David Moenning Daily State of the Markets: 02/06
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Game Back On
For a while there, it looked like the bulls were set to run away with the game this year. But with issues including the potential for the Fed to resume tightening rates, the inversion of the yield curve, a whiff of inflation, geopolitical problems, and earnings disappointments cropping up, Friday�s action showed that we�ve now got a ballgame on our hands. And while the bulls still have the upper hand as well as the January Barometer on their side (insert cynical snicker here), it looks like they may encounter some resistance going forward.
Stocks posted a second straight day of declines on Friday after the Jobs report data showed that the labor market may be tightening up. The headline number on job creation was light, but revisions to both November and December totals made up for the shortfall. But the big surprise was the drop in the unemployment rate, which was the lowest in almost five years. And when this report is combined with Thursday�s report on Unit Labor Costs (which showed costs increasing and productivity decreasing) and Tuesday�s comments from the Fed that further rate increases were likely to be needed, traders recognized that these reports give the Fed all the ammunition they need to continue to raise rates.
Toss in the increasing tensions in Iran, some punk consumer sentiment numbers, a bump in oil prices, and another crummy earnings report from another big name (Amazon.com), and traders found themselves feeling empty on Friday. Frankly, given the abundance of discouraging data available during the session, it�s a wonder the bears didn�t have a field day.
Don�t get me wrong, Friday�s action certainly wasn�t positive. The two-day decline has taken the big three indices back toward important support levels and pared the year�s gains significantly. And in what can definitely be considered a stretch, Friday�s gap down at the open on the NASDAQ was actually a positive as it provides the bulls with a target to recover toward in the near future. It was also positive that volume actually pulled back a bit and that the leading indices (NYSE, Russell 2000, S&P Small and Mid Caps) continue to be in a confirmed uptrend.
Turning to this morning, there isn�t any economic data to review, but the fact that the International Atomic Energy Agency referred the situation in Iran to the U.N. Security on Saturday is certainly attracting some attention. In short, this situation creates uncertainty. Now the question is, how much uncertainty will traders award this problem?
In the early going at least, it looks as if traders may be ignoring the situation in Iran and focusing on strong overseas markets and reports that AIG may be close to a huge settlement with regulators. In addition, upgrades to aluminum companies at JP Morgan seem to be lifting traders� spirits before the opening bell.
Running through the rest of the pre-market indicators, Gold is higher by $2.40 this morning at $574; Oil is higher by +$0.72 to $66.09; Natural Gas is off -$0.19 to $8.42; the inversion of the yield curve continues with the 2 yr at 4.61% and 10 yr at 4.52%; and finally, stock futures in the U.S. are up modestly before the bell (Dow +16, S&P +2.20, NASDAQ +3.50).
Stocks "In Play" This Morning:
KO � Bank of America says KO may exceed Q4 expectations
AIG � Reportedly close to settlement
HUM � Reported $0.46 vs. $0.45 Revenue $3.60B vs. $3.79B
COP � C recommends buying weakness in COP, AHC, CVX, MRO, OXY, XOM
INTC � ThinkEquity reports INTC offering rebates on dual core products � could reduce margins
AA � Upgraded at JPM
PRU � Added to Global Focus List at Morgan Stanley � also FNM, CI, AMT, BTI
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: INTC, PRU
To see David Moenning�s Trading Record or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
For a while there, it looked like the bulls were set to run away with the game this year. But with issues including the potential for the Fed to resume tightening rates, the inversion of the yield curve, a whiff of inflation, geopolitical problems, and earnings disappointments cropping up, Friday�s action showed that we�ve now got a ballgame on our hands. And while the bulls still have the upper hand as well as the January Barometer on their side (insert cynical snicker here), it looks like they may encounter some resistance going forward.
Stocks posted a second straight day of declines on Friday after the Jobs report data showed that the labor market may be tightening up. The headline number on job creation was light, but revisions to both November and December totals made up for the shortfall. But the big surprise was the drop in the unemployment rate, which was the lowest in almost five years. And when this report is combined with Thursday�s report on Unit Labor Costs (which showed costs increasing and productivity decreasing) and Tuesday�s comments from the Fed that further rate increases were likely to be needed, traders recognized that these reports give the Fed all the ammunition they need to continue to raise rates.
Toss in the increasing tensions in Iran, some punk consumer sentiment numbers, a bump in oil prices, and another crummy earnings report from another big name (Amazon.com), and traders found themselves feeling empty on Friday. Frankly, given the abundance of discouraging data available during the session, it�s a wonder the bears didn�t have a field day.
Don�t get me wrong, Friday�s action certainly wasn�t positive. The two-day decline has taken the big three indices back toward important support levels and pared the year�s gains significantly. And in what can definitely be considered a stretch, Friday�s gap down at the open on the NASDAQ was actually a positive as it provides the bulls with a target to recover toward in the near future. It was also positive that volume actually pulled back a bit and that the leading indices (NYSE, Russell 2000, S&P Small and Mid Caps) continue to be in a confirmed uptrend.
Turning to this morning, there isn�t any economic data to review, but the fact that the International Atomic Energy Agency referred the situation in Iran to the U.N. Security on Saturday is certainly attracting some attention. In short, this situation creates uncertainty. Now the question is, how much uncertainty will traders award this problem?
In the early going at least, it looks as if traders may be ignoring the situation in Iran and focusing on strong overseas markets and reports that AIG may be close to a huge settlement with regulators. In addition, upgrades to aluminum companies at JP Morgan seem to be lifting traders� spirits before the opening bell.
Running through the rest of the pre-market indicators, Gold is higher by $2.40 this morning at $574; Oil is higher by +$0.72 to $66.09; Natural Gas is off -$0.19 to $8.42; the inversion of the yield curve continues with the 2 yr at 4.61% and 10 yr at 4.52%; and finally, stock futures in the U.S. are up modestly before the bell (Dow +16, S&P +2.20, NASDAQ +3.50).
Stocks "In Play" This Morning:
KO � Bank of America says KO may exceed Q4 expectations
AIG � Reportedly close to settlement
HUM � Reported $0.46 vs. $0.45 Revenue $3.60B vs. $3.79B
COP � C recommends buying weakness in COP, AHC, CVX, MRO, OXY, XOM
INTC � ThinkEquity reports INTC offering rebates on dual core products � could reduce margins
AA � Upgraded at JPM
PRU � Added to Global Focus List at Morgan Stanley � also FNM, CI, AMT, BTI
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: INTC, PRU
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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