David Moenning's Daily State of the Markets: 09/14
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The Countdown Resumes
Good morning. Grab those party hats because after a fourth straight day of rallying, the DJIA finds itself just 99 points away from the high for the year and only 207 points shy of the all-time high set in January 2000. And with the bulls this close to the Promised Land, you can rest assured that the countdown to new highs has begun.
Actually, this is a resumption of the countdown that began back in May. At that time, traders were celebrating the idea that the Fed would soon stop raising rates. Unfortunately, that call came into question soon after and the countdown was put on hold. But the concept of lower oil prices and the anticipated bump in consumer spending is giving the bulls hope.
Basically, each day that oil doesn�t spike right back to the mid $70�s seems to embolden our horned heroes. The bulls argue that it is quite positive that stocks have been able to hold onto early gains lately � even without any major catalysts to drive prices higher. Then they also suggest that the recent leadership in technology is worthy of note. The thinking is that investors are now looking ahead to valuations based on 2007 estimates (something that traditionally begins after Labor Day) and that there are values to be found in the tech arena.
So with investors apparently willing to take a bit more risk, stocks moved up again on Wednesday. The S&P 500 finds itself just about 0.5% from the high for the year, while the NASDAQ moved back above its 200 day moving average. And although volume was a bit lower than Tuesdays, the volume totals were still respectable and breadth was positive by better than 2 to 1.
However, we need to remember that the key to the market going forward is still the economic data. No one is really sure whether or not the economy will land softly after two years of rate hikes, an oil shock, and an end to the housing boom. So it is probably a good idea to avoid donning the party hat at this point since the bulls will have to get through a report on Retail Sales this morning, the CPI on Friday, and then a Fed meeting next Tuesday.
Turning to this morning, we�ve got some data to sift through. On the world stage, Germany�s IFW Institute said that they expect the ECB to raise rates a couple more times before year-end and that rates will finish out 2006 at around 3.5%. The IMF cut its growth forecast for the US economy from 3.3% to 2.9% and cited a slowing housing market as the primary reason. The IMF then raised their growth estimates for China and India.
Looking at this morning�s domestic data, the report on Retail Sales came in better than expected. Sales for August rose by +0.2% when a drop of the same amount had been expected. And when you take out the sales of autos, the numbers were a smidge below the consensus. While this appears to be a positive report, stocks initially moved a little lower in reaction. This data could be a double-edged sword as the combination of better-than expected retail sales and lower gasoline could cause analysts to begin to worry about the Fed again. We wouldn�t worry too much about this at the moment, but it is something to keep in mind in the coming months.
Running through the rest of the pre-game indicators, the overseas markets are modestly higher for the most part. Gold futures creeping back toward the $600 level this morning and are quoted at $598.30 right now. Crude futures are also moving a little higher morning and are exchanging hands $0.32 higher at $64.29 at the moment. Interest rates are a little higher this morning with the 2-year currently quoted at 4.81% 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. are a little lower. The Dow futures are currently about 26 points below fair value, the S&Ps are down by -1.40, and the NASDAQ sports a drop of 1.50 at the moment.
Stocks �In Play� This Morning:
Sandisk (SNDK) � Piper Jaffray increases estimates
Applied Materials (AMAT) � Mentioned positively in Barron�s
Boeing (BA) � Downgraded at UBS
Cymer (CYMI) � Mentioned positively in Barron�s
Ralston Holdings (RAH) � Downgraded at AG Edwards
Fifth Third Bancorp (FITB) � Downgraded at BofA
Telefonica (TEF) � Downgraded at Bear Stearns
Cumulus Media (CMLS) � Downgraded at Citigroup
Teradyne (TER) � Removed from Focus List at Cowen
Symantec (SYMC) � Added to Focus List at Cowen
XM Satellite Radio (XMSR) � Upgraded at Credit Suisse
Akami Technologies (AKAM) � Upgraded at Deutsche Bank
Texas Instruments (TXN) � Coverage started with a Buy at Deutsche Bank
Express Scripts (ESRX) � Mentioned positively at FTN Midwest
Hansen Natural (HANS) � Added to Buy List at Goldman Sachs
Genentech (DNA) � Added to Focus 1 List at Merrill Lynch, Upgraded at Stifel Nicolaus
St. Joe (JOE) � Downgraded at Morgan Stanley, Wachovia
Bear Stearns (BSC) � Reports $3.02 vs. $2.87
Long positions in stocks mentioned: SNDK, AMAT, ESRX
** 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 morning. Grab those party hats because after a fourth straight day of rallying, the DJIA finds itself just 99 points away from the high for the year and only 207 points shy of the all-time high set in January 2000. And with the bulls this close to the Promised Land, you can rest assured that the countdown to new highs has begun.
Actually, this is a resumption of the countdown that began back in May. At that time, traders were celebrating the idea that the Fed would soon stop raising rates. Unfortunately, that call came into question soon after and the countdown was put on hold. But the concept of lower oil prices and the anticipated bump in consumer spending is giving the bulls hope.
Basically, each day that oil doesn�t spike right back to the mid $70�s seems to embolden our horned heroes. The bulls argue that it is quite positive that stocks have been able to hold onto early gains lately � even without any major catalysts to drive prices higher. Then they also suggest that the recent leadership in technology is worthy of note. The thinking is that investors are now looking ahead to valuations based on 2007 estimates (something that traditionally begins after Labor Day) and that there are values to be found in the tech arena.
So with investors apparently willing to take a bit more risk, stocks moved up again on Wednesday. The S&P 500 finds itself just about 0.5% from the high for the year, while the NASDAQ moved back above its 200 day moving average. And although volume was a bit lower than Tuesdays, the volume totals were still respectable and breadth was positive by better than 2 to 1.
However, we need to remember that the key to the market going forward is still the economic data. No one is really sure whether or not the economy will land softly after two years of rate hikes, an oil shock, and an end to the housing boom. So it is probably a good idea to avoid donning the party hat at this point since the bulls will have to get through a report on Retail Sales this morning, the CPI on Friday, and then a Fed meeting next Tuesday.
Turning to this morning, we�ve got some data to sift through. On the world stage, Germany�s IFW Institute said that they expect the ECB to raise rates a couple more times before year-end and that rates will finish out 2006 at around 3.5%. The IMF cut its growth forecast for the US economy from 3.3% to 2.9% and cited a slowing housing market as the primary reason. The IMF then raised their growth estimates for China and India.
Looking at this morning�s domestic data, the report on Retail Sales came in better than expected. Sales for August rose by +0.2% when a drop of the same amount had been expected. And when you take out the sales of autos, the numbers were a smidge below the consensus. While this appears to be a positive report, stocks initially moved a little lower in reaction. This data could be a double-edged sword as the combination of better-than expected retail sales and lower gasoline could cause analysts to begin to worry about the Fed again. We wouldn�t worry too much about this at the moment, but it is something to keep in mind in the coming months.
Running through the rest of the pre-game indicators, the overseas markets are modestly higher for the most part. Gold futures creeping back toward the $600 level this morning and are quoted at $598.30 right now. Crude futures are also moving a little higher morning and are exchanging hands $0.32 higher at $64.29 at the moment. Interest rates are a little higher this morning with the 2-year currently quoted at 4.81% 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. are a little lower. The Dow futures are currently about 26 points below fair value, the S&Ps are down by -1.40, and the NASDAQ sports a drop of 1.50 at the moment.
Stocks �In Play� This Morning:
Sandisk (SNDK) � Piper Jaffray increases estimates
Applied Materials (AMAT) � Mentioned positively in Barron�s
Boeing (BA) � Downgraded at UBS
Cymer (CYMI) � Mentioned positively in Barron�s
Ralston Holdings (RAH) � Downgraded at AG Edwards
Fifth Third Bancorp (FITB) � Downgraded at BofA
Telefonica (TEF) � Downgraded at Bear Stearns
Cumulus Media (CMLS) � Downgraded at Citigroup
Teradyne (TER) � Removed from Focus List at Cowen
Symantec (SYMC) � Added to Focus List at Cowen
XM Satellite Radio (XMSR) � Upgraded at Credit Suisse
Akami Technologies (AKAM) � Upgraded at Deutsche Bank
Texas Instruments (TXN) � Coverage started with a Buy at Deutsche Bank
Express Scripts (ESRX) � Mentioned positively at FTN Midwest
Hansen Natural (HANS) � Added to Buy List at Goldman Sachs
Genentech (DNA) � Added to Focus 1 List at Merrill Lynch, Upgraded at Stifel Nicolaus
St. Joe (JOE) � Downgraded at Morgan Stanley, Wachovia
Bear Stearns (BSC) � Reports $3.02 vs. $2.87
Long positions in stocks mentioned: SNDK, AMAT, ESRX
** 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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