David Moenning Daily State of the Markets: 1/12
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Back on Track?
After taking a brief hiatus, the bulls returned to their winning ways yesterday. Positive comments from the Fed as well as some follow-through in tech helped the market overcome a rather sluggish start and overcome both earnings disappointments and higher oil prices.
Stocks kind of wandered through the day until New York Fed President Timothy Geithner took the podium in the afternoon. Up to that point, the positives from a strong tech sector were cancelled out by DuPont�s profit warning and another move up in energy and the major indices were in danger of flat lining on the day.
However, Mr. Geithner revived the patient when his speech pointed out that while overall inflation pressures have risen, �inflation excluding food and energy (i.e. the core rate) has been quite moderate.� The NY Fed President went on to justify his view by explaining that the situation was due in part to �very modes growth in unit labor costs.�
Stocks took these statements as a sign that (1) the Fed understands that outside of energy, inflation is very well contained and (2) there would be no need for the Fed to aggressively combat inflation in the near future.
The result was a modest gain in the blue chip indices and the seventh straight up day for the NASDAQ. The major indices all overcame the prior day�s selling and pushed on to new four and one-half year highs while the NYSE, Russell 2000, and Mid Cap 400 indices once again all moved to new all-time highs � which is a statement the bulls just can�t hear enough of.
The fly in the ointment however, continues to be the price of oil. While the inventory numbers showed big builds in gasoline and distillates, continued chatter out of Iran regarding the status of their nuclear program kept traders on edge. Crude futures finished the day up +$0.57 to $63.94.
Turning to this morning, traders finally got some data to guide them before the opening bell today. The nation�s trade deficit for November came in at $64.2 Billion, which was better than the expectations of $66.1 Billion. However, since the pullback is coming from October�s record high level of $68.9 Billion, traders are so far unimpressed. In addition, Import Prices were a bit lower than expected at -0.2%.
In running through the pre-market indicators, it looks to be a soft open for the market as traders may soon look to lock in some profits. Higher energy prices (oil is up $0.65 to $64.59) and downgrades in Dow components KO and JPM have the futures heading a little lower at the moment.
So will the bulls be able to once again pull a rabbit out of the hat today to keep the streak alive or will the bears finally get an opening? Stay tuned.
Stocks "In Play" This Morning:
GDT � Announced definitive agreement with JNJ at $68.06
LRCX � Lehman raises target to $45 and is favorite pick in sector
IBM � Lehman positive on stocks prior to earnings
KO � Downgraded at Goldman
JPM � Downgraded at Piper
RSH � Warns that 2005 earnings will not meet targets
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: IBM
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
After taking a brief hiatus, the bulls returned to their winning ways yesterday. Positive comments from the Fed as well as some follow-through in tech helped the market overcome a rather sluggish start and overcome both earnings disappointments and higher oil prices.
Stocks kind of wandered through the day until New York Fed President Timothy Geithner took the podium in the afternoon. Up to that point, the positives from a strong tech sector were cancelled out by DuPont�s profit warning and another move up in energy and the major indices were in danger of flat lining on the day.
However, Mr. Geithner revived the patient when his speech pointed out that while overall inflation pressures have risen, �inflation excluding food and energy (i.e. the core rate) has been quite moderate.� The NY Fed President went on to justify his view by explaining that the situation was due in part to �very modes growth in unit labor costs.�
Stocks took these statements as a sign that (1) the Fed understands that outside of energy, inflation is very well contained and (2) there would be no need for the Fed to aggressively combat inflation in the near future.
The result was a modest gain in the blue chip indices and the seventh straight up day for the NASDAQ. The major indices all overcame the prior day�s selling and pushed on to new four and one-half year highs while the NYSE, Russell 2000, and Mid Cap 400 indices once again all moved to new all-time highs � which is a statement the bulls just can�t hear enough of.
The fly in the ointment however, continues to be the price of oil. While the inventory numbers showed big builds in gasoline and distillates, continued chatter out of Iran regarding the status of their nuclear program kept traders on edge. Crude futures finished the day up +$0.57 to $63.94.
Turning to this morning, traders finally got some data to guide them before the opening bell today. The nation�s trade deficit for November came in at $64.2 Billion, which was better than the expectations of $66.1 Billion. However, since the pullback is coming from October�s record high level of $68.9 Billion, traders are so far unimpressed. In addition, Import Prices were a bit lower than expected at -0.2%.
In running through the pre-market indicators, it looks to be a soft open for the market as traders may soon look to lock in some profits. Higher energy prices (oil is up $0.65 to $64.59) and downgrades in Dow components KO and JPM have the futures heading a little lower at the moment.
So will the bulls be able to once again pull a rabbit out of the hat today to keep the streak alive or will the bears finally get an opening? Stay tuned.
Stocks "In Play" This Morning:
GDT � Announced definitive agreement with JNJ at $68.06
LRCX � Lehman raises target to $45 and is favorite pick in sector
IBM � Lehman positive on stocks prior to earnings
KO � Downgraded at Goldman
JPM � Downgraded at Piper
RSH � Warns that 2005 earnings will not meet targets
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: IBM
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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