David Moenning’s Daily State of the Markets: 08/27
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Old News?
Stocks continued to recover some of the drop from the credit crisis on Friday. The Dow put a gain of 140 points up on the board, which was a nice way to finish what turned out to be a pretty decent week. The advance was based on a couple of obvious data points and one piece of news that was not so widely publicized.
Things got moving in the right direction in the early going Friday on the back of a better-than expected report on the sale of Durable Goods in July. While analysts had been looking for an increase of 1.0%, the government reported that the Durable Goods jumped by 5.9%. And while, everyone knows that this is a very volatile data series, the positive news ran contrary to the bears’ argument that we are heading straight into recession.
The bears also had to stay quiet when it was reported that the sale of new homes came in significantly better than expected, which is a phrase that we haven’t used much lately in conjunction with anything related to the housing market. Analysts had been looking for sales to continue to fall in July, but instead, we saw an increase of 2.8%. And in short, this provided the bulls with the argument that the sky may not be falling at the present time.
Avid market watchers may find it a bit strange that stocks would rally on reports that obviously reflect the state of the economy BEFORE the credit crisis got rolling. Most would consider this to be “old news” and not reflective of the current environment. But, the fact that things might have been better than analysts had estimated before the crisis began, means that the economy might just have a shot at getting through this relatively unscathed.
But in reality, the fact that the New York Fed made some noise about accepting commercial paper as collateral at the discount window may have been the primary factor behind Friday’s move higher. Since much of the credit crisis is tied to the fact that there are virtually no buyers for certain types of commercial paper, this would be a move that would allow cash to continue to flow and be a welcome improvement in the situation.
Turning to this morning, we don’t have any economic data to review before the bell. However, we will get a report on existing home sales at 10:00 am eastern.
Running through the rest of the pre-game indicators, the overseas markets are higher this morning. Crude futures are higher by $0.16 with the latest quote at $71.25. Interest rates are flat so far as the 10-yr is trading with a yield of 4.63% right now. And finally, with about an hour before the bell, stock futures in the U.S. are a little lower. The Dow futures are currently off by about 31 points; the S&Ps are down by about 4 points, and the NASDAQ looks to be about 6 points below fair value at the moment.
Stocks “In Play” This Morning:
News, Upgrades/Downgrades/Brokerage Research:
Rowan Companies (NYSE: RDC) – Upgraded at Bear Stearns
CNA Financial (NYSE: CAN) – Upgraded at Credit Suisse
Tenet Healthcare (NYSE: THC) – Upgraded at First Albany
O’Reilly Automotive (Nasdaq: ORLY) – Upgraded at Goldman Sachs
Whole Foods (Nasdaq: WFMI) – Upgraded at JP Morgan
Countrywide Financial (NYSE: CFC) – Estimates reduced at Lehman
Safeway (NYSE: SWY) – Downgraded at Merrill Lynch
BE Aerospace (Nasdaq: BEAV) – Mentioned positively at UBS
Mr. Moenning holds Long positions in stocks mentioned: MER
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.
Stocks continued to recover some of the drop from the credit crisis on Friday. The Dow put a gain of 140 points up on the board, which was a nice way to finish what turned out to be a pretty decent week. The advance was based on a couple of obvious data points and one piece of news that was not so widely publicized.
Things got moving in the right direction in the early going Friday on the back of a better-than expected report on the sale of Durable Goods in July. While analysts had been looking for an increase of 1.0%, the government reported that the Durable Goods jumped by 5.9%. And while, everyone knows that this is a very volatile data series, the positive news ran contrary to the bears’ argument that we are heading straight into recession.
The bears also had to stay quiet when it was reported that the sale of new homes came in significantly better than expected, which is a phrase that we haven’t used much lately in conjunction with anything related to the housing market. Analysts had been looking for sales to continue to fall in July, but instead, we saw an increase of 2.8%. And in short, this provided the bulls with the argument that the sky may not be falling at the present time.
Avid market watchers may find it a bit strange that stocks would rally on reports that obviously reflect the state of the economy BEFORE the credit crisis got rolling. Most would consider this to be “old news” and not reflective of the current environment. But, the fact that things might have been better than analysts had estimated before the crisis began, means that the economy might just have a shot at getting through this relatively unscathed.
But in reality, the fact that the New York Fed made some noise about accepting commercial paper as collateral at the discount window may have been the primary factor behind Friday’s move higher. Since much of the credit crisis is tied to the fact that there are virtually no buyers for certain types of commercial paper, this would be a move that would allow cash to continue to flow and be a welcome improvement in the situation.
Turning to this morning, we don’t have any economic data to review before the bell. However, we will get a report on existing home sales at 10:00 am eastern.
Running through the rest of the pre-game indicators, the overseas markets are higher this morning. Crude futures are higher by $0.16 with the latest quote at $71.25. Interest rates are flat so far as the 10-yr is trading with a yield of 4.63% right now. And finally, with about an hour before the bell, stock futures in the U.S. are a little lower. The Dow futures are currently off by about 31 points; the S&Ps are down by about 4 points, and the NASDAQ looks to be about 6 points below fair value at the moment.
Stocks “In Play” This Morning:
News, Upgrades/Downgrades/Brokerage Research:
Rowan Companies (NYSE: RDC) – Upgraded at Bear Stearns
CNA Financial (NYSE: CAN) – Upgraded at Credit Suisse
Tenet Healthcare (NYSE: THC) – Upgraded at First Albany
O’Reilly Automotive (Nasdaq: ORLY) – Upgraded at Goldman Sachs
Whole Foods (Nasdaq: WFMI) – Upgraded at JP Morgan
Countrywide Financial (NYSE: CFC) – Estimates reduced at Lehman
Safeway (NYSE: SWY) – Downgraded at Merrill Lynch
BE Aerospace (Nasdaq: BEAV) – Mentioned positively at UBS
Mr. Moenning holds Long positions in stocks mentioned: MER
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.
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