David Moenning's Daily State of the Markets: 06/26
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High Anxiety
Good Monday morning and welcome back to the game. With the Fed meeting just days away, the stock market continues to trade in an anxious fashion. Although the volatility has slowed somewhat, unless we can get some kind of resolution to the fear that the Fed will overdo it, the current environment of high anxiety may be around for a while.
Stocks waffled back and forth on Friday before finally succumbing to selling late in the day. A couple merger deals in the oil patch and a strong earnings report from Oracle kept the bulls in the game, but a sluggish report on durable goods and a new high for interest rates wound up helping the bears maintain possession of the ball.
Frankly, all the analysis of the current market action isn�t worth a hill of beans given the impending Fed meeting. So let�s skip the review of the tea leaves and focus on the big picture for a bit this morning.
In our humble opinion, there are two key issues that investors must be aware of going into Thursday�s Fed announcement at 2:15 eastern.
First is the fact that the FOMC meeting qualifies as a much anticipated �big bad event.� And as such, the market has had plenty of time to weigh the pros and cons and to come to a consensus in terms of what to expect from Mr. Bernanke. Thus, the major indices should go into Thursday�s session at some sort of an equilibrium point. We�ve had the overreaction to the downside and then the obligatory bounce higher. So stocks should be settled in nicely before the announcement.
Next, we need to know what to expect from Mr. Bernanke�s band of inflation fighters. As we detailed in this weekend�s big picture State of the Markets report, if the Fed raises rates by the usual 25 bps and provides little more than the usual bit about being �data dependent,� this would indicate that we�ve got more inflation fighting ahead and more rate hikes on the horizon. And needless to say, if the Fed decides to continue hiking down the measured path, stocks could be in for a rough summer.
On the other hand, should Mr. Bernanke and Co. decide to raise rates by 50bps, the market would assume that a pause is at hand. History shows that the Fed likes to end their rate hike campaigns with a bang and this would be a clear signal to the markets that the Fed wants to take a break to measure the impact of the previous 16 rate hikes. Therefore, �the big one� would likely trigger a rally and leave a lot of investors scratching their heads.
Looking at the week ahead, there is quite a bit of data on tap before the FOMC announcement on Thursday, so the anxiety is likely to continue.
- Monday � New Home Sales at 10:00 a.m.
- Tuesday � Consumer Confidence, Existing Home Sales, Richmond Fed Index
- Wednesday � Weekly Oil Inventories
- Thursday � Final Q1 GDP, Help Wanted Index, FOMC Announcement
- Friday � Personal Income and Spending, U of M�s Consumer Sentiment, Chicago Purchasing Managers Index
Turning to this morning, traders have some M&A news to talk about in the metals market, but other than that, things are once again fairly quiet.
Running through the pre-game indicators, overseas markets show little change this morning. Gold is moving up a bit and is trading at $578.10 at the moment. Oil is moving down a little this morning and August crude futures are currently trading lower by $0.23 to $70.64. Interest rates are continuing to get in line with the expected 5.25% Fed Funds rate. The 2-year is currently trading at 5.26% while the 10-yr is quoted at 5.22% right now. And finally, with about an hour before the bell, stock futures in the U.S. are doing very little. The Dow futures are currently ahead by 6 points; the S&Ps are up a point, and the NASDAQ is sporting an advance of 2 points.
Stocks �In Play� This Morning:
Johnson & Johnson (JNJ) � Purchasing consumer unit of Pfizer
Microsoft (MSFT) � Announces strategic alliance with Motorola
Intel (INTC) � To announce higher performing new Xeon chip
Qualcomm (QCOM) � Upgraded at Thomas Weisel
Altria (MO) � Mentioned positively at Morgan Stanley
McAfee (MFE) � Upgraded at Raymond James
Phelps Dodge (PD) � To purchase Inco and FAL
McKesson (MCK) � Upgraded at Morgan Stanley
Medco Health (MHS) - � Upgraded at Morgan Stanley
Zimmer Holdings (ZMH) � Downgraded at BofA
Endo Pharma (ENDP) � Upgraded at JP Morgan
Sepracor (SEPR) � Downgraded at JP Morgan
Playboy Ent (PLA) � Mentioned positively in Barron�s
Nokia (NOK) � Mentioned positively in Barron�s
Kerr McGee (KMG) � Downgraded at AG Edwards
Celgene (CELG) � Price target increased at Citigroup
Wachovia (WB) � Upgraded at Sandler O�Neill
Positions in stocks mentioned: INTC, MO
** 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 Monday morning and welcome back to the game. With the Fed meeting just days away, the stock market continues to trade in an anxious fashion. Although the volatility has slowed somewhat, unless we can get some kind of resolution to the fear that the Fed will overdo it, the current environment of high anxiety may be around for a while.
Stocks waffled back and forth on Friday before finally succumbing to selling late in the day. A couple merger deals in the oil patch and a strong earnings report from Oracle kept the bulls in the game, but a sluggish report on durable goods and a new high for interest rates wound up helping the bears maintain possession of the ball.
Frankly, all the analysis of the current market action isn�t worth a hill of beans given the impending Fed meeting. So let�s skip the review of the tea leaves and focus on the big picture for a bit this morning.
In our humble opinion, there are two key issues that investors must be aware of going into Thursday�s Fed announcement at 2:15 eastern.
First is the fact that the FOMC meeting qualifies as a much anticipated �big bad event.� And as such, the market has had plenty of time to weigh the pros and cons and to come to a consensus in terms of what to expect from Mr. Bernanke. Thus, the major indices should go into Thursday�s session at some sort of an equilibrium point. We�ve had the overreaction to the downside and then the obligatory bounce higher. So stocks should be settled in nicely before the announcement.
Next, we need to know what to expect from Mr. Bernanke�s band of inflation fighters. As we detailed in this weekend�s big picture State of the Markets report, if the Fed raises rates by the usual 25 bps and provides little more than the usual bit about being �data dependent,� this would indicate that we�ve got more inflation fighting ahead and more rate hikes on the horizon. And needless to say, if the Fed decides to continue hiking down the measured path, stocks could be in for a rough summer.
On the other hand, should Mr. Bernanke and Co. decide to raise rates by 50bps, the market would assume that a pause is at hand. History shows that the Fed likes to end their rate hike campaigns with a bang and this would be a clear signal to the markets that the Fed wants to take a break to measure the impact of the previous 16 rate hikes. Therefore, �the big one� would likely trigger a rally and leave a lot of investors scratching their heads.
Looking at the week ahead, there is quite a bit of data on tap before the FOMC announcement on Thursday, so the anxiety is likely to continue.
- Monday � New Home Sales at 10:00 a.m.
- Tuesday � Consumer Confidence, Existing Home Sales, Richmond Fed Index
- Wednesday � Weekly Oil Inventories
- Thursday � Final Q1 GDP, Help Wanted Index, FOMC Announcement
- Friday � Personal Income and Spending, U of M�s Consumer Sentiment, Chicago Purchasing Managers Index
Turning to this morning, traders have some M&A news to talk about in the metals market, but other than that, things are once again fairly quiet.
Running through the pre-game indicators, overseas markets show little change this morning. Gold is moving up a bit and is trading at $578.10 at the moment. Oil is moving down a little this morning and August crude futures are currently trading lower by $0.23 to $70.64. Interest rates are continuing to get in line with the expected 5.25% Fed Funds rate. The 2-year is currently trading at 5.26% while the 10-yr is quoted at 5.22% right now. And finally, with about an hour before the bell, stock futures in the U.S. are doing very little. The Dow futures are currently ahead by 6 points; the S&Ps are up a point, and the NASDAQ is sporting an advance of 2 points.
Stocks �In Play� This Morning:
Johnson & Johnson (JNJ) � Purchasing consumer unit of Pfizer
Microsoft (MSFT) � Announces strategic alliance with Motorola
Intel (INTC) � To announce higher performing new Xeon chip
Qualcomm (QCOM) � Upgraded at Thomas Weisel
Altria (MO) � Mentioned positively at Morgan Stanley
McAfee (MFE) � Upgraded at Raymond James
Phelps Dodge (PD) � To purchase Inco and FAL
McKesson (MCK) � Upgraded at Morgan Stanley
Medco Health (MHS) - � Upgraded at Morgan Stanley
Zimmer Holdings (ZMH) � Downgraded at BofA
Endo Pharma (ENDP) � Upgraded at JP Morgan
Sepracor (SEPR) � Downgraded at JP Morgan
Playboy Ent (PLA) � Mentioned positively in Barron�s
Nokia (NOK) � Mentioned positively in Barron�s
Kerr McGee (KMG) � Downgraded at AG Edwards
Celgene (CELG) � Price target increased at Citigroup
Wachovia (WB) � Upgraded at Sandler O�Neill
Positions in stocks mentioned: INTC, MO
** 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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