David Moenning's Daily State of the Markets: 07/19

Likely to Get Worse Before It Gets Better

Good morning. The bears appeared to have had everything going their way for much of the day yesterday. Our furry friends pointed to punk earnings from Intel (NASDAQ: INTC) and Yahoo (NASDAQ: YHOO), the admission that the now famous Bear Stearns hedge funds are essentially worthless, an uptick in the inflation data, worries over subprime mortgages, a big downgrade of the financials, higher oil prices, and comments from Ben Bernanke as the reasons for the Dow being down as much as -134 points mid-day. And with the Dow 14,000 level suddenly looking like a ceiling, the feeling was that this thing might get ugly in a hurry.

While there were lots of things to worry about yesterday, the line that seemed to attract most of the attention came from none other than Fed Chairman Ben Bernanke. In testimony before the House Financial Services Committee, Gentle Ben covered most of the popular topics including inflation and the economy. And in the big picture, it is safe to say that Mr. Bernanke didn't really offer much in the way of new information. The Fed Chairman did lower the economy's growth targets a bit for the year due to the sluggish housing market and said that inflation remains the committee's primary focus.

However, it was the topic of subprime mortgages that really caught people's attention yesterday. With just about everyone in the business having at least some concerns about the idea of the problems in subprime possibly spilling over into the rest of the financial system, Mr. Bernanke's comment that the situation was "likely to get worse before it gets better" seemed to seal the bull's fate on the day.

But, all's well that ends well because a late-day rally, which was helped along by interest rates dipping back down to the 5% level, cut the losses dramatically into the close and everybody in the bull camp was breathing easier at the end of the day

It is worthy of note however that once again, the price of oil went almost unnoticed yesterday. Apparently the bears already had plenty on their plate so the move didn't get much attention. But, with the August futures popping up $1.03 to close at $75.05, you can bet that this is a topic that is likely to get some play one of these days.

Turning to this morning, we don't have much in the way of economic data to review before the bell, but we will get the Index of Leading Indicators at 10:00am Eastern and the Fed Minutes at 2:00. In addition, with Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT) reporting after the close, there is bound to be some speculation on these reports during today's session.

However, things look pretty good so far in the pre-market activity. Solid reports from Juniper (NASDAQ: JNPR) and IBM (NYSE: IBM) have put a bid under tech and some new M&A talk is reminding traders of the bullish prop that buyouts continue to provide.

Running through the rest of the pre-game indicators, the foreign markets are up nicely across the board this morning. In the oil pits, crude futures are moving up again with the latest quote up $0.62 at $75.67. Interest rates are moving up this morning with the yield on the 10-year currently trading at 5.05%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a higher open at the present time. The Dow futures are currently up by about 57 points; the S&P's are higher by more than 6, while the NASDAQ looks to be almost 13 points above fair value at the moment.

Stocks "In Play" This Morning:

Yesterday's Earnings After the Bell:

Allstate (NYSE: ALL) - Reported $1.76 vs. $1.80
eBay (NASDAQ: EBAY) - Reported $0.34 vs. $0.32
Intl Bus Machines (NYSE: IBM) - Reported $1.50 vs. $1.47
Juniper Networks (NASDAQ: JNPR) - Reported $0.20 vs. $0.20
Noble Corp (NYSE: NE) - Reported $2.16 vs. $2.13
Sovereign Bancorp (NYSE: SOV) - Reported $0.33 vs. $0.32
Teradyne (NYSE: TER) - Reported $0.14 vs. $0.11

Today's Earnings Before the Bell:

Bank of America (NYSE: BAC) - Reported $1.28 vs. $1.20
Baxter Intl (NYSE: BAX) - Reported $0.72 vs. $0.67
Bank of New York Mellon (NYSE: BK) - Reported $0.63 vs. $0.61
Continental Airlines (NYSE: CAL) - Reported $2.10 vs. $1.84
Harley Davidson (NYSE: HOG) - Reported $1.14 vs. $1.13
Hershey (NYSE: HSY) - Reported $0.35 vs. $0.35
International Game Technology (NYSE: IGT) - Reported $0.41 vs. $0.39
Motorola (NYSE: MOT) - Reported $0.02 vs. $0.00
TD Ameritrade (NASDAQ: AMTD) - Reported $0.26 vs. $0.25
UnitedHealth Group (NYSE: UNH) - Reported $0.87 vs. $0.81
VF Corp (NYSE: VFC) - Reported $0.89 vs. $0.87
Wyeth (NYSE: WYE) - Reported $0.90 vs. $0.87


News, Upgrades/Downgrades/Brokerage Research:*

Valero (NYSE: VLO) - Downgraded at Bernstein
Sunoco (NYSE: SUN) - Downgraded at Bernstein
JP Morgan (NYSE: JPM) - Upgraded at CIBC
Juniper Networks (NASDAQ: JNPR) - Upgraded at Goldman Sachs, RW Baird
Citrix Systems (NASDAQ: CTXS) - Upgraded at Jefferies, RW Baird
Piper Jaffray (NYSE: PJC) - Upgraded at Wachovia
St. Jude Medical (NYSE: STJ) - Upgraded at Wachovia

Mr. Moenning holds Long positions in stocks mentioned: GS, JNPR, IBM, VFC, VLO

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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