David Moenning�s Daily State of the Markets: 12/14
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Not This Time
Good morning. Lately, the simple fact that companies are continuing to merge and/or acquire other companies has been enough to push stocks higher. As we�ve discussed a time or two, the thinking here is really very simple. If corporate executives, who arguably know their business better than anyone, are willing to purchase a competitor at a premium to current market prices, then obviously the people doing the buying think the company they are buying is worth more than the current market price. And in the big picture, if the deals keep coming, then it is easy to extrapolate that the overall market is cheap � which, in relation to interest rates, is quite true.
However, despite stocks starting higher on a handful of new deals yesterday as well as a cheery report on Retail Sales, the bears wagged a paw Dikembe-style and effectively said, �Not this time.� And while the bulls weren�t completely rebuffed (after all, the indices did manage to finish with teeny tiny gains) as more than one analyst put it, the rally is looking a little tired.
The day started on a upbeat note as Retail Sales soared by 1% in November, which was well above the expectations for gains of +0.2%. Even when you strip out the sale of autos, which rose by +0.9%, sales were up an impressive +1.1%. Thus, all the recent worry over the consumer�s desire to hit the malls appears to have been for naught.
However, this good economic news wound up being a modest negative for stocks. Well, actually, the news was a negative for bonds, which, when coupled with a bounce in oil prices turned out to be a negative for stocks. In short, bond traders took note of the fact that the latest economic data has had a rather positive bent, which may keep the Fed on the sidelines longer than projected. The yield on the 10-year soared 87 basis points yesterday, pushing the closing yield to 4.57%. This represented an increase of nearly 2% and was obviously not lost on stock traders.
And while we can easily argue that this was simply an adjustment to the current environment, everyone who has ever played this game knows that rising interest rates is a bad thing for stocks. Thus, it is probably a good idea to keep one eye on the bond pits for a while.
Turning to this morning, we�ve got some solid earnings numbers from the brokers and no fewer than 10 potential deals being discussed. But so far at least, there isn't a lot of movement in the U.S. pre-market.
Running through the pre-game indicators, Asian markets were strong overnight while European bourses are up modestly in the early going. Gold futures are up nicely this morning with the last trade at $632.80. Crude futures are also higher this morning with the latest quote showing the January contract up $0.85 to $62.22. Interest rates are continuing to inch higher so far today as the 10-yr is currently trading with a yield of 4.58%. And finally, with an hour before the bell, stock futures in the U.S. are looking to open a little higher. The Dow futures are currently ahead by about 10 points; the S&Ps are about 1 point above breakeven, and the NASDAQ looks to be about 4 points above fair value at the moment.
Stocks �In Play� This Morning:
Bear Stearns (BSC) � Reported $4.00 vs. $3.36, Increased dividend
Lehman (LEH) � Reported $1.72 vs. $1.63
Ciena (CIEN) � Reported $0.16 vs. $0.11
MetLife (MET) � Upgraded at Bear Stearns
Black & Decker (BDK) � Downgraded at Citigroup
Sprint Nextel (S) � Downgraded at Cowen
Digital River (DRIV) � Downgraded at Credit Suisse
Archer Daniels Midland (ADM) � Downgraded at Credit Suisse
Heinz (HNZ) � Upgraded at Credit Suisse
Valero (VLO) � Downgraded at Deutsche Bank
BEA Systems (BEAS) � Upgraded at JMP Securities
Peabody Energy (BTU) � Upgraded at JP Morgan
Massey Energy (MEE) � Downgraded at JP Morgan
Archstone Smith Trust (ASN) � Upgraded at Lehman
Essex Property Trust (ESS) � Upgraded at Lehman
Ford (F) � Upgraded at Merrill Lynch
Safeway (SWY) � Upgraded at Morgan Stanley
Long positions in stocks mentioned: BSC, MS, S
** 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. Lately, the simple fact that companies are continuing to merge and/or acquire other companies has been enough to push stocks higher. As we�ve discussed a time or two, the thinking here is really very simple. If corporate executives, who arguably know their business better than anyone, are willing to purchase a competitor at a premium to current market prices, then obviously the people doing the buying think the company they are buying is worth more than the current market price. And in the big picture, if the deals keep coming, then it is easy to extrapolate that the overall market is cheap � which, in relation to interest rates, is quite true.
However, despite stocks starting higher on a handful of new deals yesterday as well as a cheery report on Retail Sales, the bears wagged a paw Dikembe-style and effectively said, �Not this time.� And while the bulls weren�t completely rebuffed (after all, the indices did manage to finish with teeny tiny gains) as more than one analyst put it, the rally is looking a little tired.
The day started on a upbeat note as Retail Sales soared by 1% in November, which was well above the expectations for gains of +0.2%. Even when you strip out the sale of autos, which rose by +0.9%, sales were up an impressive +1.1%. Thus, all the recent worry over the consumer�s desire to hit the malls appears to have been for naught.
However, this good economic news wound up being a modest negative for stocks. Well, actually, the news was a negative for bonds, which, when coupled with a bounce in oil prices turned out to be a negative for stocks. In short, bond traders took note of the fact that the latest economic data has had a rather positive bent, which may keep the Fed on the sidelines longer than projected. The yield on the 10-year soared 87 basis points yesterday, pushing the closing yield to 4.57%. This represented an increase of nearly 2% and was obviously not lost on stock traders.
And while we can easily argue that this was simply an adjustment to the current environment, everyone who has ever played this game knows that rising interest rates is a bad thing for stocks. Thus, it is probably a good idea to keep one eye on the bond pits for a while.
Turning to this morning, we�ve got some solid earnings numbers from the brokers and no fewer than 10 potential deals being discussed. But so far at least, there isn't a lot of movement in the U.S. pre-market.
Running through the pre-game indicators, Asian markets were strong overnight while European bourses are up modestly in the early going. Gold futures are up nicely this morning with the last trade at $632.80. Crude futures are also higher this morning with the latest quote showing the January contract up $0.85 to $62.22. Interest rates are continuing to inch higher so far today as the 10-yr is currently trading with a yield of 4.58%. And finally, with an hour before the bell, stock futures in the U.S. are looking to open a little higher. The Dow futures are currently ahead by about 10 points; the S&Ps are about 1 point above breakeven, and the NASDAQ looks to be about 4 points above fair value at the moment.
Stocks �In Play� This Morning:
Bear Stearns (BSC) � Reported $4.00 vs. $3.36, Increased dividend
Lehman (LEH) � Reported $1.72 vs. $1.63
Ciena (CIEN) � Reported $0.16 vs. $0.11
MetLife (MET) � Upgraded at Bear Stearns
Black & Decker (BDK) � Downgraded at Citigroup
Sprint Nextel (S) � Downgraded at Cowen
Digital River (DRIV) � Downgraded at Credit Suisse
Archer Daniels Midland (ADM) � Downgraded at Credit Suisse
Heinz (HNZ) � Upgraded at Credit Suisse
Valero (VLO) � Downgraded at Deutsche Bank
BEA Systems (BEAS) � Upgraded at JMP Securities
Peabody Energy (BTU) � Upgraded at JP Morgan
Massey Energy (MEE) � Downgraded at JP Morgan
Archstone Smith Trust (ASN) � Upgraded at Lehman
Essex Property Trust (ESS) � Upgraded at Lehman
Ford (F) � Upgraded at Merrill Lynch
Safeway (SWY) � Upgraded at Morgan Stanley
Long positions in stocks mentioned: BSC, MS, S
** 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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