David Moenning�s Daily State of the Markets: 12/26
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Bulls Get Scrooged
To those brave souls that are at your desks this morning, good morning and welcome back to the game. While a three-day holiday weekend always makes Friday�s market activity seems like a distant memory, the news that wound up driving stocks lower was actually worthy of note.
While Friday�s data failed to offer a unified theme for stocks, the cross currents in the reports when coupled with the big drop in the bond market, were enough for a �Bah Humbug� response among the traders left manning their posts.
There is no mistaking the fact that volume was very light and that the markets were clearly in pre-holiday mode. However, the drop of 78 points on the Dow definitely ran contrary to the historical tendencies around the holiday.
A review of Friday�s economic data can be depicted as an on-the-one-hand-but-on-the-other-hand type of affair. And frankly, the market reaction was a little puzzling. For example, the Durable Goods report came in much higher than expectations, but was easily explained away by the surge in defense orders. And when you strip out aircraft and defense, the ever popular Nondefense Capital Goods Ex-Aircraft number actually sported a drop of 1.4%.
Next up; Personal Spending increased by +0.5% in November, which was the largest advance in four months. And since this was the second straight sizable monthly gain, it would appear that the consumer is indeed alive and well. However, the Personal Income number was a bit disappointing, coming in below expectations at +0.3%. But, on the other hand (that�s the other, other hand), the inflation component � the Core PCE � showed the smallest advance since October 2002.
Finally, the University of Michigan�s Consumer Sentiment Index rebounded nicely in December and came in 1.5 points above consensus at 91.7.
Although the message from the economic data didn�t appear to be terribly bearish for stock or bond prices, the action in the bond pits provided a differing opinion. In short, the big move down in bond prices produced a fresh new high for the month in bond yields as the 10-year moved up almost 8 basis points to finish at 4.62%. And while the economic data got the blame for the drop in stock prices in the popular press, it is probably more accurate to blame the bonds and the lack of liquidity.
Turning to this morning and the last 4 trading days of 2006, there is no economic data before the bell today, but we will get the Richmond Fed Index at 10:00, then New Homes Sales tomorrow. But, in the big picture, it is likely to be a slow week.
On the news front, over the weekend, the UN Security Council imposed economic sanction on Iran for their failure to comply with the Council�s request to stop enriching uranium. In response, Iran says it will continue to pursue its nuclear ambitions.
Running through the rest of the pre-game indicators, the overseas markets are higher in Asia while those smart Europeans stayed home as the major bourses remain closed for the holiday. Gold futures are higher this morning on the uncertainty with Iran and the last trade was up $6 at $628.30. Crude futures are moving up a bit this morning with the latest quote showing the February futures contract up $0.40 to $62.81. Interest rates are a smidge better as the yield on the 10-year currently stands at 4.60%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open on the flat side.
Stocks �In Play� This Morning:
Leap Wireless (LEAP) � Mentioned positively in Wall Street Journal
ITT Corp (ITT) � Mentioned positively in Barron�s
Peabody Energy (BTU) � Mentioned positively in Barron�s
EW Scripps (SSP) � Mentioned positively in Barron�s
Lockheed Martin (LMT) � Added to Conviction Buy list at Goldman
E-Trade (ET) � Estimates lowered at Goldman
Charles Schwab (SCHW) � Estimates lowered at Goldman
Costco (COST) � Named Top Pick for �07 at Wachovia
Hertz Global (HTZ) � Goldman starts coverage at Buy, JP Morgan starts at Neutral, Lehman starts at Overweight
Long positions in stocks mentioned: GS, LMT, ET, LEH
** 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.
To those brave souls that are at your desks this morning, good morning and welcome back to the game. While a three-day holiday weekend always makes Friday�s market activity seems like a distant memory, the news that wound up driving stocks lower was actually worthy of note.
While Friday�s data failed to offer a unified theme for stocks, the cross currents in the reports when coupled with the big drop in the bond market, were enough for a �Bah Humbug� response among the traders left manning their posts.
There is no mistaking the fact that volume was very light and that the markets were clearly in pre-holiday mode. However, the drop of 78 points on the Dow definitely ran contrary to the historical tendencies around the holiday.
A review of Friday�s economic data can be depicted as an on-the-one-hand-but-on-the-other-hand type of affair. And frankly, the market reaction was a little puzzling. For example, the Durable Goods report came in much higher than expectations, but was easily explained away by the surge in defense orders. And when you strip out aircraft and defense, the ever popular Nondefense Capital Goods Ex-Aircraft number actually sported a drop of 1.4%.
Next up; Personal Spending increased by +0.5% in November, which was the largest advance in four months. And since this was the second straight sizable monthly gain, it would appear that the consumer is indeed alive and well. However, the Personal Income number was a bit disappointing, coming in below expectations at +0.3%. But, on the other hand (that�s the other, other hand), the inflation component � the Core PCE � showed the smallest advance since October 2002.
Finally, the University of Michigan�s Consumer Sentiment Index rebounded nicely in December and came in 1.5 points above consensus at 91.7.
Although the message from the economic data didn�t appear to be terribly bearish for stock or bond prices, the action in the bond pits provided a differing opinion. In short, the big move down in bond prices produced a fresh new high for the month in bond yields as the 10-year moved up almost 8 basis points to finish at 4.62%. And while the economic data got the blame for the drop in stock prices in the popular press, it is probably more accurate to blame the bonds and the lack of liquidity.
Turning to this morning and the last 4 trading days of 2006, there is no economic data before the bell today, but we will get the Richmond Fed Index at 10:00, then New Homes Sales tomorrow. But, in the big picture, it is likely to be a slow week.
On the news front, over the weekend, the UN Security Council imposed economic sanction on Iran for their failure to comply with the Council�s request to stop enriching uranium. In response, Iran says it will continue to pursue its nuclear ambitions.
Running through the rest of the pre-game indicators, the overseas markets are higher in Asia while those smart Europeans stayed home as the major bourses remain closed for the holiday. Gold futures are higher this morning on the uncertainty with Iran and the last trade was up $6 at $628.30. Crude futures are moving up a bit this morning with the latest quote showing the February futures contract up $0.40 to $62.81. Interest rates are a smidge better as the yield on the 10-year currently stands at 4.60%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open on the flat side.
Stocks �In Play� This Morning:
Leap Wireless (LEAP) � Mentioned positively in Wall Street Journal
ITT Corp (ITT) � Mentioned positively in Barron�s
Peabody Energy (BTU) � Mentioned positively in Barron�s
EW Scripps (SSP) � Mentioned positively in Barron�s
Lockheed Martin (LMT) � Added to Conviction Buy list at Goldman
E-Trade (ET) � Estimates lowered at Goldman
Charles Schwab (SCHW) � Estimates lowered at Goldman
Costco (COST) � Named Top Pick for �07 at Wachovia
Hertz Global (HTZ) � Goldman starts coverage at Buy, JP Morgan starts at Neutral, Lehman starts at Overweight
Long positions in stocks mentioned: GS, LMT, ET, LEH
** 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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