy of a 5-star review, it did satisfy the crowd who, after two down days, were absolutely starving for something positive.
Turning to this morning, it looks like the bulls got another tasty ingredient in the form of the 3rd Quarter GDP data. In the government�s second stab at the numbers it looks like the economy performed better than previously thought as GDP came in at +2.2%. This is higher than last month�s estimate of +1.8% and should quell concerns about the economy moderating too quickly. The PCE Deflator came in right on target at 1.8%, which is also a positive on the inflation front. Stocks and bonds have improved nicely on the numbers.
Running through the rest of the pre-game indicators, the major overseas markets are all higher. Gold futures are down this morning and are quoted at $641.80 right now. Crude futures are continuing to move higher this morning, with the latest quote showing the December contract up $0.26 to $61.25. Interest rates are moving up a little on the GDP data, with the 2-year currently quoted at 4.68% while the 10-yr is trading with a yield of 4.51% right now. And finally, with an hour before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently ahead by 37 points, the S&Ps are up about 5 points, and the NASDAQ looks to be about 5 points ahead of fair value at the moment.
Stocks �In Play� This Morning:
Deutsche Telekom (DT) � Downgraded at ABN Amro
Verizon (VZ) � Upgraded at AG Edwards
Apple Computer (AAPL) � Target increased at Bear Stearns
Amerigroup (AGP) � Downgraded at FTN Midwest
3 Com (COMS) � Removed from Conviction Buy list at Goldman Sachs
Leap Wireless (LEAP) � Added to Conviction Buy list at Goldman
Constellation Energy (CEG) � Upgraded at Jefferies
Bausch & Lomb (BOL) � Downgraded at JP Morgan
NYSE Group (NYX) � Downgraded at JP Morgan
Linear Technology (LLTC) � Downgraded at Lehman
Ann Taylor Stores (ANN) � Downgraded at UBS
Nokia (NOK) � Downgraded at West LB Equity
YRC Worldwide (YRCW) � Downgraded at Stephens
Intel (INTC) � Mentioned positively at UBS
Tribune Co. (TRB) � Mentioned cautiously at UBS
Fluor Corp (FLR) � Wins $2.2B contract for a petrochemical plant in Saudi Arabia
Aeropostale (ARO) � Reported $0.63 vs. $0.61
Long positions in stocks mentioned: LEH, BSC, JPM, GS, Q
** 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. After a couple of hard down days, the bulls finally managed to put a halt to the red ink yesterday. The mish mash of news and economic data presented during the session actually wound up creating a rather delightful dish for the bulls. While there was nothing that could be considered an outright positive, the combination of ingredients appeared to put the bulls back in business.
The first ingredient in the economic stew was on the bitter side. Stocks opened lower in response to the weaker-than expected report on Durable Goods. A 45% drop in aircraft orders was responsible for the biggest decline in orders in more than six years. And even when you strip out transportation, orders for durable goods slumped -1.7%. The culprit here was the swoon in computer sales, which plunged a record 25.6%. And although this can easily be explained as an indication that consumers are waiting on Vista before buying, the 17% drop in communications equipment wasn�t exactly encouraging.
The next ingredient was also a bit distasteful on its own as the Consumer Confidence Index fell 2.2 points in November. The reading of 102.9 was a bit lighter than the expectations of 105.8. And while the modest deterioration in confidence is a positive in terms of inflation expectations, it added to the worries over the holiday shopping season.
However, the report on Existing Home sales wound up being a tasty addition to the mix. Existing Home Sales rose 0.5% to a 6.24 million annual rate in October, which was the first increase since February. But more importantly, the report was considered a positive surprise as economists had been looking for sales to decline 1% last month.
Another delicious addition to the mix was the fact that the Richmond Fed index also came in better than expected. And while this ingredient doesn�t taste like much by itself, it blended nicely with the other ingredients.
Fed Chairman Ben Bernanke then put the finishing touches on the day�s economic stew by offering a speech dedicated to the state of the economy. Gentle Ben tried to talk tough on the economy and inflation, but basically wound up reiterating the Fed�s stance that the economy will continue to grow, albeit at a slower pace. He also mentioned that the gang at the FOMC remains concern about inflation risks � but then again, traders understand that worrying about inflation is their primary job.
So after everything was stirred properly and the ingredients had been given chance to simmer for a while, the bulls decided that the day�s economic stew wound up being a rather tasty dish. And while a gain of 15 points isn�t exactly worthy of a 5-star review, it did satisfy the crowd who, after two down days, were absolutely starving for something positive.
Turning to this morning, it looks like the bulls got another tasty ingredient in the form of the 3rd Quarter GDP data. In the government�s second stab at the numbers it looks like the economy performed better than previously thought as GDP came in at +2.2%. This is higher than last month�s estimate of +1.8% and should quell concerns about the economy moderating too quickly. The PCE Deflator came in right on target at 1.8%, which is also a positive on the inflation front. Stocks and bonds have improved nicely on the numbers.
Running through the rest of the pre-game indicators, the major overseas markets are all higher. Gold futures are down this morning and are quoted at $641.80 right now. Crude futures are continuing to move higher this morning, with the latest quote showing the December contract up $0.26 to $61.25. Interest rates are moving up a little on the GDP data, with the 2-year currently quoted at 4.68% while the 10-yr is trading with a yield of 4.51% right now. And finally, with an hour before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently ahead by 37 points, the S&Ps are up about 5 points, and the NASDAQ looks to be about 5 points ahead of fair value at the moment.
Stocks �In Play� This Morning:
Deutsche Telekom (DT) � Downgraded at ABN Amro
Verizon (VZ) � Upgraded at AG Edwards
Apple Computer (AAPL) � Target increased at Bear Stearns
Amerigroup (AGP) � Downgraded at FTN Midwest
3 Com (COMS) � Removed from Conviction Buy list at Goldman Sachs
Leap Wireless (LEAP) � Added to Conviction Buy list at Goldman
Constellation Energy (CEG) � Upgraded at Jefferies
Bausch & Lomb (BOL) � Downgraded at JP Morgan
NYSE Group (NYX) � Downgraded at JP Morgan
Linear Technology (LLTC) � Downgraded at Lehman
Ann Taylor Stores (ANN) � Downgraded at UBS
Nokia (NOK) � Downgraded at West LB Equity
YRC Worldwide (YRCW) � Downgraded at Stephens
Intel (INTC) � Mentioned positively at UBS
Tribune Co. (TRB) � Mentioned cautiously at UBS
Fluor Corp (FLR) � Wins $2.2B contract for a petrochemical plant in Saudi Arabia
Aeropostale (ARO) � Reported $0.63 vs. $0.61
Long positions in stocks mentioned: LEH, BSC, JPM, GS, Q
** 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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