David Moenning�s Daily State of the Markets: 12/18
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Good, But Not Great
Good Monday morning. Friday morning�s inflation data initially seemed to light a fire under the both the stock and bond bulls. Both markets popped higher on the CPI data and in the early going, it looked like investors had received another early gift from Santa. However, as the day progressed, bonds ran into resistance and stock traders seemed to lose interest.
While the Dow managed to finish at a new record high for the second straight session and the S&P closed at its best level since early 2000, we need to recognize that the indices finished well off their highs. In fact, the NYSE, Russell 2000, and both the S&P Small and Mid Cap indexes all closed in the red. And the bond market, which always bears watching in relation to economic data, actually gave away the morning�s entire gain and also finished in the red.
The inflation report was the focus before the bell as investors were hoping to see more confirmation that inflation remains in check. And when the report showed that both the headline CPI and the Core rate were below expectations, it looked like it would be another great day for the bulls.
However, the day�s other economic data, in conjunction with another rise in oil prices, may have been responsible for downgrading the session from great to merely good. Although the Industrial Production report isn�t quite the household name that the CPI is, the report on the output of manufacturing did come in better than expected. This reminded traders that we�ve got a mixed bag of data on our hands right now. And in short, this ought to keep the Fed from doing much of anything in the near future.
As we�ve mentioned a time or two, we like to watch the bond market for reaction to all economic data. And since bonds gave up all of the big CPI-induced gains, we should recognize that the boys in the bond pits seem to be saying that the economy may do just fine without the Fed�s help. And while this may be construed as good news, it puts a wee bit of uncertainty in the market.
You see, traditionally, the Fed has had to reverse course and actually lower rates within six months of ending a tightening campaign in order to give the economy a boost. But this time, it looks like that there may be no such boost needed and those betting on an improving economy six months out may have to rethink their outlook.
Turning to this morning, it�s Monday, so we�ve got some new M&A activity to review. The biggest deal this morning sees Express Scripts (ESRX) topping CVS�s bid for Caremark Rx (CMX). And as usual, the urge to merge has put traders in an upbeat mood before the bell.
We don�t have any big economic data to consider today, but we will get the PPI and Housing Starts on Tuesday, GDP, LEI and the Philly Fed Report on Thursday, and then Personal Income, Durable Goods, and the University of Michigan�s Sentiment reports on Friday.
Running through the pre-game indicators, the overseas markets were mostly a little higher overnight. Gold futures are up a fraction this morning with the last trade at $619.70. Crude futures are falling this morning with the latest quote showing the January contract off $0.32 to $63.11. Interest rates are moving a little lower at the moment with the yield on the 2-year currently at 4.72% while the 10-yr is trading with a yield of 4.59%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently ahead by more than 20 points; the S&Ps are about 3 point above breakeven, and the NASDAQ looks to be about 9 points above fair value at the moment.
Stocks �In Play� This Morning:
ConocoPhillips (COP) � Mentioned positively in Barron�s
Turbochef Tech (OVEN) � Mentioned positively in Barron�s
Newfield Exploration (NFX) � Mentioned positively in Barron�s
Caremark Rx (CMX) � Express Scripts proposes buyout
Teck Cominco (TCK) � Downgraded at CIBC Capital Markets
US Concrete (RMIX) � Upgraded at Citigroup
L-3 Comm (LLL) � Downgraded at Credit Suisse
Allegheny Energy (AYE) � Upgraded at Credit Suisse
Exxon Mobil (XOM) � Downgraded at Friedman Billings
Schlumberger (SLB) � Downgraded at Goldman Sachs
Baker Hughes (BHI) � Upgraded at Goldman Sachs
Eli Lilly (LLY) � Downgraded at HSBC
Google (GOOG) � Estimates increased at JP Morgan
BMC Software (BMC) � Upgraded at Lehman
Citigroup (c) � Upgraded at Merrill Lynch
Cooper Companies (COO) � Downgraded at Prudential
Sovereign Bancorp (SOV) � Downgraded at RBC Capital
Cisco Systems (CSCO) � Cisco�s Linksys unit introduces iPhone, which is not the much anticipated mobile phone from Apple
Long positions in stocks mentioned: GS, MER, SLB, BHI, CSCO
** 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 Monday morning. Friday morning�s inflation data initially seemed to light a fire under the both the stock and bond bulls. Both markets popped higher on the CPI data and in the early going, it looked like investors had received another early gift from Santa. However, as the day progressed, bonds ran into resistance and stock traders seemed to lose interest.
While the Dow managed to finish at a new record high for the second straight session and the S&P closed at its best level since early 2000, we need to recognize that the indices finished well off their highs. In fact, the NYSE, Russell 2000, and both the S&P Small and Mid Cap indexes all closed in the red. And the bond market, which always bears watching in relation to economic data, actually gave away the morning�s entire gain and also finished in the red.
The inflation report was the focus before the bell as investors were hoping to see more confirmation that inflation remains in check. And when the report showed that both the headline CPI and the Core rate were below expectations, it looked like it would be another great day for the bulls.
However, the day�s other economic data, in conjunction with another rise in oil prices, may have been responsible for downgrading the session from great to merely good. Although the Industrial Production report isn�t quite the household name that the CPI is, the report on the output of manufacturing did come in better than expected. This reminded traders that we�ve got a mixed bag of data on our hands right now. And in short, this ought to keep the Fed from doing much of anything in the near future.
As we�ve mentioned a time or two, we like to watch the bond market for reaction to all economic data. And since bonds gave up all of the big CPI-induced gains, we should recognize that the boys in the bond pits seem to be saying that the economy may do just fine without the Fed�s help. And while this may be construed as good news, it puts a wee bit of uncertainty in the market.
You see, traditionally, the Fed has had to reverse course and actually lower rates within six months of ending a tightening campaign in order to give the economy a boost. But this time, it looks like that there may be no such boost needed and those betting on an improving economy six months out may have to rethink their outlook.
Turning to this morning, it�s Monday, so we�ve got some new M&A activity to review. The biggest deal this morning sees Express Scripts (ESRX) topping CVS�s bid for Caremark Rx (CMX). And as usual, the urge to merge has put traders in an upbeat mood before the bell.
We don�t have any big economic data to consider today, but we will get the PPI and Housing Starts on Tuesday, GDP, LEI and the Philly Fed Report on Thursday, and then Personal Income, Durable Goods, and the University of Michigan�s Sentiment reports on Friday.
Running through the pre-game indicators, the overseas markets were mostly a little higher overnight. Gold futures are up a fraction this morning with the last trade at $619.70. Crude futures are falling this morning with the latest quote showing the January contract off $0.32 to $63.11. Interest rates are moving a little lower at the moment with the yield on the 2-year currently at 4.72% while the 10-yr is trading with a yield of 4.59%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently ahead by more than 20 points; the S&Ps are about 3 point above breakeven, and the NASDAQ looks to be about 9 points above fair value at the moment.
Stocks �In Play� This Morning:
ConocoPhillips (COP) � Mentioned positively in Barron�s
Turbochef Tech (OVEN) � Mentioned positively in Barron�s
Newfield Exploration (NFX) � Mentioned positively in Barron�s
Caremark Rx (CMX) � Express Scripts proposes buyout
Teck Cominco (TCK) � Downgraded at CIBC Capital Markets
US Concrete (RMIX) � Upgraded at Citigroup
L-3 Comm (LLL) � Downgraded at Credit Suisse
Allegheny Energy (AYE) � Upgraded at Credit Suisse
Exxon Mobil (XOM) � Downgraded at Friedman Billings
Schlumberger (SLB) � Downgraded at Goldman Sachs
Baker Hughes (BHI) � Upgraded at Goldman Sachs
Eli Lilly (LLY) � Downgraded at HSBC
Google (GOOG) � Estimates increased at JP Morgan
BMC Software (BMC) � Upgraded at Lehman
Citigroup (c) � Upgraded at Merrill Lynch
Cooper Companies (COO) � Downgraded at Prudential
Sovereign Bancorp (SOV) � Downgraded at RBC Capital
Cisco Systems (CSCO) � Cisco�s Linksys unit introduces iPhone, which is not the much anticipated mobile phone from Apple
Long positions in stocks mentioned: GS, MER, SLB, BHI, CSCO
** 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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