David Moenning Daily State of the Markets: 1/27
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Houston, We Have Liftoff
The bulls took advantage of some decent economic news and solid earnings from a few Dow components to get their rebound off the launch pad yesterday. The lift-off, which had been delayed on several occasions and looked to be in serious jeopardy earlier in the week, finally took place at the opening bell.
Surprisingly strong earnings from Caterpillar, which included the impressive phrase �unprecedented customer demand,� and solid results from the new AT&T, when combined with a better than expected report on sales of durable goods, was enough to finally move the countdown to zero and turn the bulls� mission into a �go.� From there, it was up, up, and away, and the market put in its best day since last Friday�s thrashing. While it wasn�t quite a moon-shot, the Dow finished with a gain of 100 points and the NYSE and Mid Caps moved back to within spitting distance of the recent highs. However, the Small Caps were the stars of the day as both the Russell 2000 and S&P Small Cap indices blasted to new all-time highs.
Digging into the Durable Goods report�s details showed that the economy finished last year on a strong note and provides a solid outlook going forward. Orders rose 1.3% in December, which was a bit better than expectations and November�s orders were revised higher by 1%. More importantly, orders for nondefense capital goods ex-aircraft number, which is a proxy for Capex (capital expenditures), rose an impressive 3.5%. And on a year-over year basis, orders were up a stellar 12%.
The bond market certainly took note of the strength in Capex demand and rates moved higher throughout yesterday�s session. The yield on the 10-yr finished at 4.52%, which is the highest level of the year and is up significantly from last week�s closing level of 4.35%.
Turning to this morning, the feeling that the economy was stronger than expected in the latter part of last year, has been dealt a serious blow. The advanced report on the nation�s GDP for the fourth quarter came in well below expectation. Q4�s GDP came in at just 1.1% which is significantly lower than expectations for a growth rate in the 2.8% range.
The unexpected weakness in the report appears to have come from a surge in imports and a rather surprising drop in government spending (does that really happen?). And to make matters worse, the price index (inflation) came in hotter than expected at 3.0% versus estimates of 2.7%.
Although this report will undoubtedly lead to speculation that the economy is slowing down, we should remember that this is just the �advanced� edition of the number, which tends to be volatile, and that the government will get two more shots at it before the final result is confirmed. But at least in the early going today, worry over a slowdown seems to be prevalent.
Running through the morning indicators, overseas markets, particularly the Asian markets, were strong on news that the Livedoor scandal may be winding down; gold is trading higher by +$4.30 to $564.20; oil is higher by $0.99 to $67.25; natural gas is moving up $0.29 to $8.52; bond yields are falling on the GDP report, with the 10-yr currently yielding 4.48%; and finally, stock futures are modestly higher before the bell, but have pulled back from earlier levels.
Stocks "In Play" This Morning:
CVX - Reported $1.86 vs. $1.89, revenues $53.8B vs. $55.1B
BRCM - Reported $0.80 vs. $0.76, revenues $820.6M vs. $760.8M, announced 3-2 split and stock repurchase of $500M
COLM - Reported $0.97 vs. $0.89, revenues $314.1 vs. $304.3M
HAL - Reported $1.06 vs. $0.89, revenues $5.8B vs. $5.3B
KLAC - Reported $0.50 vs. $0.47, revenues $488M vs. $468.2M
MSFT - Reported $0.34 vs. $0.33, revenues $11.8B vs. $11.9B
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: BRCM
To see David Moenning�s Trading Record or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
The bulls took advantage of some decent economic news and solid earnings from a few Dow components to get their rebound off the launch pad yesterday. The lift-off, which had been delayed on several occasions and looked to be in serious jeopardy earlier in the week, finally took place at the opening bell.
Surprisingly strong earnings from Caterpillar, which included the impressive phrase �unprecedented customer demand,� and solid results from the new AT&T, when combined with a better than expected report on sales of durable goods, was enough to finally move the countdown to zero and turn the bulls� mission into a �go.� From there, it was up, up, and away, and the market put in its best day since last Friday�s thrashing. While it wasn�t quite a moon-shot, the Dow finished with a gain of 100 points and the NYSE and Mid Caps moved back to within spitting distance of the recent highs. However, the Small Caps were the stars of the day as both the Russell 2000 and S&P Small Cap indices blasted to new all-time highs.
Digging into the Durable Goods report�s details showed that the economy finished last year on a strong note and provides a solid outlook going forward. Orders rose 1.3% in December, which was a bit better than expectations and November�s orders were revised higher by 1%. More importantly, orders for nondefense capital goods ex-aircraft number, which is a proxy for Capex (capital expenditures), rose an impressive 3.5%. And on a year-over year basis, orders were up a stellar 12%.
The bond market certainly took note of the strength in Capex demand and rates moved higher throughout yesterday�s session. The yield on the 10-yr finished at 4.52%, which is the highest level of the year and is up significantly from last week�s closing level of 4.35%.
Turning to this morning, the feeling that the economy was stronger than expected in the latter part of last year, has been dealt a serious blow. The advanced report on the nation�s GDP for the fourth quarter came in well below expectation. Q4�s GDP came in at just 1.1% which is significantly lower than expectations for a growth rate in the 2.8% range.
The unexpected weakness in the report appears to have come from a surge in imports and a rather surprising drop in government spending (does that really happen?). And to make matters worse, the price index (inflation) came in hotter than expected at 3.0% versus estimates of 2.7%.
Although this report will undoubtedly lead to speculation that the economy is slowing down, we should remember that this is just the �advanced� edition of the number, which tends to be volatile, and that the government will get two more shots at it before the final result is confirmed. But at least in the early going today, worry over a slowdown seems to be prevalent.
Running through the morning indicators, overseas markets, particularly the Asian markets, were strong on news that the Livedoor scandal may be winding down; gold is trading higher by +$4.30 to $564.20; oil is higher by $0.99 to $67.25; natural gas is moving up $0.29 to $8.52; bond yields are falling on the GDP report, with the 10-yr currently yielding 4.48%; and finally, stock futures are modestly higher before the bell, but have pulled back from earlier levels.
Stocks "In Play" This Morning:
CVX - Reported $1.86 vs. $1.89, revenues $53.8B vs. $55.1B
BRCM - Reported $0.80 vs. $0.76, revenues $820.6M vs. $760.8M, announced 3-2 split and stock repurchase of $500M
COLM - Reported $0.97 vs. $0.89, revenues $314.1 vs. $304.3M
HAL - Reported $1.06 vs. $0.89, revenues $5.8B vs. $5.3B
KLAC - Reported $0.50 vs. $0.47, revenues $488M vs. $468.2M
MSFT - Reported $0.34 vs. $0.33, revenues $11.8B vs. $11.9B
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: BRCM
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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