David Moenning�s Daily State of the Markets 01/19
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Tech Wreck?
Good morning. Blue chips pulled back ever-so slightly yesterday. But over in four-letter-land, the action was downright ugly. While the Dow closed down 9 points and the S&P dropped 4, the NASDAQ fell almost -1.5% and the Semiconductor index plunged -3.9%.
To be sure, there has been a sudden and rather violent turn in sentiment toward all things tech. It could be the calendar but it may also be the state of the earnings reports in the sector. Intel got things started off with a thud. The popular press reported that Apple disappointed, Cisco was downgraded, and then IBM has followed up with numbers that were less than inspiring. The result has been a quick -2.5% haircut in the tech indices and some seriously scary action in the leaders.
But there may be some additional forces at work here as well. For example, Apple blew away earnings estimates and surprised everyone with their iPod sales totals. But, as usual, they sandbagged the guidance for the coming quarter, which was taken as a negative this time. So with a rather sour predilection toward tech at the moment, many traders decided to sell first and ask questions later.
So after three straight days of selling, the question that begs to be asked in the tech sector is if we�ve got a full fledged �tech wreck� on our hands or merely a fender-bender? Stay tuned to the action in the NASDAQ in general and the SOX in particular for clues.
With the bears focusing their attention on Technology, the major indices got a pass yesterday. However, another way to look at the action is the bulls weren�t able to get anything done with another batch of data that has to be considered good news on balance. For example, oil finished at $50.48, a level not seen since May of 2005 (and even briefly broke below $50 intraday). The CPI report was considered to be more of the same � I.E. the Core Rate continues to be fairly well behaved. Initial Claims for Unemployment fell to their lowest level in a year. The Philly Fed Index rebounded in January to the highest level since August. And the Housing Starts numbers were surprisingly strong due to the warmer weather. Thus, based on the data we�ve seen this week, it would appear that Goldilocks is alive and well.
But, to be fair, the bears have been caged up for an inordinate amount of time. Thus, so far at least, we should be thankful that their efforts have been limited to the tech sector.
Turning to this morning, for a change, there is no economic data before the bell today. However there are some big earnings reports to review. Earnings from GE and IBM were lackluster when analysts had been looking for a positive quarter from Big Blue. At first blush, IBM�s report of $2.26 versus the Reuters consensus of $2.19 sounds pretty positive. However, the company mentioned that $0.06 of their gain came from unexpectedly lower tax rates. So the report was more or less in line with expectations, which isn�t good enough at this stage of the game. But, since it isn�t a train wreck either, the report is likely to lead to a continuation of the negative outlook for tech right now.
Running through the rest of the pre-game indicators, the foreign markets suffered from IBM�s earnings and with the exception of Hong Kong, were modestly lower overnight. Gold futures are a little higher this morning with the last trade up $2.20 to $630.30. In the oil pits, crude futures are doing very little so far with the latest quote showing the futures contract up $0.17 to $50.65. Interest rates are unchanged this morning and the 10-year is currently trading with a yield of 4.75%. And finally, with 45 minutes before the bell, stock futures in the U.S. are looking lower. The Dow futures are currently off by 34 points; the S&P�s are 1.50 under water, while the NASDAQ looks to be about 5 points below fair value at the moment.
Stocks �In Play� This Morning:
General Electric (GE) � Reported $0.64 vs. $0.64
Motorola (MOT) � Reported $0.24 vs. $0.24
Schlumberger (SLB) � Reported $0.92 vs. $0.85
Intl Business Machines (IBM) � Reported $2.26 vs. $2.19
Citigroup (C) � Reported $1.03 vs. $1.02
US Airways � Mentioned positively in Business Week
Deutsche Telekom (DT) � Upgraded at Bear Stearns
Knight Capital (NITE) � Upgraded at CIBC
Red Hat (RHT) � Upgraded at CIBC
Altria (MO) � Downgraded at Deutsche Bank
Check Point Software (CHKP) � Downgraded at Friedman, Billings
Johnson & Johnson (JNJ) � Added to Conviction Buy list at Goldman Sachs
TRW Automotive (TRW) � Downgraded at Goldman Sachs
Fortune Brands (FO) � Downgraded at JP Morgan
Nordstrom (JWN) � Downgraded at Stifel Nicolaus
Limited Brands (LTD) � Downgraded at Stifel Nicolaus
Texas Instruments (TXN) � Upgraded at Think Equity
Disclosure: Long positions is stocks mentioned: GS, BSC, MO, SLB
** 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. Blue chips pulled back ever-so slightly yesterday. But over in four-letter-land, the action was downright ugly. While the Dow closed down 9 points and the S&P dropped 4, the NASDAQ fell almost -1.5% and the Semiconductor index plunged -3.9%.
To be sure, there has been a sudden and rather violent turn in sentiment toward all things tech. It could be the calendar but it may also be the state of the earnings reports in the sector. Intel got things started off with a thud. The popular press reported that Apple disappointed, Cisco was downgraded, and then IBM has followed up with numbers that were less than inspiring. The result has been a quick -2.5% haircut in the tech indices and some seriously scary action in the leaders.
But there may be some additional forces at work here as well. For example, Apple blew away earnings estimates and surprised everyone with their iPod sales totals. But, as usual, they sandbagged the guidance for the coming quarter, which was taken as a negative this time. So with a rather sour predilection toward tech at the moment, many traders decided to sell first and ask questions later.
So after three straight days of selling, the question that begs to be asked in the tech sector is if we�ve got a full fledged �tech wreck� on our hands or merely a fender-bender? Stay tuned to the action in the NASDAQ in general and the SOX in particular for clues.
With the bears focusing their attention on Technology, the major indices got a pass yesterday. However, another way to look at the action is the bulls weren�t able to get anything done with another batch of data that has to be considered good news on balance. For example, oil finished at $50.48, a level not seen since May of 2005 (and even briefly broke below $50 intraday). The CPI report was considered to be more of the same � I.E. the Core Rate continues to be fairly well behaved. Initial Claims for Unemployment fell to their lowest level in a year. The Philly Fed Index rebounded in January to the highest level since August. And the Housing Starts numbers were surprisingly strong due to the warmer weather. Thus, based on the data we�ve seen this week, it would appear that Goldilocks is alive and well.
But, to be fair, the bears have been caged up for an inordinate amount of time. Thus, so far at least, we should be thankful that their efforts have been limited to the tech sector.
Turning to this morning, for a change, there is no economic data before the bell today. However there are some big earnings reports to review. Earnings from GE and IBM were lackluster when analysts had been looking for a positive quarter from Big Blue. At first blush, IBM�s report of $2.26 versus the Reuters consensus of $2.19 sounds pretty positive. However, the company mentioned that $0.06 of their gain came from unexpectedly lower tax rates. So the report was more or less in line with expectations, which isn�t good enough at this stage of the game. But, since it isn�t a train wreck either, the report is likely to lead to a continuation of the negative outlook for tech right now.
Running through the rest of the pre-game indicators, the foreign markets suffered from IBM�s earnings and with the exception of Hong Kong, were modestly lower overnight. Gold futures are a little higher this morning with the last trade up $2.20 to $630.30. In the oil pits, crude futures are doing very little so far with the latest quote showing the futures contract up $0.17 to $50.65. Interest rates are unchanged this morning and the 10-year is currently trading with a yield of 4.75%. And finally, with 45 minutes before the bell, stock futures in the U.S. are looking lower. The Dow futures are currently off by 34 points; the S&P�s are 1.50 under water, while the NASDAQ looks to be about 5 points below fair value at the moment.
Stocks �In Play� This Morning:
General Electric (GE) � Reported $0.64 vs. $0.64
Motorola (MOT) � Reported $0.24 vs. $0.24
Schlumberger (SLB) � Reported $0.92 vs. $0.85
Intl Business Machines (IBM) � Reported $2.26 vs. $2.19
Citigroup (C) � Reported $1.03 vs. $1.02
US Airways � Mentioned positively in Business Week
Deutsche Telekom (DT) � Upgraded at Bear Stearns
Knight Capital (NITE) � Upgraded at CIBC
Red Hat (RHT) � Upgraded at CIBC
Altria (MO) � Downgraded at Deutsche Bank
Check Point Software (CHKP) � Downgraded at Friedman, Billings
Johnson & Johnson (JNJ) � Added to Conviction Buy list at Goldman Sachs
TRW Automotive (TRW) � Downgraded at Goldman Sachs
Fortune Brands (FO) � Downgraded at JP Morgan
Nordstrom (JWN) � Downgraded at Stifel Nicolaus
Limited Brands (LTD) � Downgraded at Stifel Nicolaus
Texas Instruments (TXN) � Upgraded at Think Equity
Disclosure: Long positions is stocks mentioned: GS, BSC, MO, SLB
** 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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