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David Moenning's Daily State of the Markets: 09/12

September 12, 2007 9:37 AM EDT
Feeling Better?

Despite a sharp move up in oil prices and another crummy report on housing sales, investors appear to be feeling better about the stock market. Well, at least for yesterday. And while there wasn’t any one dominant theme providing a catalyst, stocks blasted higher yesterday and finished with gains of +1.4% or more in the major indices.

There may have been a sigh of relief that Fed Chairman Bernanke didn’t cause any additional confusion on the topic of a rate cut. Speaking to bankers in Germany, Mr. Bernanke avoided the subject of monetary policy in the U.S. altogether. And after the barrage of somewhat divergent views from Fed officials on Monday, the lack of commentary from the chairman was seen as being supportive of a rate cut on the 18th.

Traders may have also started to feel better about the consumer yesterday. First, McDonald’s reported impressive same store sales comparisons, which came in almost double analyst expectations. And second, General Motors said that strong demand for their new models would ease the beleaguered car company’s dependence on incentives.

Next, the worries over the labor market, which were spurred by Friday’s stunning jobs report, eased somewhat after a Manpower survey showed that hiring expectations for the fourth quarter haven’t really changed.

And finally, investors began to feel a little better about the commercial paper market yesterday. While things are definitely not back to normal, with the FDC deal looking like it is going to get done and LIBOR rates starting to decline, you could almost feel the sigh of relief wafting over the markets yesterday afternoon.

Yes, there was a good deal of talk about short-covering yesterday. And no, the gain of +180 points didn’t do all that much on the charts. And yes, it is true that the move came on rather light volume. But, the fact that stocks didn’t decline in the face of Countrywide’s search for new cash and the news that the National Assoc. of Realtors cut its sales forecast for the seventh straight month, has to be considered a modest positive.

Turning to this morning, we don’t have any economic news to sift through before the opening bell. However, higher oil prices and turmoil in Japanese politics have put a damper on yesterday’s rally in the early going.

Running through the rest of the pre-game indicators, with the exception of Hong Kong, the overseas markets are mostly lower right now. Crude futures are up by $0.11, with the latest quote at $78.34. Interest rates are down a little this morning and the 10-yr is trading at a yield of 4.35% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open lower. The Dow futures are currently off by about 35 points; the S&Ps are down by more than 5 points, and the NASDAQ looks to be about 7 points below fair value at the moment.

Stocks "In Play" This Morning:

News, Upgrades/Downgrades/Brokerage Research:

Frontier Oil (NYSE: FTO) – Upgraded at BofA
Tesoro (NYSE: TSO) – Upgraded at BofA
Sunoco (NYSE: SUN) – Downgraded at BofA
Cognizant Technology (Nasdaq: CTSH) – Upgraded at Bernstein
Apache Corp (NYSE: APA) – Upgraded at Goldman Sachs
Newfield Exploration (NYSE: NFX) – Downgraded at Goldman Sachs
Transocean (NYSE: RIG) – Upgraded at JP Morgan
GlobalSantaFe (NYSE: GSF) – Upgraded at JP Morgan
American Eagle Outfitters (NYSE: AEO) – Downgraded at Merrill Lynch
Amgen (Nasdaq: AMGN) – Upgraded at Merrill, UBS
Agnico Eagle Mines (NYSE: AEM) – Downgraded at UBS
Intl Game Technology (NYSE: IGT) – Upgraded at Wachovia

Mr. Moenning holds Long positions in stocks mentioned: MER

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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