David Moenning - Daily State of the Markets: 03/08

Are the Bulls Back?

Good morning. Although the numbers wound up on the negative side of the ledger at the close of trading yesterday, the bulls could be heard claiming victory on the session. Yes, stocks did fall off in the last half-hour for little or no reason. But this time there didn’t appear to be any fear in the air and the decline was quite modest. If anything, yesterday’s action seemed to suggest that some balance has been restored to the game.

It was a very light news day and the volume was light as well. The bulls did attempt to come up with a follow-through day and build on Tuesday’s strength but didn’t have the muster to get it done. But here’s the good news - the bears did not go back into attack mode. Thus, the session has to be considered a modest positive.

What economic news there was provided little direction as nothing new came to light. The ADP employment report requires a degree in economics to understand the new calculations but appeared to show job growth to be lighter than expected. But since this report has had some huge misses lately investors appear to have decided to wait for the Labor Department’s data on Friday.

The release of the Fed’s Beige Book report, which strangely enough isn’t used by the Fed to any great degree, showed more of the same Goldilocks-like data we've seen for some time now. The report said that manufacturing activity in most districts is steady or expanding although there was some slowing evident in a couple spots. Housing markets remained weak in almost all regions, though signs of stabilization were noted in several districts. On the jobs front, which will be tomorrow’s highlight, most districts reported an expansion in the labor markets and continued tight supply of skilled workers. And finally, retail sales showed steady growth in most districts.

There was also a small amount of Fedspeak as one of the bears’ best buddies, Chicago Fed President Michael Moskow said that inflation remains stubborn and that interest rate increases might be needed to contain in costs. Despite the hawkish statement, stocks failed to move on the news as Mr. Moskow’s stance is well known by traders.

Turning to this morning, it appears that the bulls are attempting to return us to our regularly scheduled program as the screens are bright green at the moment. The impetus for the move up this morning appears to be tied to Japan, which rallied on weakness in the Yen, and some renewed M&A activity here in the U.S. We should keep in mind that M&A was all the rage before last week's drop and the view right now is that the only thing different on this front is that prices of the companies being bought are now cheaper.

There is also some interest rate news in Europe as the UK left rates unchanged while the European Central Bank raised rates by 0.25% to 3.75% - both moves were expected and as such, are not moving the markets.

Finally, we’ve got the February sales numbers coming in from the retailers, so we’ll be watching for signs that the consumer is alive and shopping.

Running through the pre-game indicators, the major overseas markets are higher across the board. Gold futures are trading higher by $1.60 this morning to $654.50 right now. In the oil pits, crude futures are ahead $0.21 this morning and the latest quote is at $62.03. Interest rates are also moving up a little this morning and the yield on the 10-year is currently trading at 4.51%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently up by about 70 points; the S&P’s are about 11 points ahead, while the NASDAQ looks to be about 21 points above fair value at the moment.

Stocks "In Play" This Morning:

Costco Wholesale (Nasdaq: COST) – Reported $0.66 vs. $0.66
TiVo Inc (Nasdaq: TIVO) – Reported <$0.19> vs. <$0.36>
Caremark Rx (NYSE: CMX) – Express Scripts increases offer to $29.25
Medco Health Solutions (NYSE: MHS) – Target raised at BofA
Ford Motor (NYSE:F) – Upgraded at Credit Suisse
Kemet Corp (NYSE:KEM) – Upgraded at Lehman
Applied Materials (Nasdaq: AMAT) – Upgraded at Morgan Stanley
KLA Tencor (Nasdaq: KLAC) – Upgraded at Morgan Stanley
Cymer Inc (Nasdaq: CYMI) – Downgraded at Morgan Stanley
Apartment Inv & Mgmt (AIV) – Downgraded at RBC
Fastenal (Nasdaq: FAST) – Upgraded at RW Baird
Barnes & Noble (NYSE:BKS) – Upgraded at Stifel
Avalon Bay (NYSE:AVB) – Upgraded at Wachovia
Essex Property Trust (NYSE: ESS) – Upgraded at Wachovia

Mr. Moenning holds Long positions in stocks mentioned: AMAT

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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