David Moenning Daily State of the Markets: 12/23
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A Sleigh Sighting
For the first time in eight sessions, the now traditional afternoon meltdown went missing yesterday. Stocks moved steadily higher throughout the day and for a change, there was no weakness evident at all after lunch.
Perhaps it was the inflation data contained in the Personal Income and Spending report that allowed traders to cancel their afternoon sell orders. Perhaps it was the decline in bond yields. Perhaps it was the drop in energy prices. Or maybe, just maybe, it was the fact that Santa and his reindeer were reported to have visited all the good little boys and girls at the NYSE yesterday afternoon.
As we reported before the bell yesterday, the Core PCE Deflator, which is one of Mr. Greenspan�s favorite measures of inflation, rose by just 0.1% in November. This was actually lower than expected and on a year-over-year basis; the index fell to 1.8%, which was the lowest level in 20 months. The Fed says it prefers this measure to be in a range between 1% and 2%, so the report suggests that inflation risks, as well as the risks of further Fed tightening, may be waning. However, the indicator is still at the high end of the range, so the next couple of rate hikes, which are widely expected, are still on the table.
Stocks also got a boost yesterday from a drop in energy prices. While a decline of -$0.28 in the price of oil wasn�t much to write home about, the plunge in the Natural Gas contract certainly got traders� attention. Natural Gas for February delivery fell by -$1.33 to $13.02, which in percentage terms represents a decline of -9.3%. The warmer weather heading towards the Northeast was the catalyst for the move and the decline in heating costs obviously extrapolates positively toward the outlook for consumer spending.
Turning to this morning, the economic news du jour is creating a stir. Everybody knows that the report on Durable Goods tends to be volatile and this one was no exception. Analysts were looking for an increase in orders for Durable Goods of 1.2%, but instead, they got an increase of +4.4%. But before you leap to the conclusion that this is bad news for the market (too much of a good thing), we must recognize that the headline number is not an accurate depiction of the report since aircraft orders were up 133%.
When you strip out transportation, orders actually fell by -0.6%, and the key Non-Defense Capital Goods Ex. Aircraft (there�s a mouthful) fell by -2.0%. In addition, last month�s numbers were revised a bit lower.
The markets have had little reaction to the news and appear content to wait for the University of Michigan�s Consumer Sentiment numbers and the report on New Home Sales � both of which will be released at 10:00 am.
So far this morning gold is lower by -$0.70 to $504.30, oil is off by -$0.43 to $57.85, bonds are steady with a yield of 4.43% on the 10-yr, and stock futures are hovering just above breakeven.
With this being the last trading day before the start of the holidays, we probably should expect a thin trading session as investors focus on the important stuff, such as trying to figure out a way to get their hands on an Xbox.
Stocks "In Play" This Morning:
MSFT � Plans subscription-based movie download service
TOM � Agrees to acquired by Apax partners
ABS � Downgraded at CIBC, BB&T, and JP Morgan
ACS � Could be a target according to NYT
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: ACS
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
For the first time in eight sessions, the now traditional afternoon meltdown went missing yesterday. Stocks moved steadily higher throughout the day and for a change, there was no weakness evident at all after lunch.
Perhaps it was the inflation data contained in the Personal Income and Spending report that allowed traders to cancel their afternoon sell orders. Perhaps it was the decline in bond yields. Perhaps it was the drop in energy prices. Or maybe, just maybe, it was the fact that Santa and his reindeer were reported to have visited all the good little boys and girls at the NYSE yesterday afternoon.
As we reported before the bell yesterday, the Core PCE Deflator, which is one of Mr. Greenspan�s favorite measures of inflation, rose by just 0.1% in November. This was actually lower than expected and on a year-over-year basis; the index fell to 1.8%, which was the lowest level in 20 months. The Fed says it prefers this measure to be in a range between 1% and 2%, so the report suggests that inflation risks, as well as the risks of further Fed tightening, may be waning. However, the indicator is still at the high end of the range, so the next couple of rate hikes, which are widely expected, are still on the table.
Stocks also got a boost yesterday from a drop in energy prices. While a decline of -$0.28 in the price of oil wasn�t much to write home about, the plunge in the Natural Gas contract certainly got traders� attention. Natural Gas for February delivery fell by -$1.33 to $13.02, which in percentage terms represents a decline of -9.3%. The warmer weather heading towards the Northeast was the catalyst for the move and the decline in heating costs obviously extrapolates positively toward the outlook for consumer spending.
Turning to this morning, the economic news du jour is creating a stir. Everybody knows that the report on Durable Goods tends to be volatile and this one was no exception. Analysts were looking for an increase in orders for Durable Goods of 1.2%, but instead, they got an increase of +4.4%. But before you leap to the conclusion that this is bad news for the market (too much of a good thing), we must recognize that the headline number is not an accurate depiction of the report since aircraft orders were up 133%.
When you strip out transportation, orders actually fell by -0.6%, and the key Non-Defense Capital Goods Ex. Aircraft (there�s a mouthful) fell by -2.0%. In addition, last month�s numbers were revised a bit lower.
The markets have had little reaction to the news and appear content to wait for the University of Michigan�s Consumer Sentiment numbers and the report on New Home Sales � both of which will be released at 10:00 am.
So far this morning gold is lower by -$0.70 to $504.30, oil is off by -$0.43 to $57.85, bonds are steady with a yield of 4.43% on the 10-yr, and stock futures are hovering just above breakeven.
With this being the last trading day before the start of the holidays, we probably should expect a thin trading session as investors focus on the important stuff, such as trying to figure out a way to get their hands on an Xbox.
Stocks "In Play" This Morning:
MSFT � Plans subscription-based movie download service
TOM � Agrees to acquired by Apax partners
ABS � Downgraded at CIBC, BB&T, and JP Morgan
ACS � Could be a target according to NYT
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: ACS
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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