David Moenning's Daily State of the Markets: 04/30

A Worrisome Advance?

Good morning. I don’t mean to sound like a worrywart, but I always get a little nervous when the media celebrates a new record high for the Dow, or in this case a series of new highs, while the broad market fails to play along. Such was the case on both Thursday and Friday. While all anyone could talk about was the new high for the Dow and how quickly the index went from 12,000 to 13,000, the NYSE index actually was falling during both sessions. Granted, the declines weren’t significant, but the advances on the Dow weren’t exactly robust either.

However, there is no arguing the fact that the recent run up from the March low has indeed been impressive. Since the intraday low of 11,939.61 on March 14th, the Dow has climbed 1,181 points, or just under 10% in about a month and a half. Now that’s robust.

On the other hand, Friday’s action was really a weak effort. One could easily argue that investors spent the day trying to reconcile the disappointing results found in the GDP report against the positives seen from most earnings reports. And I guess we really shouldn't complain too loudly as the bulls probably deserved a rest after running hard for four straight days last week and for finishing in the green nineteen of the last twenty-one sessions.

But that doesn't negate the fact that the Dow moved higher on Friday while the S&P 500, NYSE, Russell 2000, and S&P Small Cap and Mid Cap indices all finished in the red. While this worrisome situation probably isn’t fatal to the bulls, when you have a market that has been moving straight up and now finds itself more than just a little overbought, we feel that it might be a good idea to start thinking a little more cautiously. But there I go again, being a worrywart.

Turning to this morning, we've got some more macro data to review before the bell. This time it's the Personal Income and Spending report. The report shows that incomes rose by +0.7% which was higher than the consensus estimates for an increase of +0.6%. Spending came in at 0.3%, which was below expectations for an uptick of +0.5%. And the PCE Core was reported unchanged. Finally, on a year-over-year basis, the all-important PCE Deflator, which is a measure of inflation, was up +2.1%, which is down from the last month’s reading of +2.3%.

Running through the rest of the pre-game indicators, the major foreign markets were all over the map overnight with Hong Kong dropping 1%, Japan was closed, France and Germany are up +0.6% while the UK is down a fraction. Gold futures are moving up this morning by $1.40 and are trading at $683.20. In the oil pits, crude futures are higher by $0.04 with the latest quote at $66.50. Interest rates are a moving down this morning with the yield on the 10-year currently trading at 4.67%. And finally, with about an hour before the bell, stock futures in the U.S. aren’t moving all that much at the moment. The Dow futures are currently ahead by 9 points; the S&P’s are about 2 points above fair value, while the NASDAQ also looks to be about 3 points ahead of fair value at the moment

Stocks "In Play" This Morning:

Today's Earnings Before the Bell:

Humana (NYSE: HUM) – Reported $0.42 vs. $0.40
Kellogg (NYSE: K) – Reported $0.70 vs. $0.68
Radio Shack (NYSE: RSH) – Reported $0.29 vs. $0.14
Verizon (NYSE: VZ) – Reported $0.54 vs. $0.54
Tyson Foods (NYSE: TSN) – Reported $0.19 vs. $0.11
Loews - Carolina Group (NYSE: CG) - Reported $1.08 vs. $0.98

News, Upgrades/Downgrades/Brokerage Research:
Valero (NYSE: VLO) – Mentioned positively in Barron’s
Apple (NASDAQ: AAPL) – Mentioned positively in Barron’s
Intel (NASDAQ: INTC) – Mentioned positively in Barron’s
Berkshire Hathaway (NYSE: BRK.A) – Mentioned positively in Barron’s
Dell (NASDAQ: DELL) – Mentioned positively in Barron’s
Home Depot (NYSE: HD) – Mentioned positively in Barron’s
Johnson & Johnson (NYSE: JNJ) – Mentioned positively in Barron’s
Colgate-Palmolive (NYSE: CL) – Upgraded at AG Edwards
Nvidia (NASDAQ: NVDA) – Earnings estimates increased at Bear Stearns
RF Microdevices (NASDAQ: RFMD) – Upgraded at CIBC
Bristol Meyers (NYSE: BMY) – Upgraded at Deutsche Bank
Continental Airlines (NYSE: CAL) – Upgraded at Goldman Sachs
MEMC Electronic Materials (NYSE: WFR) – Downgraded at RBC Capital

Mr. Moenning holds Long positions in stocks mentioned: GS, AAPL, VLO, CG

Note: All earnings reports compared to Reuter's consensus estimates

** For More of David Moenning’s Market Analysis, Stock Portfolios, and Trading Ideas, visit: www.TopGunsTrading.com

The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management and Co-Founder of TopGunsTrading.com and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

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