David Moenning's Daily State of the Markets: 10/04

Not Much To Do Yet

Stocks pulled back for a second straight day as there doesn't seem to be any real reason to do a lot of buying in front of Friday’s all-important employment report. In light of the fact that the Dow has now erased every inch of the more than 10% Credit Crisis Correction and even managed to hit a new all-time high on Monday, one can easily argue that the market has discounted all of the good news from the Fed’s rate cuts and will need additional input before moving on.

It is expected that the input traders are looking for will also come from the Fed. But, with Mr. Bernanke and Co. not meeting until Halloween, stocks are basically left up to their own devices until then.

Since there is a large contingent who feel that Monday’s blast to new all-time highs was primarily a short-covering event, the bears have been trying to make a game of it over the past two days. And although it doesn’t look like much on the scoreboard, the bears did manage to move the ball a little yesterday.

The news certainly helped our furry friends in their efforts. Morgan Stanley got things started with a downgrade in tech and the suggestion that there is a price war brewing in chips. Micron Technology (MU) then added fuel to the tech decline with a pretty crummy earnings report and a reduction in guidance.

On the economic front, it's all about jobs at the moment. ADP’s report on job growth before the bell yesterday suggested that Friday’s Employment report may not contain any surprises. However, this report hasn’t exactly been a stellar forecaster of the Labor Department’s findings so far this year.

Speaking of jobs, it is hard to be sure what traders are looking for from Friday’s report. If we get a strong employment report, stocks may slide on the idea that the economy is doing fine and thus, there is no need for the Fed to cut rates further. But, if we get an overly weak report, the argument will be that the economy is in trouble. Therefore, our assumption is that traders will be looking for a Goldilocks sighting on Friday.

Turning to this morning, we don’t have any major economic news to review before the bell. However, across the pond, both the Bank of England and the ECB left rates unchanged today, which was the expected outcome.

Running through the rest of the pre-game indicators, the overseas markets are mixed this morning Crude futures are down $0.43 so far with the latest quote at $79.51. Interest rates are higher this morning with the 10-yr trading at a yield of 4.57% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. look like they will try to open to the upside. The Dow futures are currently ahead by about 30 points; the S&Ps are up a little more than 2 points, while the NASDAQ looks to be about 2 points below fair value at the moment.

Stocks "In Play" This Morning:

Today's Earnings Before the Bell:

Family Dollar Stores (NYSE: FDO) – Reported $0.26 vs. $0.25
Marriott (NYSE: MAR) – Reported $0.31 vs. $0.30

News, Upgrades/Downgrades/Brokerage Research:

Weatherford Intl (NYSE: WFT) – Downgraded at BofA
Smith Intl (NYSE: SII) – Downgraded at BofA
SAP (NYSE: SAP) – Downgraded at Bernstein
National Semiconductor (NYSE: NSM) – Removed from Conviction Buy list at Goldman
Hansen Natural (Nasdaq: HANS) – Downgraded at Goldman Sachs
Rite Aid (NYSE: RAD) – Upgraded at HSBC

Mylan Labs (NYSE: MYL) – Upgraded at JP Morgan
Panera Bread (Nasdaq: PNRA) – Upgraded at JP Morgan
Motorola (NYSE: MOT) – Price target increased at Lehman
Ciena (Nasdaq: CIEN) – Downgraded at UBS
Intel (Nasdaq: INTC) – Initiated outperform at Wachovia
Broadcom (Nasdaq: BRCM) – Initiated outperform at Wachovia
Micron Technology (NYSE: MU) – Initiated outperform at Wachovia


Mr. Moenning holds Long positions in stocks mentioned: HANS

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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