David Moenning Daily State of the Markets: 1/06
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Going For the Sweep
Technically, the bulls enjoyed a third straight day of gains yesterday. However, the end result really wasn�t much to write home about as traders spent the vast majority of the day waiting on this morning�s jobs report. But as the bulls like to say, a gain is a gain.
The markets received a steady flow of economic data yesterday, and although traders largely ignored the reports, the news was fairly positive on balance. Stocks started to the downside in pre-open activity in response to generally unimpressive same-store sales during the holiday season. Wal-Mart was one of the biggest offenders, posting sales gains of just 2.2%, which was clearly on the low end of their projections of 2% to 4%. Overall, retailers showed sales gains for the holiday season of approximately 3.2% over last year. This was in-line with expectations, but the bulls are quick to remind us that sales of gift cards are not counted until the cards are actually used.
Next up, the ISM�s Non-Manufacturing Business Activity Index rose by 1.3 points in December to 59.8, which was above expectations. Orders were up, exports rose, inventories increased to their third highest level on record, and comments from managers were �generally positive.� And when the data is fed into the computers at Ned Davis Research, the report suggests GDP growth of 3.8%.
On the oil front, the inventory data was interesting. Refineries are continuing to recover from the storms and capacity utilization hit 89.9% last week, which was higher than anticipated. The reports on stockpiles of crude, distillates, and natural gas showed that inventories are currently adequate on all fronts, but that we will need a warmer than normal winter for distillate stores to be adequate. It is also interesting to note that despite a significant increase in price over the last twelve months, demand for gasoline and petroleum products remains strong and actually showed an increase in the past year.
Turning to this morning, in short, it�s all about jobs. The employment report showed that the economy created 108,000 new jobs in December, which was much weaker than expectations for job gains of 200,000. However, the entire shortfall was offset by an upward revision of 100,000 jobs to November�s numbers (305k vs. 215). In addition, the report showed that the Unemployment Rate fell to 4.9% from 5.0%.
In short, the report doesn�t show any notable improvement in the labor market, but it doesn�t point to any deterioration either. And this news is basically music to stock traders� ears. The report shows that the economy is doing good, but not great, which should help keep the Fed from getting trigger happy.
Running down the morning indicators, the major overseas markets are all green. After a brief respite yesterday, gold is heading higher again this morning and is trading higher by $5.20 to $533. Crude oil futures are up $0.53 to $63.32. Natural Gas is rebounding a bit to $9.69, but keep in mind that the contract was around $15 recently. Bond yields are showing little movement after the jobs number and the 10-yr is currently yielding 4.35%. And finally, stocks futures are off their best levels but are moving up before the bell (Dow +25, S&P +3.80, and NASDAQ +6.50)
So with an almost Goldilocks-like jobs report, the question of the day comes down to this: Will the bulls be able to sweep the week and make it four in a row? Or will the Bears have something to say before all is said and done?
Stocks "In Play" This Morning:
STJ � Upgraded at Piper
IBM � Goldman recommends purchase at current levels
NOVL � Reiterated outperform at CSFB
ANF � WSJ reports SEC to issue formal investigation
SNDK � Mentioned positively at AmTech
EMC � Increases guidance
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: IBM, EMC
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
Technically, the bulls enjoyed a third straight day of gains yesterday. However, the end result really wasn�t much to write home about as traders spent the vast majority of the day waiting on this morning�s jobs report. But as the bulls like to say, a gain is a gain.
The markets received a steady flow of economic data yesterday, and although traders largely ignored the reports, the news was fairly positive on balance. Stocks started to the downside in pre-open activity in response to generally unimpressive same-store sales during the holiday season. Wal-Mart was one of the biggest offenders, posting sales gains of just 2.2%, which was clearly on the low end of their projections of 2% to 4%. Overall, retailers showed sales gains for the holiday season of approximately 3.2% over last year. This was in-line with expectations, but the bulls are quick to remind us that sales of gift cards are not counted until the cards are actually used.
Next up, the ISM�s Non-Manufacturing Business Activity Index rose by 1.3 points in December to 59.8, which was above expectations. Orders were up, exports rose, inventories increased to their third highest level on record, and comments from managers were �generally positive.� And when the data is fed into the computers at Ned Davis Research, the report suggests GDP growth of 3.8%.
On the oil front, the inventory data was interesting. Refineries are continuing to recover from the storms and capacity utilization hit 89.9% last week, which was higher than anticipated. The reports on stockpiles of crude, distillates, and natural gas showed that inventories are currently adequate on all fronts, but that we will need a warmer than normal winter for distillate stores to be adequate. It is also interesting to note that despite a significant increase in price over the last twelve months, demand for gasoline and petroleum products remains strong and actually showed an increase in the past year.
Turning to this morning, in short, it�s all about jobs. The employment report showed that the economy created 108,000 new jobs in December, which was much weaker than expectations for job gains of 200,000. However, the entire shortfall was offset by an upward revision of 100,000 jobs to November�s numbers (305k vs. 215). In addition, the report showed that the Unemployment Rate fell to 4.9% from 5.0%.
In short, the report doesn�t show any notable improvement in the labor market, but it doesn�t point to any deterioration either. And this news is basically music to stock traders� ears. The report shows that the economy is doing good, but not great, which should help keep the Fed from getting trigger happy.
Running down the morning indicators, the major overseas markets are all green. After a brief respite yesterday, gold is heading higher again this morning and is trading higher by $5.20 to $533. Crude oil futures are up $0.53 to $63.32. Natural Gas is rebounding a bit to $9.69, but keep in mind that the contract was around $15 recently. Bond yields are showing little movement after the jobs number and the 10-yr is currently yielding 4.35%. And finally, stocks futures are off their best levels but are moving up before the bell (Dow +25, S&P +3.80, and NASDAQ +6.50)
So with an almost Goldilocks-like jobs report, the question of the day comes down to this: Will the bulls be able to sweep the week and make it four in a row? Or will the Bears have something to say before all is said and done?
Stocks "In Play" This Morning:
STJ � Upgraded at Piper
IBM � Goldman recommends purchase at current levels
NOVL � Reiterated outperform at CSFB
ANF � WSJ reports SEC to issue formal investigation
SNDK � Mentioned positively at AmTech
EMC � Increases guidance
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: IBM, EMC
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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