David Moenning's Daily State of the Markets: 07/24

Done Deal

Good morning. Stocks reversed some of Friday's big decline yesterday as a slew of deals made investors forget about subprime mortgages for a while. The bulls also got some help from a pullback in oil and some solid earnings news. And although the small and mid cap indices actually finished lower on the day, the session did somehow manage to have an upbeat feel to it.

With the busiest week of earnings season now underway, analysts appear to have turned their attention to the earnings numbers instead of worrying about what could or should happen next in the mortgage arena. And with 60% of the reports so far coming in ahead of estimates, there seems to be little to worry about on the earnings front at the present time.

Speaking of worry, it was also quite positive that we heard nothing more of Friday's rumor that a major European bank was in trouble. Our first clue that we had nothing to fear but fear itself was the fact that the European markets didn't seem to react to the rumor and simply brushed aside Friday's steep losses on Wall Street.

What seemed to turn things around was the realization that deals are continuing to get done. And in short, if the deals keep coming, then the trouble amongst companies that like to lend money to people who can't qualify for the loan to begin with is really of little consequence.

So, if you really need something to worry about, consider spending your time fretting about when the deals will stop getting done. With this bull market being driven by global liquidity, the biggest fear other than a slowdown in the economy, a pullback in earnings, or inflation perking up is if the money for M&A starts to dry up.

Turning to this morning, there is no economic data scheduled for release before the bell, but we will get a report from the Richmond Fed at 10:00am. So far at least, yesterday's enthusiasm appears to be waning as reports from Texas Instruments (NYSE: TXN) and DuPont (NYSE: DD) came in on the disappointing side and the problems within Countrywide Financial's report (NYSE: CFC) are once again giving the subprime dilemma new life.

Running through the rest of the pre-game indicators, Asian markets were higher while Europe is lower at the moment. In the oil pits, crude futures are moving down again with the latest quote off $1.10 at $73.79. Interest rates are a little higher this morning with the yield on the 10-year currently trading at 4.97%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a lower open at the present time. The Dow futures are currently off by about 50 points; the S&P's are lower by more than 6 points, while the NASDAQ looks to be almost 9 points below fair value at the moment.


Stocks "In Play" This Morning:

Yesterday's Earnings After the Bell:

American Express (NYSE: AXP) - Reported $0.83 vs. $0.86
Hercules (NYSE: HPC) - Reported $0.40 vs. $0.39
Pactiv (NYSE: PV) - Reported $0.52 vs. $0.48
Texas Instruments (NYSE: TXN) - Reported $0.42 vs. $0.42
Steel Dynamics (NASDAQ: STLD) - Reported $1.03 vs. $1.03

Today's Earnings Before the Bell:

Biogen Idec (NASAQ: BIIB) - Reported $0.70 vs. $0.63
BJ Services (NYSE: BJS) - Reported $0.57 vs. $0.56
Countrywide Financial (NYSE: CFC) - Reported $0.69 vs. $0.93
DuPont (NYSE: DD) - Reported $1.94 vs. $1.06
EMC Corp (NYSE: EMC) - Reported $0.16 vs. $0.15
Kimberly Clark (NYSE: KMB) - Reported $1.04 vs. $1.03
Laboratory Corp (NYSE: LH) - Reported $1.09 vs. $1.09
Lockheed Martin (NYSE: LMT) - Reported $1.82 vs. $1.52
Lexmark (NYSE: LXK) - Reported $0.65 vs. $0.63
McDonalds (NYSE: MCD) - Reported $0.71 vs. $0.71
Northrop Grumman (NYSE: NOC) - Reported $1.31 vs. $1.23
Occidental Petroleum (NYSE: OXY) - Reported $1.18 vs. $1.10
Pepsico (NYSE: PEP) - Reported $0.94 vs. $0.89
AT&T (NYSE: T) - Reported $0.70 vs. $0.67
Tellabs (NASDAQ: TLAB) - Reported $0.07 vs. $0.06
Waters Corp (NYSE: WAT) - Reported $0.60 vs. $0.58
UPS (NYSE: UPS) - Reported $1.04 vs. $1.03

News, Upgrades/Downgrades/Brokerage Research:*

Ventana Medical Systems (NASDAQ: VMSI) - Downgraded at Banc of America
Cumulus Media (NASDAQ: CMLS) - Upgraded at Citi
KLA Tencor (NASDAQ: KLAC) - Downgraded at Citi
Wachovia (NYSE: WB) - Upgraded at Citi
American Express (NYSE: AXP) - Downgraded at Friedman Billings, Added to Conviction Buy list at Goldman Sachs
Gilead Sciences (NASDAQ: GILD) - Downgraded at Goldman Sachs
NetFlix (NASDAQ: NFLX) - Downgraded at Lehman Brothers
Xcel Energy (NYSE: XEL) - Upgraded at Lehman Brothers
Genworth Financial (NYSE: GNW) - Upgraded at Merrill Lynch
Pacer Intl (NASDAQ: PACR) - Downgraded at UBS

Mr. Moenning holds Long positions in stocks mentioned: MER, T, WAT

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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