David Moenning - Daily State of the Markets: 03/13
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M&A is Back (But So is the Yen)
Good morning. Although it was a little like watching paint dry, stocks did manage to put a third straight day of gains up on the board yesterday. A late day move with no apparent catalyst other than a sudden warm and fuzzy feeling toward Texas Instrument’s new guidance range, pushed the major indices up into the “nice day” category as the Dow tacked on 42 points.
The overall positive mood was attributed to a new round of M&A activity involving the likes of Dollar General, Schering Plough, UnitedHealth, and a little company called Procter & Gamble. As you will recall, before the global sell off, which began on February 27, the idea that companies were willing to plunk down cash on the barrelhead was considered a driving force behind the bulls’ relentless advance. The thinking was that as long as corporate executives, who arguably know best how business is going, retain the urge to merge then (a) the economy can’t be doing too badly and (b) there must be decent values available in the marketplace.
Thus, the fact that we got a resumption of the Merger Monday trend yesterday helped keep the bulls buying and the bears on the sidelines.
It also didn’t hurt that oil prices once again pushed below $60 as warmer temperatures are showing up across the country and OPEC appears to have little interest in cutting production at current prices. The front-month contract closed down $1.14 to $58.91.
But the news wasn’t all good yesterday. The bulls argue that the ability for traders to simply ignore the news that sub-prime mortgage lender New Century Financial announced that it has effectively been cut off by lenders has to be viewed as a positive. However, New Century’s reminder that all is not well in the sub-prime market definitely helped keep any exuberance for buying in check.
Turning to this morning, a rising Yen is causing some problems in the foreign markets as the fretting over the possible impact of the carry-trade has returned. In addition, new difficulties in the sub-prime market have sparked rumors of a hedge fund blowup in London, but the relatively light volume across the pond would seem to refute the rumors. And while the selling is modest at the moment, we have to be on the lookout for any catalyst that could spark the much anticipated "retest" of the lows.
On the economic front, it was just reported that February Retail Sales were a little on the disappointing side. Last month’s sales came in 0.1% higher which was lighter than the expectations for a gain of 0.3%. And when you strip out Autos, the song remains the same as sales actually fell by -0.1% versus the consensus of +0.3%.
Running through the pre-game indicators, the major overseas markets are lower across the board. Interest rates are moving lower this morning with the yield on the 10-year currently trading at 4.55%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to head lower as the S&P’s are a little more than 9 points below fair value at the moment.
Stocks “In Play” This Morning:
Foundry Networks (Nasdaq: FDRY) – Upgraded at BofA
Vail Resorts (NYSE: MTN) – Downgraded at BofA
Dollar Tree Stores (DLTR) – Upgraded at Bear Stearns, Deutsche Bank
Dollar General (NYSE: DG) – Downgraded at Citigroup
CVS Corp (NYSE: CVS) – Upgraded at Deutsche Bank
PPG Industries (NYSE: PPG) – Upgraded at Goldman Sachs
J2 Global Comm (Nasdaq: JCOM) – Upgraded at Jefferies
Expedia (Nasdaq: EXPE) – Upgraded at Merrill Lynch
Davita (NYSE: DVA) – Upgraded at Piper Jaffray
Radio Shack (NYSE: RSH) – Downgraded at RBC Capital
Sandisk (Nasdaq: SNDK) – Upgraded at UBS
Marvell Technology (Nasdaq: MRVL) – Downgraded at UBS
Dicks Sporting Goods (NYSE: DKS) – Reported $1.20 vs. $1.15
Goldman Sachs (NYSE: GS) – Reported $6.67 vs. $4.90
Mr. Moenning holds Long positions in stocks mentioned: 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.
Good morning. Although it was a little like watching paint dry, stocks did manage to put a third straight day of gains up on the board yesterday. A late day move with no apparent catalyst other than a sudden warm and fuzzy feeling toward Texas Instrument’s new guidance range, pushed the major indices up into the “nice day” category as the Dow tacked on 42 points.
The overall positive mood was attributed to a new round of M&A activity involving the likes of Dollar General, Schering Plough, UnitedHealth, and a little company called Procter & Gamble. As you will recall, before the global sell off, which began on February 27, the idea that companies were willing to plunk down cash on the barrelhead was considered a driving force behind the bulls’ relentless advance. The thinking was that as long as corporate executives, who arguably know best how business is going, retain the urge to merge then (a) the economy can’t be doing too badly and (b) there must be decent values available in the marketplace.
Thus, the fact that we got a resumption of the Merger Monday trend yesterday helped keep the bulls buying and the bears on the sidelines.
It also didn’t hurt that oil prices once again pushed below $60 as warmer temperatures are showing up across the country and OPEC appears to have little interest in cutting production at current prices. The front-month contract closed down $1.14 to $58.91.
But the news wasn’t all good yesterday. The bulls argue that the ability for traders to simply ignore the news that sub-prime mortgage lender New Century Financial announced that it has effectively been cut off by lenders has to be viewed as a positive. However, New Century’s reminder that all is not well in the sub-prime market definitely helped keep any exuberance for buying in check.
Turning to this morning, a rising Yen is causing some problems in the foreign markets as the fretting over the possible impact of the carry-trade has returned. In addition, new difficulties in the sub-prime market have sparked rumors of a hedge fund blowup in London, but the relatively light volume across the pond would seem to refute the rumors. And while the selling is modest at the moment, we have to be on the lookout for any catalyst that could spark the much anticipated "retest" of the lows.
On the economic front, it was just reported that February Retail Sales were a little on the disappointing side. Last month’s sales came in 0.1% higher which was lighter than the expectations for a gain of 0.3%. And when you strip out Autos, the song remains the same as sales actually fell by -0.1% versus the consensus of +0.3%.
Running through the pre-game indicators, the major overseas markets are lower across the board. Interest rates are moving lower this morning with the yield on the 10-year currently trading at 4.55%. And finally, with about an hour before the bell, stock futures in the U.S. are looking to head lower as the S&P’s are a little more than 9 points below fair value at the moment.
Stocks “In Play” This Morning:
Foundry Networks (Nasdaq: FDRY) – Upgraded at BofA
Vail Resorts (NYSE: MTN) – Downgraded at BofA
Dollar Tree Stores (DLTR) – Upgraded at Bear Stearns, Deutsche Bank
Dollar General (NYSE: DG) – Downgraded at Citigroup
CVS Corp (NYSE: CVS) – Upgraded at Deutsche Bank
PPG Industries (NYSE: PPG) – Upgraded at Goldman Sachs
J2 Global Comm (Nasdaq: JCOM) – Upgraded at Jefferies
Expedia (Nasdaq: EXPE) – Upgraded at Merrill Lynch
Davita (NYSE: DVA) – Upgraded at Piper Jaffray
Radio Shack (NYSE: RSH) – Downgraded at RBC Capital
Sandisk (Nasdaq: SNDK) – Upgraded at UBS
Marvell Technology (Nasdaq: MRVL) – Downgraded at UBS
Dicks Sporting Goods (NYSE: DKS) – Reported $1.20 vs. $1.15
Goldman Sachs (NYSE: GS) – Reported $6.67 vs. $4.90
Mr. Moenning holds Long positions in stocks mentioned: 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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