David Moenning’s Daily State of the Markets: 04/13

Still Shopping

Good morning. Stocks reversed Wednesday’s decline yesterday and have now been higher in nine of the last ten sessions. The reasons for the advance were a bit elusive, which further supports our argument that the drop on Wednesday was based more on an overbought condition than on any real fears about the Fed raising rates.

As the closing bell rang, the bears could be heard complaining loudly that the recent advance, which has pushed the NYSE up into new all-time high territory and finds the S&P just 1.24% away from its recent high, has been rather lackluster. The grizzly gang is quick to point out that the volume has been light on the advance, which they contend means that there is little conviction behind the move.

The bull camp counters with the idea that the bears definitely dropped the ball yesterday and argue that the most positive thing a market can do is go up – regardless of the oomph behind the move.

To be fair, our horned heroes have a point about yesterday’s session. The bears had the ball and looked like they were ready to move up field in the early going. They had rising oil prices, a crummy report from Research in Motion (RIMM), a cautious outlook from Wal-Mart (WMT), and some momentum from Wednesday on their side. Stocks opened down and with the bulls waiting on earnings, it looked like things might get ugly.

But, surprisingly, the downdraft only lasted about 15 minutes. From there, stocks marched steadily higher for the rest of the day and finished with solid gains. As we mentioned, there was no real catalyst for the reversal of fortunes. Therefore, one has to view the action as a mild positive for the bulls.

Perhaps traders were encouraged by the March Same-Store Sales figures. Although retailers got the benefit of an early Easter and some warm weather, 69% of the reports were higher than expected and sales increased by a strong 6%, which was higher than the expectations for a gain of 4.2%. Thus, it appears that the consumer remains undeterred by geopolitical problems and all the talk about the housing market and a slowing economy.

Turning to this morning, inflation is in focus with the release of the March PPI data. In short, the PPI is one of those “good news – bad news” situations. The bad news is the headline number came in hotter than expected at +1.0% versus consensus estimates for +0.7%. But, the good news is that the Core Rate (excluding food and energy) was unchanged for the month, which was BELOW the estimates for an increase of +0.2%.

In addition, on a year-over-year basis, the Core Rate now stands at +1.7%, which is down from last month’s reading of +1.8% and also down from the high water mark of 2.0% seen in December.

So, with Mr. Bernanke and company looking pretty smart this morning, stock are rallying higher.

Running through the rest of the pre-game indicators, the major foreign markets are mixed by region with Asian markets in decline while Europe is a bit higher. Gold futures are continuing to rally and are trading up by $5.80 to $685.50. In the oil pits, crude futures are up another $0.33 with the latest quote at $64.18. Interest rates are moving a little lower in response to the positive inflation data this morning as the yield on the 10-year is currently trading at 4.73%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to advance at the open. The Dow futures are currently ahead by 33 points; the S&P’s are a about 2 points above board, while the NASDAQ looks to be about 2 points above fair value at the moment

Stocks “In Play” This Morning:

General Electric (NYSE: GE) – Reported $0.44 vs. $0.44, Guides Q2 to $0.52 - $0.54 vs. $0.53
Infosys (Nasdaq: INFY) – Reported $0.45 vs. $0.44
Broadcom (Nasdaq: BRCM) – Initiates new litigation against Qualcomm (QCOM)
Sunpower Corp (Nasdaq: SWPR) – Mentioned positively in Business Week
JB Hunt Transport (Nasdaq: JBHT) – Downgraded at Bear Stearns
Medimmune (Nasdaq: MEDI) – Downgraded at First Albany, Prudential
Apple Inc (Nasdaq: AAPL) – Mentioned positively at Goldman Sachs
Lockheed Martin (NYSE: LMT) – Removed from Conviction Buy list at Goldman
L-3 Communications (NYSE: LLL) – Added to Conviction Buy list at Goldman
Intersil Corp (Nasdaq: ISIL) – Downgraded at Goldman
TJX Cos (NYSE: TJX) – Upgraded at JP Morgan
US Bancorp (NYSE: USB) – Downgraded at Stifel Nicolaus
McCormick & Co (NYSE: MCK) – Upgraded at Wachovia

Mr. Moenning holds Long positions in stocks mentioned: GS, LMT, AAPL

Note: All earnings reports compared to Reuter’s consensus estimates

** 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.

You May Also Be Interested In

• After-Hours Movers: AMAT, DLO, GLOB, YSS, ETON
• After-Hours Movers: P, RIOT, BW, RKLB, HIMS, UPWK
• After-Hours Movers: CSCO, COHR, HLIT, CBRS, STUB, ENS