David Moenning�s Daily State of the Markets 07/13
Tweet
Share
E-mail
Not Out of the Woods
The bulls have argued recently that traders should put away their worries about the Fed and inflation, and focus on what really matters: earnings. After all, it�s earnings that make the world go round on the corner of Broad and Wall. And it doesn�t hurt that analysts are projecting another double digit gain for the S&P earnings. But, in the early going at least, the earnings season has been a bit of a dud as some pretty big names have provided some rather lackluster results.
Now toss in rising oil prices on escalating violence in the Middle East and a big drop in supplies of crude, which has reignited inflation fears, and it is easy to see that our barnyard buddies aren�t out of the inflation/Fed woods just yet. And it was this realization that was at least partially responsible for yesterday�s triple-digit decline, which appears to be a resumption of the downtrend and a retest of the recent lows.
An analyst downgrade of Dell and negative comments on Apple didn�t help matters any yesterday in an already struggling tech market. It looks like tech has now been declared DOA by the street and even the value guys don�t seem interested these days. The negative sentiment has taken the NASDAQ back to within a whisker of last months lows and has traders talking bear market again.
Then there is the geopolitical situation, which seems to worsen by the day. Not only have traders had to deal with the Iran nuclear mess and North Korea�s saber rattling recently, now we�ve got terrorist activity in Bombay, what verges on open warfare with Israel and Lebanon, and renewed attacks on oil installations in Nigeria. In short, it�s tough to get too fired up about putting money to work with all the threatening headlines putting pressure on oil prices � which in turn, puts pressure on inflation � which, of course, takes us right back to the economy and the Fed. Ughh.
And don�t look now but oil prices are pushing into new-high territory again. The escalating geopolitical issues have caused traders to up the risk premium on a barrel of oil, and yesterday�s inventory numbers also renewed talk of summer shortages. Analysts had been expecting a reduction in inventories to the tune of about 1.5 million barrels, but instead they were greeted with a reduction of 6 million barrels. And to make matters worse, refinery utilization actually fell when an increase had been expected.
It will suffice to say that the mood on the street has turned ugly. Fear of inflation and the Fed, weakness in the economy, lousy earnings guidance, and a worsening technical picture has produced a pretty negative outlook.
But before we throw in the towel, let�s remember that may be a couple of positives lurking after some further downside action. First, the negativity is growing rapidly, which helps set up the next advance. And then in looking at the chart of the S&P 500, could that be a head-and-shoulders bottom forming? So while the bulls may be on the run at the moment, hang tight because in this market, anything can happen.
Turning to this morning, escalation in the situation between Israel and Hezbollah and attacks against oil installations in Nigeria has pushed oil prices back above $75. In addition, a downgrade of Wal-Mart and another negative preannouncement, this time by SAP, who said that revenues will be below estimates, has put the markets on a downward path.
Running through the pre-game indicators, overseas markets are down more than 1% across the board. Gold is moving a higher again this morning and is up by $1.80 to $653 at the moment. Oil is continuing to move higher and is currently trading up by $0.76 to $75.71. Interest rates are moving down as investors flee stocks and the 2-year currently trading at 5.15% while the 10-yr is testing the recent low yield at 5.09% right now. And finally, with about an hour before the bell, stock futures in the U.S. are solidly lower. The Dow futures are currently off by 63 points; the S&Ps are down by 6.60, and the NASDAQ sports a decline of more than 13 points.
Stocks �In Play� This Morning:
Wal-Mart (WMT) � Downgraded at Merrill Lynch
PepsiCo (PEP) � Reported $0.80 vs. $0.77, Revenues of $8.6B vs. $8.48
Marriott Intl (MAR) � Reported $42 vs. $0.40, Revenues $2.85B vs. $2.8B
JC Penney (JCP) � Mentioned cautiously in Barron�s
Ericsson (ERICY) � Upgraded at Deutsche, mentioned cautiously at BofA
Nabors Ind (NBR) � Downgraded at JPM along with WFT, GW, PTEN
Procter & Gamble (PG) � Upgraded at UBS
AT&T (T) � Credit Suisse lowers price target
Wells Fargo (WFC) � Mentioned positively at UBS
Disney (DIS) � Downgraded at CIBC
Brunswick (BC) � Downgraded at Citigroup
Eli Lilly (LLY) � Added to Buy list at Goldman Sachs
Cigna (CI) � Added to Buy list at Goldman Sachs
Deutsche Bank (DB) � Upgraded at Goldman
Astrazeneca (AZN) � Downgraded at HSBC
Boeing (BA) � Mentioned positively at Cowen
Positions in stocks mentioned: GS, JCP
** 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.
The bulls have argued recently that traders should put away their worries about the Fed and inflation, and focus on what really matters: earnings. After all, it�s earnings that make the world go round on the corner of Broad and Wall. And it doesn�t hurt that analysts are projecting another double digit gain for the S&P earnings. But, in the early going at least, the earnings season has been a bit of a dud as some pretty big names have provided some rather lackluster results.
Now toss in rising oil prices on escalating violence in the Middle East and a big drop in supplies of crude, which has reignited inflation fears, and it is easy to see that our barnyard buddies aren�t out of the inflation/Fed woods just yet. And it was this realization that was at least partially responsible for yesterday�s triple-digit decline, which appears to be a resumption of the downtrend and a retest of the recent lows.
An analyst downgrade of Dell and negative comments on Apple didn�t help matters any yesterday in an already struggling tech market. It looks like tech has now been declared DOA by the street and even the value guys don�t seem interested these days. The negative sentiment has taken the NASDAQ back to within a whisker of last months lows and has traders talking bear market again.
Then there is the geopolitical situation, which seems to worsen by the day. Not only have traders had to deal with the Iran nuclear mess and North Korea�s saber rattling recently, now we�ve got terrorist activity in Bombay, what verges on open warfare with Israel and Lebanon, and renewed attacks on oil installations in Nigeria. In short, it�s tough to get too fired up about putting money to work with all the threatening headlines putting pressure on oil prices � which in turn, puts pressure on inflation � which, of course, takes us right back to the economy and the Fed. Ughh.
And don�t look now but oil prices are pushing into new-high territory again. The escalating geopolitical issues have caused traders to up the risk premium on a barrel of oil, and yesterday�s inventory numbers also renewed talk of summer shortages. Analysts had been expecting a reduction in inventories to the tune of about 1.5 million barrels, but instead they were greeted with a reduction of 6 million barrels. And to make matters worse, refinery utilization actually fell when an increase had been expected.
It will suffice to say that the mood on the street has turned ugly. Fear of inflation and the Fed, weakness in the economy, lousy earnings guidance, and a worsening technical picture has produced a pretty negative outlook.
But before we throw in the towel, let�s remember that may be a couple of positives lurking after some further downside action. First, the negativity is growing rapidly, which helps set up the next advance. And then in looking at the chart of the S&P 500, could that be a head-and-shoulders bottom forming? So while the bulls may be on the run at the moment, hang tight because in this market, anything can happen.
Turning to this morning, escalation in the situation between Israel and Hezbollah and attacks against oil installations in Nigeria has pushed oil prices back above $75. In addition, a downgrade of Wal-Mart and another negative preannouncement, this time by SAP, who said that revenues will be below estimates, has put the markets on a downward path.
Running through the pre-game indicators, overseas markets are down more than 1% across the board. Gold is moving a higher again this morning and is up by $1.80 to $653 at the moment. Oil is continuing to move higher and is currently trading up by $0.76 to $75.71. Interest rates are moving down as investors flee stocks and the 2-year currently trading at 5.15% while the 10-yr is testing the recent low yield at 5.09% right now. And finally, with about an hour before the bell, stock futures in the U.S. are solidly lower. The Dow futures are currently off by 63 points; the S&Ps are down by 6.60, and the NASDAQ sports a decline of more than 13 points.
Stocks �In Play� This Morning:
Wal-Mart (WMT) � Downgraded at Merrill Lynch
PepsiCo (PEP) � Reported $0.80 vs. $0.77, Revenues of $8.6B vs. $8.48
Marriott Intl (MAR) � Reported $42 vs. $0.40, Revenues $2.85B vs. $2.8B
JC Penney (JCP) � Mentioned cautiously in Barron�s
Ericsson (ERICY) � Upgraded at Deutsche, mentioned cautiously at BofA
Nabors Ind (NBR) � Downgraded at JPM along with WFT, GW, PTEN
Procter & Gamble (PG) � Upgraded at UBS
AT&T (T) � Credit Suisse lowers price target
Wells Fargo (WFC) � Mentioned positively at UBS
Disney (DIS) � Downgraded at CIBC
Brunswick (BC) � Downgraded at Citigroup
Eli Lilly (LLY) � Added to Buy list at Goldman Sachs
Cigna (CI) � Added to Buy list at Goldman Sachs
Deutsche Bank (DB) � Upgraded at Goldman
Astrazeneca (AZN) � Downgraded at HSBC
Boeing (BA) � Mentioned positively at Cowen
Positions in stocks mentioned: GS, JCP
** 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.
Create E-mail Alert Related Categories
Contributors, Special ReportsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
