David Moenning's Daily State of the Markets: 10/05
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Now THAT�s Soaring
Good morning. Yesterday, we were definitely guilty as charged of doing a little complaining about Tuesday�s move to a new record high on the close on the DJIA. While the headlines used the word �soaring� to describe the move to new highs, we noted that the momentum was lackluster and the troops didn�t follow suit, and thus, the result was less than impressive.
Well, as the saying goes, gripe and you shall receive � because the word �soaring� is a perfect adjective for yesterday�s blast higher. More evidence of a �soft landing� coupled with lower oil (well, for a while, anyway) and falling interest rates propelled the Dow higher by 123 points to, yes, that�s right, another new all-time high. And this time, the rest of the indices not only went along for the ride, they displayed some leadership tendencies. While the Dow registered a gain of +1%, the S&P rose +1.3% and the NASDAQ put up an impressive gain of +2.1%.
What�s more, volume was the strongest in more than three months, the breadth statistics showed that advancing stocks outnumbered declining stocks by a measure of almost 4 to 1, and the number of new highs expanded nicely. And finally, it is important to note that the troops followed the generals higher yesterday, as the Russell 2000, S&P Small Caps, and Mid Caps all posted gains in excess of +1.5%. Now THAT�s soaring.
The move was triggered by the view that the economy will experience a �soft landing� which, in English, means that while economic growth will slow and inflation will decline, the GDP should avoid dipping into negative territory.
It was the ISM Non-Manufacturing Report that got most of the credit for the newfound enthusiasm. The headline number for the economy�s services sector actually came in well below consensus estimates. However, the underlying components such as New Orders showed some strength and the prices index, which is a measure of inflation, fell to the lowest level in over three years. And in short, this type of report should keep the Fed from even thinking about returning to the hiking trail.
So with the inflation picture improving, the economy embracing its inner Goldilocks, and both interest rates and oil prices in a downtrend, investors have decided that there is a lot to like these days. Basically, lower oil and falling interest rates will keep the consumer happy and help thwart the negative impact of the decline in the housing market. And if the consumer is happy, then the holiday shopping season ought to be joyous and that bodes well for the economy, earnings, and stock prices.
Turning to this morning, while there are no major economic indicators to report today, there is a good deal of news to digest. First, OPEC has announced that it will immediately cut production by 1 million barrels a day. Next, while the Bank of England left interest rates unchanged, the ECB decided to bump up their rates by another 0.25% to 3.25%. And finally, retailers are reporting their September sales numbers, which, with the exception of Wal-Mart look to be pretty darned good.
Running through the pre-game indicators, overseas markets followed our move higher and are sporting solidly green screens. Gold futures are up about $8 this morning which can best be described as a rebound after the recent shellacking and are quoted at $575 right now. Crude oil futures are also moving up this morning on the OPEC announcement and are currently ahead by $1.17 to $60.58. Interest rates are a little higher right now, with the 2-year currently quoted at 4.60% while the 10-yr is trading with a yield of 4.58%. And finally, with an hour before the bell, stock futures in the U.S. are a trading a bit below fair value. The Dow futures are currently about 15 points under fair value, the S&Ps are negative by about 2, and the NASDAQ is about 6 points below fair value at the moment.
Stocks �In Play� This Morning:
Apple Computer (AAPL) � WSJ reports prosecutors looking at options practices
Goldman Sachs (GS) � Mentioned cautiously in Barron�s
Kohls (KSS) � Downgraded at Bear Stearns
Avon Products (AVP) � Downgraded at Bear Stearns
Molson Coors (TAP) � Downgraded at Bear Stearns
Shaw Group (SGR) � Downgraded at Citigroup
American Eagle Outfitters (AEOS) � Downgraded at Friedman, Billings
Assurant (AIZ) � Downgraded at Merrill Lynch
Forest Labs (FRX) � Downgraded at Merrill Lynch
Midas Group (MDS) � Upgraded at UBS
International Business Machines (IBM) � Mentioned cautiously at UBS
Marriott Intl (MAR) � Reported $0.34 vs. $0.30
JC Penney (JCP) � Raises guidance for the quarter
Long positions in stocks mentioned: KSS, MER, IBM, JCP
** 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. Yesterday, we were definitely guilty as charged of doing a little complaining about Tuesday�s move to a new record high on the close on the DJIA. While the headlines used the word �soaring� to describe the move to new highs, we noted that the momentum was lackluster and the troops didn�t follow suit, and thus, the result was less than impressive.
Well, as the saying goes, gripe and you shall receive � because the word �soaring� is a perfect adjective for yesterday�s blast higher. More evidence of a �soft landing� coupled with lower oil (well, for a while, anyway) and falling interest rates propelled the Dow higher by 123 points to, yes, that�s right, another new all-time high. And this time, the rest of the indices not only went along for the ride, they displayed some leadership tendencies. While the Dow registered a gain of +1%, the S&P rose +1.3% and the NASDAQ put up an impressive gain of +2.1%.
What�s more, volume was the strongest in more than three months, the breadth statistics showed that advancing stocks outnumbered declining stocks by a measure of almost 4 to 1, and the number of new highs expanded nicely. And finally, it is important to note that the troops followed the generals higher yesterday, as the Russell 2000, S&P Small Caps, and Mid Caps all posted gains in excess of +1.5%. Now THAT�s soaring.
The move was triggered by the view that the economy will experience a �soft landing� which, in English, means that while economic growth will slow and inflation will decline, the GDP should avoid dipping into negative territory.
It was the ISM Non-Manufacturing Report that got most of the credit for the newfound enthusiasm. The headline number for the economy�s services sector actually came in well below consensus estimates. However, the underlying components such as New Orders showed some strength and the prices index, which is a measure of inflation, fell to the lowest level in over three years. And in short, this type of report should keep the Fed from even thinking about returning to the hiking trail.
So with the inflation picture improving, the economy embracing its inner Goldilocks, and both interest rates and oil prices in a downtrend, investors have decided that there is a lot to like these days. Basically, lower oil and falling interest rates will keep the consumer happy and help thwart the negative impact of the decline in the housing market. And if the consumer is happy, then the holiday shopping season ought to be joyous and that bodes well for the economy, earnings, and stock prices.
Turning to this morning, while there are no major economic indicators to report today, there is a good deal of news to digest. First, OPEC has announced that it will immediately cut production by 1 million barrels a day. Next, while the Bank of England left interest rates unchanged, the ECB decided to bump up their rates by another 0.25% to 3.25%. And finally, retailers are reporting their September sales numbers, which, with the exception of Wal-Mart look to be pretty darned good.
Running through the pre-game indicators, overseas markets followed our move higher and are sporting solidly green screens. Gold futures are up about $8 this morning which can best be described as a rebound after the recent shellacking and are quoted at $575 right now. Crude oil futures are also moving up this morning on the OPEC announcement and are currently ahead by $1.17 to $60.58. Interest rates are a little higher right now, with the 2-year currently quoted at 4.60% while the 10-yr is trading with a yield of 4.58%. And finally, with an hour before the bell, stock futures in the U.S. are a trading a bit below fair value. The Dow futures are currently about 15 points under fair value, the S&Ps are negative by about 2, and the NASDAQ is about 6 points below fair value at the moment.
Stocks �In Play� This Morning:
Apple Computer (AAPL) � WSJ reports prosecutors looking at options practices
Goldman Sachs (GS) � Mentioned cautiously in Barron�s
Kohls (KSS) � Downgraded at Bear Stearns
Avon Products (AVP) � Downgraded at Bear Stearns
Molson Coors (TAP) � Downgraded at Bear Stearns
Shaw Group (SGR) � Downgraded at Citigroup
American Eagle Outfitters (AEOS) � Downgraded at Friedman, Billings
Assurant (AIZ) � Downgraded at Merrill Lynch
Forest Labs (FRX) � Downgraded at Merrill Lynch
Midas Group (MDS) � Upgraded at UBS
International Business Machines (IBM) � Mentioned cautiously at UBS
Marriott Intl (MAR) � Reported $0.34 vs. $0.30
JC Penney (JCP) � Raises guidance for the quarter
Long positions in stocks mentioned: KSS, MER, IBM, JCP
** 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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