David Moenning Daily State of the Markets: 02/01
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Greenspan Goodbye Gets Googled
One might have expected the markets to provide Mr. Greenspan with some sort of a rally as a tribute to the fine work the Fed Chairman has done since August 1987. However, traders are an unsentimental group and instead of applauding Mr. Greenspan�s career, they displayed concern over Mr. Bernanke�s first move.
As was widely expected, the FOMC raised the Fed Funds rate by 25 basis points (0.25%) for the fourteenth straight time. The move took the overnight bank lending rate to 4.5%, which is where the majority of economists thought the endpoint might be. However, the statement accompanying the announcement left the door wide open for additional tightenings.
The only real change in the Fed�s tune this time was they made it clear that their hike down the measured path has ended as the word �measured� was removed from the statement. But the Fed believes that additional policy tightening may be needed to achieve its goals of growth and price stability. And since the word �measured� was removed, this means that further hikes will largely depend on the data that comes in.
In summary, Mr. Greenspan has handed a neutral policy stance to Mr. Bernanke. Up to this point, the markets have understood that the current campaign was not an effort to combat inflation or slow the economy and thus, stocks have actually moved higher over the course of the tightenings. However, there is a very strong chance that Ben Bernanke will want to send a message that he is �on the job� with another rate hike on March 28. Thus, Fed watchers will have to admit that the Fed is now operating under a tightening bias.
Since the event was largely expected, the stock market�s response was pretty much a non-event. There was the usual see-saw reaction after the report which left stocks largely where they were before the Fed�s announcement. While the Dow wound up losing -35 on the day, once again the NYSE, Russell 2000, and the S&P Small Cap and Mid Cap indices inched up to another new all-time high. And since the bond market had a similarly muted response, it appeared that the markets would easily digest the move and get ready to continue the rally.
However, that assumption was called into question when Google reported a very big �miss� after the close. Although the company earned $1.92 Billion for the quarter, which was in line with expectations, earnings came in a whopping $0.23 light at $1.54 per share. The stock was halted in after hours trading for a bit, but then was pummeled for a loss of more than -15% when trading resumed. And although the company�s explanation for the miss is tied to unexpectedly high tax rates, the miss is already sparking discussions of a slowing economy.
Turning to this morning, the Google miss has spread into the tech arena, which is naturally putting pressure on the NASDAQ in the pre-market. The President�s State of the Union address appears to be having little impact outside of industry specific areas.
Running through this morning�s pre-game indicators, Gold is hovering around breakeven right now at $70.70; Oil is higher by +$0.13 to $68.05; Natural Gas is continuing to bounce and is up another +$0.25 to $9.57; Bonds are little changed with the 2 yr and 10 yr both yielding 4.54%; and finally, stock futures in the U.S. are mixed (Dow +15, S&P -3.0, NASDAQ -16).
So with Google�s earnings falling flat, the question of the day is if the questions of a possible slowdown, further rate hikes, and higher energy will be embraced by the bears.
Stocks "In Play" This Morning:
ADPT � Reported $0.03 vs. -$0.04, Revenues $77.8M vs. $76.2M
ALL - Reported $1.49 vs. $1.57, Revenues $8.95B vs. $7.5B
CHIR - Reported $0.81 vs. $0.51, Revenues $615.6M vs. $558.6M
GOOG - Reported $1.54 vs. $1.77, Revenues $1.92B vs. $1.92B
SYMC - Reported $0.26 vs. $0.25, Revenues $1.25B vs. $1.26B
TWX - Reported $0.25 vs. $0.22, Revenues $11.89B vs. $11.82B
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: none
To see David Moenning�s Trading Record or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
One might have expected the markets to provide Mr. Greenspan with some sort of a rally as a tribute to the fine work the Fed Chairman has done since August 1987. However, traders are an unsentimental group and instead of applauding Mr. Greenspan�s career, they displayed concern over Mr. Bernanke�s first move.
As was widely expected, the FOMC raised the Fed Funds rate by 25 basis points (0.25%) for the fourteenth straight time. The move took the overnight bank lending rate to 4.5%, which is where the majority of economists thought the endpoint might be. However, the statement accompanying the announcement left the door wide open for additional tightenings.
The only real change in the Fed�s tune this time was they made it clear that their hike down the measured path has ended as the word �measured� was removed from the statement. But the Fed believes that additional policy tightening may be needed to achieve its goals of growth and price stability. And since the word �measured� was removed, this means that further hikes will largely depend on the data that comes in.
In summary, Mr. Greenspan has handed a neutral policy stance to Mr. Bernanke. Up to this point, the markets have understood that the current campaign was not an effort to combat inflation or slow the economy and thus, stocks have actually moved higher over the course of the tightenings. However, there is a very strong chance that Ben Bernanke will want to send a message that he is �on the job� with another rate hike on March 28. Thus, Fed watchers will have to admit that the Fed is now operating under a tightening bias.
Since the event was largely expected, the stock market�s response was pretty much a non-event. There was the usual see-saw reaction after the report which left stocks largely where they were before the Fed�s announcement. While the Dow wound up losing -35 on the day, once again the NYSE, Russell 2000, and the S&P Small Cap and Mid Cap indices inched up to another new all-time high. And since the bond market had a similarly muted response, it appeared that the markets would easily digest the move and get ready to continue the rally.
However, that assumption was called into question when Google reported a very big �miss� after the close. Although the company earned $1.92 Billion for the quarter, which was in line with expectations, earnings came in a whopping $0.23 light at $1.54 per share. The stock was halted in after hours trading for a bit, but then was pummeled for a loss of more than -15% when trading resumed. And although the company�s explanation for the miss is tied to unexpectedly high tax rates, the miss is already sparking discussions of a slowing economy.
Turning to this morning, the Google miss has spread into the tech arena, which is naturally putting pressure on the NASDAQ in the pre-market. The President�s State of the Union address appears to be having little impact outside of industry specific areas.
Running through this morning�s pre-game indicators, Gold is hovering around breakeven right now at $70.70; Oil is higher by +$0.13 to $68.05; Natural Gas is continuing to bounce and is up another +$0.25 to $9.57; Bonds are little changed with the 2 yr and 10 yr both yielding 4.54%; and finally, stock futures in the U.S. are mixed (Dow +15, S&P -3.0, NASDAQ -16).
So with Google�s earnings falling flat, the question of the day is if the questions of a possible slowdown, further rate hikes, and higher energy will be embraced by the bears.
Stocks "In Play" This Morning:
ADPT � Reported $0.03 vs. -$0.04, Revenues $77.8M vs. $76.2M
ALL - Reported $1.49 vs. $1.57, Revenues $8.95B vs. $7.5B
CHIR - Reported $0.81 vs. $0.51, Revenues $615.6M vs. $558.6M
GOOG - Reported $1.54 vs. $1.77, Revenues $1.92B vs. $1.92B
SYMC - Reported $0.26 vs. $0.25, Revenues $1.25B vs. $1.26B
TWX - Reported $0.25 vs. $0.22, Revenues $11.89B vs. $11.82B
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: none
To see David Moenning�s Trading Record or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
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