David Moenning’s Daily State of the Markets: 7/22

Still Going…

Although it was a bit of a struggle yesterday, the bulls, like the Energizer bunny are still going. Stocks managed to advance for a seventh straight session on Tuesday and finished at another new cycle high while the NASDAQ, which is clearly the market leader this year, made it an even ten straight days of green screens.

So far, the rally has pushed the constituents of four-letterland up nearly +10% (9.74% to be exact) over the past two weeks of trading while the S&P currently sports a gain of +8.58% and the Dow has romped +9.44% during the recent bull run.

However, yesterday’s session wasn’t all peaches and cream as the banks in general and regional banks in particular had a rough go and the testimony from Ben Bernanke wasn’t entirely upbeat. In addition, the earnings parade had its share of lowlights to accompany the high profile earnings “beats.” For example, Coca Cola (KO), Regions Financial (RF), Zions Bancorp (ZION), Southwest Airlines (LUV), and Lockheed Martin (LMT) all struggled while some big names such as Caterpillar (CAT) and Merck (MRK) helped the major averages keep on keepin’ on.

Speaking of Caterpillar, the bulls initially got a boost from the big cat after the company soundly beat earnings estimates. However, beating on the top line wasn’t the only positive from the report as the CAT guided earnings higher and the CEO said the company is seeing signs of stabilization that it hopes will be the foundation for a recovery.

Ben Bernanke was in the spotlight yesterday or rather the hot seat as the Fed Chairman delivered the first of his two-day Humphrey Hawkins testimony on Capitol Hill. During his testimony, Fed Chairman Bernanke noted that despite tentative signs of stabilization in the economy, the Fed plans to maintain a highly accommodative monetary policy (meaning low interest rates) for some time given rising unemployment, substantial economic slack, limited inflation pressures and the continued stress in financial markets.

Yesterday’s give-and-take from the news flow produced a market that appeared to be faltering for much of the session. However, the dip buyers came in around lunchtime and then things once again heated up into the close. While there was no real catalyst to the late-day move, it is worth noting that Apple (AAPL) reported earnings that blew the doors off the estimates immediately after the close. So, in light of the fact that there had been a great deal of discussion about the upside potential for this particular report, some jockeying for position may have been involved.

On a chart basis, the bulls can be comforted by the fact that strength tends to beget strength in this game and after seven straight green bars, strength is indeed the operative word here. However, it is worth noting that the volume relationship hasn’t exactly been stellar of late and that the bears are overdue for a day or two in the sun.

Turning to this morning, we don’t have any economic data to review before the bell. However, earnings from the likes of Boeing, Bank of New York, PepsiCo, Morgan Stanley, and Wells Fargo are keeping analysts hopping.

Running through the rest of the pre-game indicators, the major overseas markets are mostly lower. Crude futures are moving down with the latest quote showing oil trading off by $1.03 to $64.58. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.50%, while the yield on the 3-month T-Bill is trading at 0.18%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open for a change. The Dow futures are currently off by about 45 points; the S&P’s are down by about 6 points, while the NASDAQ looks to be about 5 points below fair value at the moment.

Yesterday’s Earnings After the Bell:

Aaron’s (NYSE: AAN) – Reported $0.51 vs. $0.48

Apple (Nasdaq: AAPL) – Reported $1.35 vs. $1.17
Advanced Micro (NYSE: AMD) – Reported -$0.62 vs. -$0.53
Amylin Pharmaceuticals (Nasdaq: AMLN) – Reported -$0.36 vs. -$0.36
Boston Properties (NYSE: BXP) – Reported $1.32 vs. $1.22
CH Robinson (Nasdaq: CHRW) – Reported $0.54 vs. $0.53
Gilead Sciences (Nasdaq: GILD) – Reported $0.69 vs. $0.61
Linear Technology (Nasdaq: LLTC) – Reported $0.25 vs. $0.22
Nabors Industries (NYSE: NBR) – Reported $0.32 vs. $0.28
Pactiv (NYSE: PTV) – Reported $0.73 vs. $0.56
QLogic (Nasdaq: QLGC) – Reported $0.20 vs. $0.18
Robert Half (NYSE: RHI) – Reported $0.03 vs. $0.03
Starbucks (Nasdaq: SBUX) – Reported $0.24 vs. $0.19
SLM Corp (NYSE: SLM) – Reported $0.31 vs. $0.07
VF Corp (NYSE: VFC) – Reported $0.68 vs. $0.58
Yahoo! (Nasdaq: YHOO) – Reported $0.10 vs. $0.08

Today’s Earnings Before the Bell:

Air Products (NYSE: APD) – Reported $1.05 vs. $0.98
Allegheny Technologies (NYSE: ATI) – Reported $0.03 vs. $0.05
Boeing (NYSE: BA) – Reported $1.41 vs. $1.21
Bank of New York Mellon (NYSE: BK) – Reported $0.51 vs. $0.53
Delta Air Lines (NYSE: DAL) – Reported -$0.24 vs. -$0.27
Domino’s Pizza (NYSE: DPZ) – Reported $0.21 vs. $0.20
Host Hotels & Resorts (NYSE: HST) – Reported $0.27 vs. $0.24
Illinois Tool (NYSE: ITW) – Reported $0.36 vs. $0.35
KeyCorp (NYSE: KEY) – Reported $0.69 vs. -$0.40
Eli Lilly (NYSE: LLY) – Reported $1.12 vs. $1.02
Altria (NYSE: MO) – Reported $0.50 vs. $0.47
Morgan Stanley (NYSE: MS) – Reported -$1.37 vs. -$0.53
Northern Trust (Nasdaq: NTRS) – Reported $0..95 vs. $0.53
PepsiCo (NYSE: PEP) – Reported $1.02 vs. $1.00
Pfizer (NYSE: PFE) – Reported $0.48 vs. $0.47
SEI Investments (Nasdaq: SEIC) – Reported $0.22 vs. $0.21
SunTrust Banks (NYSE: STI) – Reported -$0.41 vs. -$0.61
St. Jude Medical (NYSE: STJ) – Reported $0.63 vs. $0.63
Stanley Works (NYSE: SWK) – Reported $0.55 vs. $0.55
US Bancorp (NYSE: USB) – Reported $0.12 vs. $0.10
Wells Fargo (NYSE: WFC) – Reported $0.57 vs. $0.34
Whirlpool (NYSE: WHR) – Reported $1.04 vs. $0.48

Upgrades/Downgrades/Brokerage Research:

Sepracor (Nasdaq: SEPR) – Downgraded at Bernstein
Apple (Nasdaq: AAPL) – Upgraded and target increased at Canaccord Adams
Freeport-McMoRan (NYSE: FCX) – Downgraded at Citi
Peabody Energy (NYSE: BTU) – Downgraded at Citi
Kraft Foods (NYSE: KFT) – Upgraded at Citi
Starbucks (Nasdaq: SBUX) – Upgraded at Deutsche Bank
Health Net (NYSE: HNT) – Upgraded at Goldman
Autoliv (NYSE: ALV) – Downgraded at Goldman
Sybase (NYSE: SY) – Upgraded at Jefferies
Intel (Nasdaq: INTC) – Upgraded at JMP Securities
Lockheed Martin (NYSE: LMT) – Upgraded at JP Morgan
Northrop Grumman (NYSE: NOC) – Downgraded at JP Morgan
Cisco (Nasdaq: CSCO) – Upgraded at RW Baird

Long positions in stocks mentioned: AAPL, SY, CSCO

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.TopStockPortfolios.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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