David Moenning's Daily State of the Markets: 07/24
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Earnings Anxiety
Good Monday morning and welcome back. Despite the majority of earnings reports coming in above expectations so far (66% to be exact) and some solid numbers from the likes of Google and Microsoft, stocks continued to sell off on Friday. Sure, we could easily blame it on the options expiration and the fact that nobody wants to buy on Friday with the mid-east so unsettled. But in reality, it appears that it is anxiety over the future of earnings and the economy that is to blame.
In short, the fear is that we are seeing the peak in earnings growth for this cycle. Disappointing results from AMD and a big warning from DELL last week reinforced the idea that this may be as good as it gets for a while. With everyone talking about a slowing economy, analysts are attempting to read between the lines regarding the future. And so far at least, it isn�t clear that the growth cycle can continue.
Mr. Bernanke himself has done a fair amount of yapping about an economic slowdown lately. Couple this with oil over $70 and gasoline over $3.00, and it doesn�t take much extrapolation to see that the consumer may not be increasing their expenditure levels any time soon.
In addition, there is a chance that �the conundrum� (bond yields falling while the Fed is raising rates) may be making a comeback as the concept of a slowdown in the economy becomes more accepted in the bond pits. Now toss in the fact that stock prices tend to discount the future and it becomes quite clear that some of the difficulty in the indices lately may be tied to the future of the economy.
But, on the other hand, the Thursday/Friday swoon may have simply been tied to the expiration day and concerns over what might happen in Lebanon over the weekend. Remember, while it does not appear likely, any hint that Syria or Iran may become involved in the current conflict would not be greeted with cheers on Wall Street.
In any event, the bulls can�t be too pleased with the action over the past month. Despite the fact that the Fed will apparently stop raising rates sooner rather than later, stocks continue to loiter near the lows of the year and the NASDAQ�s swoon of almost 15% since the April highs is certainly worthy of note. But, let�s keep in mind that stocks continue to be very oversold and sentiment is extremely negative, so the bulls will continue to hold out some hope for a rally in the near term.
Turning to this morning, there is no economic news scheduled for release today. However, there is a fair amount of merger activity, which helps remind traders that corporate executives see value in the market place. This has helped improve the mood in the markets and so far at least it looks like we may see a return to green screens today.
Running through the rest of the pre-game indicators, overseas markets are mostly higher. Gold futures are pulling back this morning and are currently exchanging hands at $615.10. Oil is also on the decline as crude futures are currently trading lower by $0.68 to $73.75. Interest rates are a little higher this morning with the 2-year currently at 5.10% while the 10-yr is trading with a yield at 5.05% right now. And finally, with about an hour before the bell, stock futures in the U.S. are moving higher. The Dow futures are currently ahead by 44 points; the S&Ps are up 5.60, and the NASDAQ is showing a gain of more than 6 points.
Stocks �In Play� This Morning:
Schering Plough (SGP) � Reported $0.25 vs. $0.17
Merck (MRK) � Reported $0.73 vs. $0.65, did not provide guidance, has been named in 14,000 lawsuits
Panera Bread (PNRA) � Upgraded at Merrill Lynch
Halliburton (HAL) � Downgraded at Merrill, UBS maintains Buy rating
Advanced Micro Devices (AMD) � Confirms purchase of ATI Tech (ATYT)
BellSouth (BLS) � Reported $0.60 vs. $0.57, Upgraded at Lehman
Ericsson (ERICY) � Downgraded at Bear Stearns
Dell Computer (DELL) � Upgraded at Citigroup
Lyondell Chemical (LYO) � Upgraded at JP Morgan
FMC Tech (FTI) � Downgraded at JP Morgan
Weyerhaeuser (WY) � Downgraded at Morgan Stanley
Yahoo (YHOO) � Mentioned positively in Barron�s
Kellogg (K) � Mentioned positively in Barron�s
Chartered Semi (CHRT) � Upgraded at Citigroup
Credit Suisse (CSR) � Upgraded at JP Morgan
Home Depot (HD) � Lehman reduces estimates and price target
HCA Inc (HCA) � Agrees to be taken over by investor group
Positions in stocks mentioned: GS, HAL, BLS, BSC
** 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. Despite the majority of earnings reports coming in above expectations so far (66% to be exact) and some solid numbers from the likes of Google and Microsoft, stocks continued to sell off on Friday. Sure, we could easily blame it on the options expiration and the fact that nobody wants to buy on Friday with the mid-east so unsettled. But in reality, it appears that it is anxiety over the future of earnings and the economy that is to blame.
In short, the fear is that we are seeing the peak in earnings growth for this cycle. Disappointing results from AMD and a big warning from DELL last week reinforced the idea that this may be as good as it gets for a while. With everyone talking about a slowing economy, analysts are attempting to read between the lines regarding the future. And so far at least, it isn�t clear that the growth cycle can continue.
Mr. Bernanke himself has done a fair amount of yapping about an economic slowdown lately. Couple this with oil over $70 and gasoline over $3.00, and it doesn�t take much extrapolation to see that the consumer may not be increasing their expenditure levels any time soon.
In addition, there is a chance that �the conundrum� (bond yields falling while the Fed is raising rates) may be making a comeback as the concept of a slowdown in the economy becomes more accepted in the bond pits. Now toss in the fact that stock prices tend to discount the future and it becomes quite clear that some of the difficulty in the indices lately may be tied to the future of the economy.
But, on the other hand, the Thursday/Friday swoon may have simply been tied to the expiration day and concerns over what might happen in Lebanon over the weekend. Remember, while it does not appear likely, any hint that Syria or Iran may become involved in the current conflict would not be greeted with cheers on Wall Street.
In any event, the bulls can�t be too pleased with the action over the past month. Despite the fact that the Fed will apparently stop raising rates sooner rather than later, stocks continue to loiter near the lows of the year and the NASDAQ�s swoon of almost 15% since the April highs is certainly worthy of note. But, let�s keep in mind that stocks continue to be very oversold and sentiment is extremely negative, so the bulls will continue to hold out some hope for a rally in the near term.
Turning to this morning, there is no economic news scheduled for release today. However, there is a fair amount of merger activity, which helps remind traders that corporate executives see value in the market place. This has helped improve the mood in the markets and so far at least it looks like we may see a return to green screens today.
Running through the rest of the pre-game indicators, overseas markets are mostly higher. Gold futures are pulling back this morning and are currently exchanging hands at $615.10. Oil is also on the decline as crude futures are currently trading lower by $0.68 to $73.75. Interest rates are a little higher this morning with the 2-year currently at 5.10% while the 10-yr is trading with a yield at 5.05% right now. And finally, with about an hour before the bell, stock futures in the U.S. are moving higher. The Dow futures are currently ahead by 44 points; the S&Ps are up 5.60, and the NASDAQ is showing a gain of more than 6 points.
Stocks �In Play� This Morning:
Schering Plough (SGP) � Reported $0.25 vs. $0.17
Merck (MRK) � Reported $0.73 vs. $0.65, did not provide guidance, has been named in 14,000 lawsuits
Panera Bread (PNRA) � Upgraded at Merrill Lynch
Halliburton (HAL) � Downgraded at Merrill, UBS maintains Buy rating
Advanced Micro Devices (AMD) � Confirms purchase of ATI Tech (ATYT)
BellSouth (BLS) � Reported $0.60 vs. $0.57, Upgraded at Lehman
Ericsson (ERICY) � Downgraded at Bear Stearns
Dell Computer (DELL) � Upgraded at Citigroup
Lyondell Chemical (LYO) � Upgraded at JP Morgan
FMC Tech (FTI) � Downgraded at JP Morgan
Weyerhaeuser (WY) � Downgraded at Morgan Stanley
Yahoo (YHOO) � Mentioned positively in Barron�s
Kellogg (K) � Mentioned positively in Barron�s
Chartered Semi (CHRT) � Upgraded at Citigroup
Credit Suisse (CSR) � Upgraded at JP Morgan
Home Depot (HD) � Lehman reduces estimates and price target
HCA Inc (HCA) � Agrees to be taken over by investor group
Positions in stocks mentioned: GS, HAL, BLS, BSC
** 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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