David Moenning - Daily State of the Markets: 03/09

David Moenning - Daily State of the Markets:

All About the Jobs (and the Yen)

Good morning. Thursday’s session certainly has to be considered a plus for the bulls as one might have expected the trading to be on the flat side in front of this morning’s much anticipated jobs report. However, a falling Yen sparked advances in the Pacific Rim and the rest of world’s markets followed suit with green numbers.

How long the tail will wag the dog is anybody’s guess, but as they say in this business, this trade will work until it doesn’t. This means that investors are likely to continue to take their queues from the Yen until something else catches their fancy, which of course, could come today in the form of the employment report.

It was also a positive that traders managed to brush aside the rather chilly results from retailers last month. It looks like most analysts decided to blame the weak numbers on the weather and instead of focusing on the negative, chose to look ahead to warmer results in March. The key here is that in what has to be considered a challenging market environment; one might have expected the less than stellar retail sales numbers to put the bears back on track. Thus, the bulls will certainly be happy to blame the numbers on the weather and move on.

However, the ongoing troubles of New Century Financial (NEW) appeared to curb traders’ enthusiasm yesterday afternoon. NEW is the poster child for the subprime mortgage mess and has fallen from above $50 last May to $3.87 yesterday on talk of the company being cut off by lenders and being forced to enter bankruptcy.

Turning to this morning, it is important to recognize that there is a slight change in the way the employment report is to be played this month. Until just recently, investors were looking for signs at every turn that the Goldilocks economy was alive and well. Thus, traders hoped for numbers that were strong enough to support the idea that the economy would continue to move forward and yet not hot enough to create concerns about inflation.

But after the recent bout of selling, which was based, at least in part, on fears that the economy might sink into recession later this year, investors will probably want to be reassured that the economy is not in any danger of stumbling.

So without further ado, let’s get to the numbers. The labor department reported that the economy created 97,000 jobs in February, which was just above the consensus estimates for 95,000. In addition, the numbers for January and December were both revised higher by a total of 55,000 jobs.

The Unemployment Rate came in a tenth below expectations at 4.5% and Average Hourly Earnings were a smidge higher than expected.

The response by the markets has certainly been positive as stock futures in the U.S. have reversed higher.

Running through the pre-game indicators, the major overseas markets are mixed as Asian markets were higher and European markets were lower. Gold futures are trading higher by $0.90 this morning to $656.40 right now. In the oil pits, crude futures are unchanged this morning and the latest quote is at $61.05. Interest rates are moving up this morning in response to the strong economic data with the yield on the 10-year currently trading at 4.59%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open higher again. The Dow futures are currently up by about 54 points; the S&P’s are about 9 points ahead, while the NASDAQ looks to be about 16 points above fair value at the moment.

Stocks “In Play” This Morning:

National Semiconductor (NYSE: NSM) – Reported $0.22 vs. $0.20, Upgraded at ThinkEquity
Home Depot (NYSE: HD) – Mentioned positively in Business Week
Countrywide Financial (NYSE: CFC) – Mentioned positively in Barron’s
Schwab (Nasdaq: SCHW) – Upgraded at Bernstein
Wind River Systems (Nasdaq: WIND) – Upgraded at Citigroup
Office Depot (NYSE: ODP) – Upgraded at Credit Suisse
Echostar (Nasdaq: DISH) – Downgraded at Credit Suisse
Altria (NYSE: MO) – Mentioned positively at Goldman Sachs
Texas Instruments (NYSE: TXN) – Upgraded at JMP Securities, Stifel Nicolaus
Alcoa (NYSE: AA) – Estimates increased at JP Morgan
Sprint Nextel (NYSE: S) – Downgraded at Lehman
Rite Aid (NYSE: RAD) – Price target raised at Lehman
Quicksilver (NYSE: ZQK) – Downgraded at Piper Jaffray, WR Hambrecht
FedEx (NYSE: FDX) – Upgraded at Stifel Nicolaus
Brinker Intl (NYSE: EAT) – Upgraded at UBS

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

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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