David Moenning Daily State of the Markets: 12/05

Ruining the Mood

Thursday�s blast higher welcomed in the final month of 2005 in grand fashion and gave the impression that the bulls were back, well rested, and ready to roll straight into the New Year. In the early going on Friday, the jobs report seemed to provide the bulls the fuel they needed to continue to power higher. But unfortunately, higher oil prices got people�s attention and then Mr. Greenspan and Co. seemed to go out of their way to spoil the mood.

The Fed Chairman, speaking in London on the imbalances in the global economy, waxed political by warning of severe economic consequences if Congress doesn�t move to balance the federal deficit and, in turn, our reliance on foreign capital. Mr. Greenspan suggested that increased spending to support a retiring baby boomer generation could put significant strains on the economy and have a negative impact on interest rate stability.

Next up, San Francisco Fed President Janet Yellen, who is not a voting member of the FOMC in 2005, but whose vote will count in 2006, really put a damper on the mood in the bull camp. Ms. Yellen got right to the point by saying that the end of the tightening campaign is �not here yet.�

Finally, Dallas Fed President, Richard Fisher, who has yet to completely recover from this summer�s �8th inning� comments, echoed Mr. Greenspan�s concerns on the subject of deficits. Fisher said the forecast for long-term budget deficits is �daunting� and that left unchecked they will present problems in the area of inflation.

Then if you toss in another crummy day for GM and the auto industry and the fact that a barrel of light sweet crude is once again approaching $60, it is easy to see why traders may have struggled to stay in an upbeat mood on Friday.

Turning to this morning�s mood, traders a little edgy in response to oil moving back above $60. At the present time, January Crude futures are higher by $0.88 to $60.20 as winter weather moves into the Northeast, causing worries over supplies of heating oil.

So with Dow and S&P resting just below their recent highs and most other indices just above, the big question right now is if traders will have the ammunition needed to move stocks higher over the next four weeks.

Stocks "In Play" This Morning:
INTC � Bernstein expects co to raise guidance at mid-qtr update on Thursday
TXN � Bear Stearns says Q4 is tracking to high end of guidance
BSX � Made $72/s offer for GDT (14% higher than JNJ�s bid)
LSTR � RW Baird raises estimates and price targets
SWY � Morgan Stanley upgrades SWY and retail grocery sector

Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: TXN, INTC, SWY

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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