David Moenning’s Daily State of the Markets: 11/03

Meltups Are Fun

After enduring one of the most difficult months in history (for the record, October was the Dow’s worst month since October 1987), last week’s four-day melt-up of +14% certainly helped improve the mood. While there was a little falloff at the close on Friday and the volume wasn’t anything to write home about, it was awfully nice to see back-to-back W’s for the Bull camp. And seriously, doesn’t a loss of 16% for the month beat the heck out of the 25% thrashing we were staring at on Monday afternoon?

After the Dow pulled off its best weekly game since 1974, I think just about everyone will agree that melt-ups, regardless of how they are induced, are fun to watch. And speaking of being induced, it didn’t really take much to keep the bulls moving on Friday as the list of positives was impressive.

For starters, interbank lending rates continued their recent plunge. Three month dollar denominated LIBOR fell another 16 bps to 3.03%, which was the 15th straight daily decline. And then the overnight LIBOR rate dove another 32 bps to 0.41%, which was a record low. To put this in perspective, the overnight rate was close to 7% at the end of September. So, the Fed can rest assured that its herculean efforts to pump money into the system seem to be having the desired result.

Next up, the commercial paper program just introduced by Mr. Bernanke also appears to be bringing both borrowers and lenders back to the table.

And speaking of Helicopter Ben, the Fed chairman scored points on Friday by talking about supporting the reorganization of Fannie (FNM) and Freddie (FRE) with some sort of government guarantee. And why not, with the government is guaranteeing everything else these days, Fannie and Freddie are a natural to be included.

It was also seen as a positive that JP Morgan (JPM) said that it plans to modify terms on $110 Billion in mortgages. JPM also said that it would halt foreclosures. And since declining home prices have been at the root of this problem, fewer foreclosures would definitely be a step in the right direction.

And finally, despite some really crummy economic data, investors breathed a collective sigh of relief that October was FINALLY over. This means that the mutual fund tax-selling might finally slow down. This means that we may have seen the worst of the redemptions. And most importantly, this means that some end-of-the-month window dressing was probably occurring.

So, armed with a host of positives and a pretty strong incentive to close prices as high as possible, the bulls were able to stave off their opponents and stocks simply melted up into the close. But now that we’ve got a new month on our hands, we’ll see how long the move can last.

Turning to this morning, things are fairly quiet for a change. There is no economic data before the bell, but we will get reports on ISM Manufacturing and Construction Spending at 10:00. However, the big economic data will come on Friday when we get the October jobs report.

Running through the rest of the pre-game indicators, the major overseas markets are up modestly across the board. Crude futures are falling with the latest quote showing oil trading lower by $0.99 to $66.82. On the interest rate front, we’ve got the yield on the 10-yr currently trading at 3.93% while the yield on the 3-month T-Bill is at 0.48% and overnight LIBOR is at 0.39% which is down from Friday’s rate of 0.41%. And finally, with about 60 minutes before the bell, stock futures in the U.S. aren’t doing much. The Dow futures are currently off by about 27 points; the S&P’s are down by about 3 points, while the NASDAQ looks to be about 2 points below fair value at the moment.

Stocks “In Play” This Morning:

Today’s Earnings Before the Bell

American Tower (NYSE: AMT) – Reported $0.15 vs. $0.14
Rockwell Collins (NYSE: COL) – Reported $1.05 vs. $1.06
DaVita (NYSE: DVA) – Reported $0.89 vs. $0.89
NICOR (NYSE: GAS) – Reported $0.03 vs. $0.13
Goodyear Tire (NYSE: GT) – Reported $0.43 vs. $0.33
Oshkosh (NYSE: OSK) – Reported $0.72 vs. $0.64
Sysco (NYSE: SYY) – Reported $0.46 vs. $0.47

News, Upgrades/Downgrades/Brokerage Research:

Pride Intl (NYSE: PDE) – Target reduced at Citi
Priceline (Nasdaq: PCLN) – Target reduced at Citi
Nvidia (Nasdaq: NVDA) – Upgraded at Citi
National Semi (NYSE: NSM) – Upgraded at Citi
Fairchild Semi (NYSE: FCS) – Upgraded at Citi
Lam Research (Nasdaq: LRCX) – Upgraded at Citi
ST Microdevices (NYSE: STM) – Upgraded at Citi
Alberto Culver (NYSE: ACV) – Downgraded at Citi
Pulte Home (NYSE: PHM) – Downgraded at Citi
CR Bard (NYSE: BCR) – Downgraded at Citi
Arthur J Gallagher (NYSE: AJG) – Upgraded at Citi
Apartment Investment (NYSE: AIV) – Upgraded at Deutsche Bank
Camden Property Trust (NYSE: CPT) – Downgraded at Deutsche Bank
Humana (NYSE: HUM) – Removed from Conviction Buy list at Goldman
Transocean (NYSE: RIG) – Removed from Conviction Buy list at Goldman
Health Net (NYSE: HNT) – Removed from Conviction Sell list at Goldman
Intl Paper (NYSE: IP) – Downgraded at Goldman
Packaging Corp (NYSE: PKG) – Downgraded at Goldman
Boeing (NYSE: BA) – Added to Conviction Sell list at Goldman
Halliburton (NYSE: HAL) – Downgraded at Goldman
Schlumberger (NYSE: SLB) – Upgraded at Goldman
Patterson UTI (Nasdaq: PTEN) – Downgraded at JP Morgan
Tesoro (NYSE: TSO) – Upgraded at JP Morgan
Wal-Mart (NYSE: WMT) – Upgraded at JP Morgan
Motorola (NYSE: MOT) – Downgraded at Merrill
JP Morgan (NYSE: JPM) – Target increased at Morgan Stanley
News Corp (NYSE: NWS.A) – Downgraded at Oppenheimer
Overseas Shipholding (NYSE: OSG) – Upgraded at Oppenheimer
DR Horton (NYSE: DHI) – Upgraded at UBS

Disclosure: Mr. Moenning and/or related firms hold long positions in: WMT, GAS
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

• SpaceX sets IPO price at $135 ahead of roadshow in break with Wall Street norms
• Quantinuum prices IPO at $60 per share for 28 million shares
• Anthropic said to pick Morgan Stanley and Goldman to lead IPO