David Moenning's Daily State of the Markets: 09/05

Back to Work

Good Tuesday morning and welcome back. Now that the kids are back in school and everyone is unpacked from their late summer vacations, it�s time for money managers to get back to work. And while we may not see fireworks right off the bat, it is important not to fall asleep at the wheel at this time of year.

Traditionally, September is a crummy month as mutual fund managers have a tendency to return from Labor Day looking to clean house into their fiscal year-ends, many of which occur in October. This explains why September is historically one of the worst months of the year, but, of course, it is also this selling that sets up the perennial year-end rally.

The question on everyone�s mind is if things will be different this time. Mutual funds haven�t changed their fiscal year-ends, so we may need to be wary of the weak becoming weaker as managers dump their laggards. However, the bulls have a few things going for them at the present time and Friday�s �when the cat�s away, the mice will play� rally is a good example.

Stocks started off the new month with a bang as there was anther Goldilocks sighting at the corner of Broad and Wall. Taken collectively, Friday�s economic data suggests that the Fed�s handiwork is starting to take effect, but, at least at this point in the game, it would appear that the economy is none the worse for wear. Friday�s reports showed that job growth continues, albeit at a slower pace, and there was no inflation from wages to speak of. The ISM reported that we continue to see moderate growth in the manufacturing sector. And finally, the University of Michigan�s survey of Consumer Sentiment produced a surprising uptick on Friday. Thus, the reports were bullish when taken as a whole and those traders that were still in town celebrated to the tune of 83 points.

In looking at the bigger picture, the bulls first argue that the �data dependent� Fed will remain on hold this month and the odds for another bump in interest rates in either October or November is becoming skinnier with each lackluster economic report. In addition, don�t look now, but oil prices are not rising at the moment and the October futures actually finished below $70 on Friday. And finally, our heroes in hooves point to the fact that interest rates have been very well behaved lately, which is something that generally helps stocks move higher.

Turning to this morning, we have little in the way of economic data to work with here in the U.S. until Wednesday and so far at least, things appear fairly quiet.

Running through the rest of the pre-game indicators, with the exception of Japan, the major overseas markets are mostly lower. Gold futures are moving higher by more than $11 this morning and are currently exchanging hands at $644.50. Crude futures are falling once again and are trading down by $0.64 this morning to $68.55. Interest rates are moving a little higher this morning with the 2-year currently quoted at 4.79% while the 10-yr is trading with a yield of 4.76% right now. And finally, with about an hour before the bell, stock futures in the U.S. waffling, but are a smidge higher overall. The Dow futures are currently ahead by 6, the S&Ps are up a 1.40, and the NASDAQ is sporting an advance of about 3 points.

Stocks �In Play� This Morning:

Robert Half (RHI) � Upgraded at Merrill Lynch
Norfolk Southern (NSC) � Downgraded at Merrill Lynch, Also: CNI, SWFT, JBHT, CNW
Lehman Brothers (LEH) � Upgraded at UBS
Redback Networks (RBAK) � Downgraded at UBS
Freeport McMoRan (FCX) � Upgraded at Citigroup
Alcoa (AA) � Downgraded at Citigroup, Also AL
Affiliated Computer Services (ACS) � Upgraded at Goldman Sachs
Fiserv (FISV) � Downgraded at Goldman Sachs
American Eagle Outfitters (AEOS) � Mentioned positively in Barron�s, Also ANF, FD
Anheuser Busch (BUD) � Mentioned positively in Barron�s
Advanced Micro Devices (AMD) � Downgraded at Susquehanna, Upgraded at Thomas Weisel
Universal Health (UHS) � Upgraded at Deutsche Bank
Ashland (ASH) � Downgraded at Jefferies
Qlogic (QLGC) � Upgraded at JP Morgan
Motorola (MOT) � Mentioned positively at CIBC
Phelps Dodge (PD) � Terminates merger agreement with Inco (N)
Corning (GLW) � Estimates raised at Thomas Weisel

Long positions in stocks mentioned: MER, ACS

** 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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