David Moenning’s Daily State of the Markets: 02/05

February 5, 2007 9:40 AM EST
Time to Take a Break?

Good morning. Over the past two weeks, traders have reacted favorably to a heavy dose of earnings and economic news. As we’ve discussed, the economic data has been largely supportive of the Goldilocks theme and even the Fed seems to be on board with the concept. In addition, the earnings parade has provided a bevy of reports that were once again, better than expected on balance.

However, the modest pace of trading on Friday may have been a precursor of things to come. While the jobs report was highly anticipated and the session managed to produce a sixth straight day of green screens on the NASDAQ as well as a fourth straight day of gains on the S&P, overall, the session was a little on the quiet side.

As we reported before the bell on Friday, the January Jobs report was somewhat of a mixed bag. Although the job creation numbers were solid after revisions to both November and December were taken into account, the Unemployment Rate actually rose a tenth of a percent. However, this is exactly the kind of report that the Fed wants to see and would seem to suggest that Mr. Bernanke and Company will remain in a holding pattern for the foreseeable future.

We also heard from the University of Michigan on Friday as to the consumer’s state of mind. While the Consumer Sentiment Index slipped 1.1 points from its midmonth reading, it was more than 5 points above the December level of 91.7. The report showed the consumer to be in a pretty healthy state at the present time, but attitudes did start to show signs of stalling near the end of the month.

Although the S&P managed to eek out another new six-year high and the Russell 2000, the S&P Small Cap, and the S&P Mid Cap indices all pushed on to fresh all-time highs, the Dow wound up in the red on the day. While hardly a death knell to the bull camp, the mixed action and the light volume can be viewed as a short-term loss of upside momentum. And since its been a very long time since the bulls have taken any kind of break, we should continue to be on the lookout for some corrective action.

Looking ahead, the economic calendar is fairly quiet this week. We’ll get the ISM Non-Manufacturing report at 10:00 this morning and then on Wednesday we’ll see details of Worker Productivity and Consumer Credit. But that’s about it in terms of data. So without much in the way of economic news and the earnings parade beginning to slow down, it will be interesting to see if the bulls decide to finally take a break from their long run higher.

Turning to this morning, despite a fresh round of M&A activity, things are a little on the weak side in the early going. Asian markets were lower on concerns that the G-7 will push for stronger currencies in the region and European markets are waffling on either side of breakeven.

Running through the rest of the pre-game indicators, Gold is trading up $3.10 to $654.60 right now. In the oil pits, crude futures are up again with the latest quote showing the March contract higher by $0.24 to $59.24. Interest rates are steady this morning with the yield on the 10-year currently trading at 4.82%. And finally, with an hour before the bell, stock futures in the U.S. are looking to open a little lower. The Dow futures are currently off by about 10 points; the S&P’s are 3.40 under water, while the NASDAQ looks to be about 3 points below fair value at the moment.

Stocks “In Play” This Morning:

Wal-Mart (WMT) – Expects Jan sales to be higher than projections
Echostar Comm (DISH) – Mentioned positively in Barron’s
MEMC Electronic Materials (WFR) – Mentioned positively in Barron’s
Mohawk Industries (MHK) – Mentioned positively in Barron’s
Cognizant Tech Solutions (CTSH) – Reported $0.46 vs. $0.43
Hewitt Associates (HEW) – Reported $0.27 vs. $0.24
Humana (HUM) – Reported $0.92 vs. $0.88
Cameron (CAM) – Target increased at Citigroup
Gannet (GCI) – Upgraded at Credit Suisse
Dell (DELL) – Upgraded at Credit Suisse
YRC Worldwide (YRCW) – Downgraded at Credit Suisse, RW Baird
Chevron (CVX) – Downgraded at Deutsche Bank
Electronic Arts (ERTS) – Downgraded at JP Morgan
Barnes & Noble (BKS) – Upgraded at Prudential
Ericsson (ERIC) – Upgraded at Newcrest
Genworth Financial (GNW) – Upgraded at Raymond James
Lexmark (LXK) – Downgraded at UBS

Mr. Moenning holds Long positions in stocks mentioned: JPM, WFR, CTSH

Note: All earnings reports compared to Reuters consensus estimates

** For More of David Moenning’s Market Analysis, Stock Portfolios, and Trading Ideas, visit:

The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management and Co-Founder of 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.

You May Also Be Interested In

Related Categories

Contributors, Special Reports