David Moenning's Daily State of the Markets: 09/24

The Glass is Half-Full Again

Although the session was rather uneventful from a headline standpoint, Friday’s action did clarify that traders now view the glass as being half-full again. Other than a solid earnings report from Oracle (ORCL) and a modest drop in oil prices, there were few catalysts available to really encourage any buying. Yet, with a triple-witch expiration Friday on hand, there was definitely some buying going on as stocks basically reversed the pullback from Thursday.

So, what do we attribute Friday’s better-than 50 point gain to? In short, we’re going to say that what we’re seeing is a sea change in sentiment, which is thanks, in most part, to Gentle Ben’s preemptive strike against future economic weakness.

With the Fed on the case, the doom and gloom scenario is suddenly gone. Sure, housing still stinks and investing in mortgage companies continues to be a bad idea at this time. But other than that, we haven’t seen the much in the way of economic weakness. We haven’t seen the expected blowups in the hedge fund community. We haven’t seen the banking system freeze up or any bank failures. And we haven’t seen liquidity dry up and blow away. (Yes, the deals are being re-priced, but it is important to note that deals are getting done right now.)

What we have seen is data that shows the economy is faring pretty well so far. We’ve also seen two encouraging inflation numbers as both the headline PPI and CPI numbers dropped in August. Thus, the argument can easily be made that the Fed has done the right thing by acting aggressively to stop the possibility of the credit crunch and the mortgage mess becoming a contagion that infects the entire economy.

So, other than an inflated volume day due to an expiration event, what we saw on Friday was the realization that things aren’t all that bad in the stock market. And with the start of the fourth quarter looming, you can bet that there are more than a few managers who might be experiencing some performance anxiety at the present time.

Turning to this morning, other than the potential for a strike at GM and the ongoing concerns about the greenback, things are looking decent in the early going. We don’t have any economic data to review before the opening bell, but the calendar will heat up later in the week.

Running through the rest of the pre-game indicators, the overseas markets are mixed as most Asian markets were higher, while the European markets are slogging around sideways. Crude futures are down some this morning with the latest quote off $0.61 to $81.01. Interest rates are little changed this morning and the 10-yr is trading at a yield of 4.66% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open a smidge higher. The Dow futures are currently ahead by about 20 points; the S&Ps are flat relative to fair value, and the NASDAQ looks to be about 3 points above fair value at the moment.

Stocks "In Play" This Morning:

News, Upgrades/Downgrades/Brokerage Research:

Myriad Genetics (NASDAQ: MYGN) – Target Increased at BofA
Autodesk (NASDAQ: ADSK) – Estimates and target increased at BofA
EMC Corp (NYSE: EMC) – Upgraded at Bear Stearns, Citi
Barclays PLC (NYSE: BCS) – Downgraded at Citi
Apple (NASDAQ: AAPL) – Target increased at Citi
Timken (NYSE: TKR) – Initiated Buy at Citi
Red Hat (NYSE: RHT) – Downgraded at Credit Suisse
Parker Hannifin (NYSE: PH) – Downgraded at Friedman Billings
Las Vegas Sands (NYSE: LVS) – Target Increased at Jefferies
Rockwell Automation (NYSE: ROK) – Downgraded at JP Morgan
Ciena Corp (NASDAQ: CIEN) – Target increased at Lehman
AMR Corp (NYSE: AMR) – Target lowered at Lehman
Motorola (NYSE: MOT) – Upgraded at RBC Capital
Reliance Steel (NYSE: RS) – Downgraded at UBS

Mr. Moenning holds Long positions in stocks mentioned: AAPL

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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