David Moenning's Daily State of the Markets: 05/02
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Seasonality Kicks In
Good morning. Stocks opened lower yesterday as the bears trumpeted their battle cry of "Sell in May and go away." And while this famous Wall Street-ism does indeed have some basis in fact, the bulls were in no mood for clichés yesterday and by the time the closing bell rang, the Dow Jones Industrial Average was at another new record high.
This time however, the Dow stood alone atop the record books. While all the indices did enjoy some modicum of success yesterday, the Dow’s usual compatriots, the NYSE, Russell 2000, and S&P Small Cap and Mid Cap indices finished well below their recent record highs.
Initially, traders did not appear terribly excited about the macro data that was presented yesterday. Although the ISM Manufacturing Composite Index did come in better than expected at a reading of 54.7 (analysts had been looking for a number around 51.0), the price component of the report, which is a measure of inflation, was higher than analysts had projected.
The good news, from an economic standpoint, is that the report suggests that the manufacturing sector is off to a good start in the second quarter of the year. With the largest gain in the composite index since before the hurricanes of 2005, it looks like the slowdown seen in the first quarter might have been temporary.
However, traders came into the session focusing on the negative and proceeded to hit the sell button once the Pending Home Sales report was released. The report showed that Pending Home Sales fell by 4.9% in March, which was the largest decline since February 2003. And while reports of a punk housing market aren’t exactly big news these days, the number did seem to put a damper on the bulls’ spirit.
But, when Rupert Murdoch’s News Corp made an unsolicited $60 per share bid for Dow Jones just before lunch, the mood seemed to change. Despite the market’s overbought status, the bid reminded traders that values remain in the market. And suddenly, the bulls were back in business.
The bulls were also helped along by a sizable drop in oil prices as crude futures fell by $1.31 to close at $64.40.
But perhaps the biggest boost the bulls received yesterday came from the favorable seasonality. You see at this time of year, tax refunds start to find their way into the stock market. In addition, the first five trading days of just about every month are seasonally strong as pension funds put new deposits to work.
Turning to this morning, ADP’s hotly contested report on monthly payrolls was just released and the April number was weaker than expected. While analysts will likely continue to argue the reliability of this data as a precursor to Friday’s Jobs report from the Labor Department, ADP says the economy produced 64,000 jobs last month, which was less than the consensus estimate for 100,000 jobs.
Running through the rest of the pre-game indicators, most of the major foreign markets followed the U.S. higher overnight. Gold futures are moving down again this morning by $5.10 and are trading at $672.20. In the oil pits, crude futures are lower by $0.05 with the latest quote at $64.35. Interest rates are also moving down again this morning with the yield on the 10-year currently trading at 4.63%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a slightly better open, but are off their best levels on the ADP data. The Dow futures are currently ahead by 20 points; the S&P’s are about 2 points above fair value, while the NASDAQ also looks to be about 2 points ahead of fair value at the moment
Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Affiliated Computer (NYSE: ACS) – Reported $0.82 vs. $0.80
CB Richard Ellis (NYSE: CBG) – Reported $0.27 vs. $0.15
Jones Lang LaSalle (NYSE: JLL) – Reported $0.81 vs. $0.09
MetLife (NYSE: MET) – Reported $1.41 vs. $1.28
Yum Brands (NYSE: YUM) – Reported $0.70 vs. $0.64
Today’s Earnings Before the Bell:
Biogen (Nasdaq: BIIB) – Reported $0.59 vs. $0.61
Cigna (NYSE: CI) – Reported $2.69 vs. $2.51
Devon Energy (NYSE: DVN) – Reported $1.44 vs. $1.23
Transocean (NYSE: RIG) – Reported $1.77 vs. $1.44
Sprint Nextel (NYSE: S) – Reported $0.18 vs. $0.24
Teva Pharma (Nasdaq: TEVA) – Reported $0.42 vs. $0.39
Time Warner (NYSE: TWX) – Reported $0.22 vs. $0.20
MasterCard (NYSE: MA) – Reported $1.57 vs. $1.15
News, Upgrades/Downgrades/Brokerage Research:
CH Robinson (Nasdaq: CHRW) – Upgraded at AG Edwards
Chicago Mercantile Holdings (NYSE: CME) – Upgraded at BofA
Starwood Hotels (NYSE: HOT) – Downgraded at Goldman Sachs
Federated Investors (NYSE: FII) – Downgraded at JP Morgan
Krispy Kreme Doughnuts (NYSE: KKD) – Upgraded at Prudential
Newmont Mining (NYSE: NEM) – Upgraded at Prudential
Liz Claiborne (NYSE: LIZ) – Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: GS, CBG, JLL
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.
Good morning. Stocks opened lower yesterday as the bears trumpeted their battle cry of "Sell in May and go away." And while this famous Wall Street-ism does indeed have some basis in fact, the bulls were in no mood for clichés yesterday and by the time the closing bell rang, the Dow Jones Industrial Average was at another new record high.
This time however, the Dow stood alone atop the record books. While all the indices did enjoy some modicum of success yesterday, the Dow’s usual compatriots, the NYSE, Russell 2000, and S&P Small Cap and Mid Cap indices finished well below their recent record highs.
Initially, traders did not appear terribly excited about the macro data that was presented yesterday. Although the ISM Manufacturing Composite Index did come in better than expected at a reading of 54.7 (analysts had been looking for a number around 51.0), the price component of the report, which is a measure of inflation, was higher than analysts had projected.
The good news, from an economic standpoint, is that the report suggests that the manufacturing sector is off to a good start in the second quarter of the year. With the largest gain in the composite index since before the hurricanes of 2005, it looks like the slowdown seen in the first quarter might have been temporary.
However, traders came into the session focusing on the negative and proceeded to hit the sell button once the Pending Home Sales report was released. The report showed that Pending Home Sales fell by 4.9% in March, which was the largest decline since February 2003. And while reports of a punk housing market aren’t exactly big news these days, the number did seem to put a damper on the bulls’ spirit.
But, when Rupert Murdoch’s News Corp made an unsolicited $60 per share bid for Dow Jones just before lunch, the mood seemed to change. Despite the market’s overbought status, the bid reminded traders that values remain in the market. And suddenly, the bulls were back in business.
The bulls were also helped along by a sizable drop in oil prices as crude futures fell by $1.31 to close at $64.40.
But perhaps the biggest boost the bulls received yesterday came from the favorable seasonality. You see at this time of year, tax refunds start to find their way into the stock market. In addition, the first five trading days of just about every month are seasonally strong as pension funds put new deposits to work.
Turning to this morning, ADP’s hotly contested report on monthly payrolls was just released and the April number was weaker than expected. While analysts will likely continue to argue the reliability of this data as a precursor to Friday’s Jobs report from the Labor Department, ADP says the economy produced 64,000 jobs last month, which was less than the consensus estimate for 100,000 jobs.
Running through the rest of the pre-game indicators, most of the major foreign markets followed the U.S. higher overnight. Gold futures are moving down again this morning by $5.10 and are trading at $672.20. In the oil pits, crude futures are lower by $0.05 with the latest quote at $64.35. Interest rates are also moving down again this morning with the yield on the 10-year currently trading at 4.63%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a slightly better open, but are off their best levels on the ADP data. The Dow futures are currently ahead by 20 points; the S&P’s are about 2 points above fair value, while the NASDAQ also looks to be about 2 points ahead of fair value at the moment
Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Affiliated Computer (NYSE: ACS) – Reported $0.82 vs. $0.80
CB Richard Ellis (NYSE: CBG) – Reported $0.27 vs. $0.15
Jones Lang LaSalle (NYSE: JLL) – Reported $0.81 vs. $0.09
MetLife (NYSE: MET) – Reported $1.41 vs. $1.28
Yum Brands (NYSE: YUM) – Reported $0.70 vs. $0.64
Today’s Earnings Before the Bell:
Biogen (Nasdaq: BIIB) – Reported $0.59 vs. $0.61
Cigna (NYSE: CI) – Reported $2.69 vs. $2.51
Devon Energy (NYSE: DVN) – Reported $1.44 vs. $1.23
Transocean (NYSE: RIG) – Reported $1.77 vs. $1.44
Sprint Nextel (NYSE: S) – Reported $0.18 vs. $0.24
Teva Pharma (Nasdaq: TEVA) – Reported $0.42 vs. $0.39
Time Warner (NYSE: TWX) – Reported $0.22 vs. $0.20
MasterCard (NYSE: MA) – Reported $1.57 vs. $1.15
News, Upgrades/Downgrades/Brokerage Research:
CH Robinson (Nasdaq: CHRW) – Upgraded at AG Edwards
Chicago Mercantile Holdings (NYSE: CME) – Upgraded at BofA
Starwood Hotels (NYSE: HOT) – Downgraded at Goldman Sachs
Federated Investors (NYSE: FII) – Downgraded at JP Morgan
Krispy Kreme Doughnuts (NYSE: KKD) – Upgraded at Prudential
Newmont Mining (NYSE: NEM) – Upgraded at Prudential
Liz Claiborne (NYSE: LIZ) – Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: GS, CBG, JLL
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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