David Moenning Daily State of the Markets: 01/03
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Starting Fresh
In looking back at the final session of 2005, things definitely did NOT go according to plan � well, not for the bulls, anyway. Instead of a session featuring light volume mark-ups, giddiness over the fact that the S&P once again found its way into the black, and enthusiasm toward the coming year, we got a pretty good thumping and red numbers all round.
The combination of very low volume, another pop in oil prices, and concern over what the inverted yield curve (the yield on the 2-yr finished a smidge above the 10-yr) might mean put traders in worry mode. Crude oil rose for the third straight session and went out with a gain of +$0.72 to $61.04. And although bond traders got to go home early they did manage to send a message before leaving. The yield on the 2-yr note finished at 4.40% while the 10-yr Bond closed the session yielding 4.39%.
This inversion of the yield curve, if not corrected in short order when trading desks become fully staffed once again, is sure to be a source of concern going forward. By now everyone knows that every recession in the U.S. has been accompanied by this condition. Thus, the major question for investors right now is if the yield curve is predicting a slowdown in the economy? Or is it simply an issue relating to the supply and demand in the debt markets
Now for the good news. The selling we have seen over the past few sessions has helped alleviate both the overbought and overconfident condition that the market was saddled with at the start of 2005. Thus, there is a chance that we may not experience the same kind of pent-up selling that greeted us last January. Stocks are now oversold on a short-term basis and sentiment is not excessively high at the present time.
But now it�s time to look ahead. Stocks will make their 2006 debut in about an hour, so let�s take this time to look at what lies ahead in the coming week. For starters, let�s recognize that it�s earning season once again, so we need to be on our toes.
On the economic front, there are no reports before the bell today, but we will get data on November Construction Spending as well as the December ISM (Institute of Supply Management) Index at 10:00 am eastern. In addition, we will get a peek at the minutes from the December 13th Fed Meeting, which is sure to draw some attention. Then Wednesday brings us reports on December Auto Sales and November Factory Orders. On Thursday, we will see the ISM Non-Manufacturing report. And then on Friday we will get the big Kahuna � the December Jobs report (look for 200k new jobs and an unemployment rate of 5.0%).
Turning to this morning�s pre-game indicators, it looks like traders have come back to work in a good mood and are looking to move stocks higher to start the New Year. Gold is higher by $5.20 to $524.10; Oil is heading up again on natural gas disputes in Russia and is currently trading up +$0.59 to $61.63; Natural Gas is continuing to move lower on warmer weather forecasts and is down -$0.44 to $10.78; the yield curve is flat at the moment with both the 2-yr and 10-yr yields at 4.42%; and finally stock futures are moving strongly higher (Dow +56, S&P +5.60, and NASDAQ +7.50).
So the question for today will be whether early gains can set the stage for a January rebound, or will the early strength will be once again met by selling?
Stocks "In Play" This Morning:
WAG � Reported $0.36 vs. $0.33
WMT � Estimates Dec sales at +2.2% vs. guidance of 2% - 4%
K � Barron�s says company has upside
ACS � NY Times reports company near deal to sell
JNJ � Upgraded at JP Morgan
MOT � Mentioned favorably at Oppenheimer
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: WAG, ACS
To see David Moenning�s Trading Record, his (Strong Buy) List, or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
In looking back at the final session of 2005, things definitely did NOT go according to plan � well, not for the bulls, anyway. Instead of a session featuring light volume mark-ups, giddiness over the fact that the S&P once again found its way into the black, and enthusiasm toward the coming year, we got a pretty good thumping and red numbers all round.
The combination of very low volume, another pop in oil prices, and concern over what the inverted yield curve (the yield on the 2-yr finished a smidge above the 10-yr) might mean put traders in worry mode. Crude oil rose for the third straight session and went out with a gain of +$0.72 to $61.04. And although bond traders got to go home early they did manage to send a message before leaving. The yield on the 2-yr note finished at 4.40% while the 10-yr Bond closed the session yielding 4.39%.
This inversion of the yield curve, if not corrected in short order when trading desks become fully staffed once again, is sure to be a source of concern going forward. By now everyone knows that every recession in the U.S. has been accompanied by this condition. Thus, the major question for investors right now is if the yield curve is predicting a slowdown in the economy? Or is it simply an issue relating to the supply and demand in the debt markets
Now for the good news. The selling we have seen over the past few sessions has helped alleviate both the overbought and overconfident condition that the market was saddled with at the start of 2005. Thus, there is a chance that we may not experience the same kind of pent-up selling that greeted us last January. Stocks are now oversold on a short-term basis and sentiment is not excessively high at the present time.
But now it�s time to look ahead. Stocks will make their 2006 debut in about an hour, so let�s take this time to look at what lies ahead in the coming week. For starters, let�s recognize that it�s earning season once again, so we need to be on our toes.
On the economic front, there are no reports before the bell today, but we will get data on November Construction Spending as well as the December ISM (Institute of Supply Management) Index at 10:00 am eastern. In addition, we will get a peek at the minutes from the December 13th Fed Meeting, which is sure to draw some attention. Then Wednesday brings us reports on December Auto Sales and November Factory Orders. On Thursday, we will see the ISM Non-Manufacturing report. And then on Friday we will get the big Kahuna � the December Jobs report (look for 200k new jobs and an unemployment rate of 5.0%).
Turning to this morning�s pre-game indicators, it looks like traders have come back to work in a good mood and are looking to move stocks higher to start the New Year. Gold is higher by $5.20 to $524.10; Oil is heading up again on natural gas disputes in Russia and is currently trading up +$0.59 to $61.63; Natural Gas is continuing to move lower on warmer weather forecasts and is down -$0.44 to $10.78; the yield curve is flat at the moment with both the 2-yr and 10-yr yields at 4.42%; and finally stock futures are moving strongly higher (Dow +56, S&P +5.60, and NASDAQ +7.50).
So the question for today will be whether early gains can set the stage for a January rebound, or will the early strength will be once again met by selling?
Stocks "In Play" This Morning:
WAG � Reported $0.36 vs. $0.33
WMT � Estimates Dec sales at +2.2% vs. guidance of 2% - 4%
K � Barron�s says company has upside
ACS � NY Times reports company near deal to sell
JNJ � Upgraded at JP Morgan
MOT � Mentioned favorably at Oppenheimer
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: WAG, ACS
To see David Moenning�s Trading Record, his (Strong Buy) List, or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
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