David Moenning�s Daily State of the Markets: 1/17
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Bernanke and Friends
While the spotlight was not nearly as bright, a good deal of attention was paid to Fed Chairman Ben Bernanke�s second day of Congressional testimony. And while there were other events that helped stocks move higher yesterday, namely a surprisingly strong report on housing, good economic numbers from the Philly Fed, and some solid earnings from big-cap tech, ultimately it was Bernanke and friends that were responsible for the Dow�s best finish in nearly five years.
The new Fed Chairman appeared before the Senate Banking Committee yesterday for part two of the semiannual Monetary Policy Report to Congress. The formal presentation was identical to Wednesday�s so the focus was on the Q&A. During the session, we learned that Mr. Bernanke likes to look out six months when forecasting the economy. We learned that he believes the inverted yield curve would be more likely to indicate a slowdown in the economy when rates are higher than now. We learned that Mr. Bernanke doesn�t think the U.S. can continue to run a deficit of 6% - 7% of GDP forever. And finally, we learned that the Fed Chairman does not feel that Chinese ownership of U.S. assets is large enough to put the economy at risk.
In short, Mr. Bernanke once again didn�t rock the boat, which allowed traders to breathe a sigh of relief. And speaking of relief, anyone owning homebuilding stocks certainly got some yesterday. Helped by the warmest January on record, housing starts soared by the largest amount (14.5%) since early 1994 and the annualized rate was the highest since March 1973.
But the good economic news didn�t stop there. The Philly Fed General Activity Index rebounded 12.1 points in February to 15.4, which is indicative of moderate growth. The reading was above expectations, which is always a plus. But most importantly, the Prices Paid index, which is an indication of inflation, fell 14.4 points and the Prices Received fell by 3.7 points.
Couple the Bernanke�s testimony, the strong housing numbers, and the generally positive report from the Philly Fed report with some decent earnings from Hewlett Packard and the result was generally positive for stocks. While traders weren�t buying with both hands, the market had an upbeat tone throughout much of the day.
But the day�s action really got started when St. Louis Fed President William Poole said that the Fed may be nearing an end to the interest rate increases. Traders did the market math on an improving economy, lower inflation, and an end to interest rate hikes, and sent the DJIA to its best finish since June 5, 2001.
Speaking of inflation, this morning�s pre-market activity is all about the inflation data. The PPI headline came in a bit hotter than expected with a gain of +0.3% versus expectations for +0.2%. The Core Rate came in showing an increase of +0.4%, which was also a little higher than the rise of +0.2% that economists had been looking for. However, last month�s number was revised lower to +0.6% from +0.9% and the year-over-year Core Rate of +1.5% is still relatively benign.
Stock and bond futures have not moved much on the data, but with Fed officials telling us that inflation is the key to future monetary policy right now, rest assured that the numbers will prompt some concern about inflation and additional rate hikes.
Running through this morning�s pre-game indicators, with the exception of Japan, which fell -2.1% on stronger than expected GDP data, the overseas markets are all modestly higher at the moment. Gold futures are up +$0.70 this morning to $549.50. Oil is rebounding by +$1.12 to $59.58 on word of an explosion in an oil pipeline in Iraq. Natural Gas is up $0.16 to $7.29 as colder weather moves in across the Midwest. Bond yields are surprisingly steady with the 2-yr at 4.68% and 10-yr at 4.56% right now. And finally, stock futures in the U.S. are a smidge under water before the bell with the Dow down -9, the S&P -1.0, and the NASDAQ -3.0.
Stocks "In Play" This Morning:
PEP � Pru initiates coverage on sector with PEP as top pick
JNJ � WSJ reports that Chart Disk may not get Medicare coverage
GE � NY Post reports advertisers already complaining about Olympic ratings
BRCD � Reported $0.10 vs. $0.05 Revenues $170.1M vs. $158.0M
DELL � Reported $0.43 vs. $0.41 Revenues $15.18B vs. $14.81B Guides $0.39 - $0.41 vs. $0.42
NVDA � Reported $0.53 vs. $0.48 Revenues $633.6M vs. $625.2M Guides higher
PCLN � Reported $0.28 vs. $0.27 Revenues $203.9M vs. $204.8M
INTC � RBC cuts target price
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: PEP, JNJ, NVDA, INTC
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) 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.
While the spotlight was not nearly as bright, a good deal of attention was paid to Fed Chairman Ben Bernanke�s second day of Congressional testimony. And while there were other events that helped stocks move higher yesterday, namely a surprisingly strong report on housing, good economic numbers from the Philly Fed, and some solid earnings from big-cap tech, ultimately it was Bernanke and friends that were responsible for the Dow�s best finish in nearly five years.
The new Fed Chairman appeared before the Senate Banking Committee yesterday for part two of the semiannual Monetary Policy Report to Congress. The formal presentation was identical to Wednesday�s so the focus was on the Q&A. During the session, we learned that Mr. Bernanke likes to look out six months when forecasting the economy. We learned that he believes the inverted yield curve would be more likely to indicate a slowdown in the economy when rates are higher than now. We learned that Mr. Bernanke doesn�t think the U.S. can continue to run a deficit of 6% - 7% of GDP forever. And finally, we learned that the Fed Chairman does not feel that Chinese ownership of U.S. assets is large enough to put the economy at risk.
In short, Mr. Bernanke once again didn�t rock the boat, which allowed traders to breathe a sigh of relief. And speaking of relief, anyone owning homebuilding stocks certainly got some yesterday. Helped by the warmest January on record, housing starts soared by the largest amount (14.5%) since early 1994 and the annualized rate was the highest since March 1973.
But the good economic news didn�t stop there. The Philly Fed General Activity Index rebounded 12.1 points in February to 15.4, which is indicative of moderate growth. The reading was above expectations, which is always a plus. But most importantly, the Prices Paid index, which is an indication of inflation, fell 14.4 points and the Prices Received fell by 3.7 points.
Couple the Bernanke�s testimony, the strong housing numbers, and the generally positive report from the Philly Fed report with some decent earnings from Hewlett Packard and the result was generally positive for stocks. While traders weren�t buying with both hands, the market had an upbeat tone throughout much of the day.
But the day�s action really got started when St. Louis Fed President William Poole said that the Fed may be nearing an end to the interest rate increases. Traders did the market math on an improving economy, lower inflation, and an end to interest rate hikes, and sent the DJIA to its best finish since June 5, 2001.
Speaking of inflation, this morning�s pre-market activity is all about the inflation data. The PPI headline came in a bit hotter than expected with a gain of +0.3% versus expectations for +0.2%. The Core Rate came in showing an increase of +0.4%, which was also a little higher than the rise of +0.2% that economists had been looking for. However, last month�s number was revised lower to +0.6% from +0.9% and the year-over-year Core Rate of +1.5% is still relatively benign.
Stock and bond futures have not moved much on the data, but with Fed officials telling us that inflation is the key to future monetary policy right now, rest assured that the numbers will prompt some concern about inflation and additional rate hikes.
Running through this morning�s pre-game indicators, with the exception of Japan, which fell -2.1% on stronger than expected GDP data, the overseas markets are all modestly higher at the moment. Gold futures are up +$0.70 this morning to $549.50. Oil is rebounding by +$1.12 to $59.58 on word of an explosion in an oil pipeline in Iraq. Natural Gas is up $0.16 to $7.29 as colder weather moves in across the Midwest. Bond yields are surprisingly steady with the 2-yr at 4.68% and 10-yr at 4.56% right now. And finally, stock futures in the U.S. are a smidge under water before the bell with the Dow down -9, the S&P -1.0, and the NASDAQ -3.0.
Stocks "In Play" This Morning:
PEP � Pru initiates coverage on sector with PEP as top pick
JNJ � WSJ reports that Chart Disk may not get Medicare coverage
GE � NY Post reports advertisers already complaining about Olympic ratings
BRCD � Reported $0.10 vs. $0.05 Revenues $170.1M vs. $158.0M
DELL � Reported $0.43 vs. $0.41 Revenues $15.18B vs. $14.81B Guides $0.39 - $0.41 vs. $0.42
NVDA � Reported $0.53 vs. $0.48 Revenues $633.6M vs. $625.2M Guides higher
PCLN � Reported $0.28 vs. $0.27 Revenues $203.9M vs. $204.8M
INTC � RBC cuts target price
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: PEP, JNJ, NVDA, INTC
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) 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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