David Moenning's Daily State of the Markets: 10/16
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Happy Campers
Good Monday morning and welcome back. Friday�s economic data confirmed that the reports of the consumers� death may be greatly exaggerated. With falling gasoline prices and lower interest rates, the consumer is showing remarkable resiliency, which is something that is definitely not lost on stock traders. So with a decent report on Retail Sales and a better-than-expected reading from the University of Michigan�s Consumer Index, the bulls were able to push the Dow to yet another new all-time high.
While it was anything but a straight up affair, stocks advanced once again. But in reality, logic would dictate that the bears might have a shot at running with the ball in here somewhere. Stocks are overbought, the hoopla surrounding the Dow is getting a bit exuberant, and the move is beginning to take on a parabolic look on the charts. Thus, one might expect stocks to pull back on a day where the catalysts were not clear cut. But, this certainly wasn�t the case on Friday as the news that the consumer is a happy camper was all it took to move prices up once again.
The report on Retail Sales offered a headline that didn�t exactly instill confidence as sales fell by -0.4% in September, which was well below the consensus for an increase of +0.3%. But, when parsing the numbers, one found that the decline was attributable almost entirely to a 9.3% drop in the sale of gasoline. And when you stripped out the sales of autos and gasoline from the numbers, sales actually showed a broad-based increase of +0.8%.
In addition, the University of Michigan�s Consumer Sentiment Index rose by 6.9 points, which was the biggest one-month jump since December. The index�s reading of 92.3, was significantly better than the expectations for a reading of 86.5, and was the highest level since July 2005. The Current Conditions component of the report jumped 9.5 points � the most since January 2004 � and the Expectations Index popped higher by 5.2 points. Thus, it is easy to see that lower gasoline and heating costs are keeping the consumer in an upbeat mood.
The better economic data was once again reflected in the bond market as yields on the 10-year rose for the sixth time in the last seven sessions and finished at 4.81%. Remember that the yield was 4.55% on 9/25, which, at the time reflected the idea that the economy was weakening and that the Fed would need to soon reduce rates. This view has been all-but reversed over the past two weeks and therefore, with the market overbought, stock traders may begin to keep an eye on the bonds in the near-term.
Turning to this morning, traders may be a bit more cautious with the PPI numbers due out tomorrow and a barrage of tech earnings that is set to begin shortly. On the economic front, we�ve got a slate of Fed speakers on tap today with both St. Louis Fed President William Poole and Fed Chairman Bernanke speaking at 1:20 and then Janet Yellen is scheduled to speak at 3:40 pm.
The morning�s economic data came in a bit stronger than expected with the October Empire Manufacturing index being reported at 22.9, which was much stronger than expectations for a reading of 11.2. However, as expected, there has been little reaction to the news.
Running through the pre-game indicators, the major overseas markets are fractionally higher across the board. Gold futures are moving a little higher this morning and are quoted at $595.50 right now. Crude oil futures are currently off by $0.16 at $58.41 at the moment. Interest rates are little changed with the 2-year currently quoted at 4.87% while the 10-yr is trading with a yield of 4.80% right now. And finally, with an hour before the bell, stock futures in the U.S. are hovering around breakeven. The Dow futures are currently unchanged, the S&Ps are down -0.20, and the NASDAQ is sporting a gain of about 4 points.
Stocks �In Play� This Morning:
General Electric (GE) � Downgraded at Merrill Lynch
Johnson & Johnson (JNJ) � Mentioned positively in Barron�s
US Steel (X) � Mentioned positively in Barron�s
Monster Worldwide (MNST) � Mentioned positively in Barron�s
Aqua America (WTR) � Mentioned positively in Barron�s
Lennar (LEN) � Upgraded at BB&T Capital
Posco (PKX) � Downgraded at Bear Stearns
Harrah�s Ent (HET) � Downgraded at CIBC, Keybanc
Citrix Systems (CTXS) � Mentioned positively at Goldman Sachs
Frontier Oil (FTO) � Upgraded at Deutsche Bank
News Corp (NWS) � Upgraded at Goldman Sachs
Lowes (LOW) � Upgraded at Goldman Sachs
Viacom (VIA.B) � Downgraded at Goldman
Home Depot (HD) � Downgraded at Goldman
Alcoa (AA) � Upgraded at Prudential
Panera Bread (PNRA) � Downgraded at Raymond James
Amazon.com (AMZN) � Downgraded at ThinkEquity
Sandisk (SNDK) � Mentioned positively at WR Hambrecht
Apple Computer (AAPL) � Mentioned cautiously at Prudential
Long positions in stocks mentioned: JNJ, CTXS, MER, SNDK
** 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 Monday morning and welcome back. Friday�s economic data confirmed that the reports of the consumers� death may be greatly exaggerated. With falling gasoline prices and lower interest rates, the consumer is showing remarkable resiliency, which is something that is definitely not lost on stock traders. So with a decent report on Retail Sales and a better-than-expected reading from the University of Michigan�s Consumer Index, the bulls were able to push the Dow to yet another new all-time high.
While it was anything but a straight up affair, stocks advanced once again. But in reality, logic would dictate that the bears might have a shot at running with the ball in here somewhere. Stocks are overbought, the hoopla surrounding the Dow is getting a bit exuberant, and the move is beginning to take on a parabolic look on the charts. Thus, one might expect stocks to pull back on a day where the catalysts were not clear cut. But, this certainly wasn�t the case on Friday as the news that the consumer is a happy camper was all it took to move prices up once again.
The report on Retail Sales offered a headline that didn�t exactly instill confidence as sales fell by -0.4% in September, which was well below the consensus for an increase of +0.3%. But, when parsing the numbers, one found that the decline was attributable almost entirely to a 9.3% drop in the sale of gasoline. And when you stripped out the sales of autos and gasoline from the numbers, sales actually showed a broad-based increase of +0.8%.
In addition, the University of Michigan�s Consumer Sentiment Index rose by 6.9 points, which was the biggest one-month jump since December. The index�s reading of 92.3, was significantly better than the expectations for a reading of 86.5, and was the highest level since July 2005. The Current Conditions component of the report jumped 9.5 points � the most since January 2004 � and the Expectations Index popped higher by 5.2 points. Thus, it is easy to see that lower gasoline and heating costs are keeping the consumer in an upbeat mood.
The better economic data was once again reflected in the bond market as yields on the 10-year rose for the sixth time in the last seven sessions and finished at 4.81%. Remember that the yield was 4.55% on 9/25, which, at the time reflected the idea that the economy was weakening and that the Fed would need to soon reduce rates. This view has been all-but reversed over the past two weeks and therefore, with the market overbought, stock traders may begin to keep an eye on the bonds in the near-term.
Turning to this morning, traders may be a bit more cautious with the PPI numbers due out tomorrow and a barrage of tech earnings that is set to begin shortly. On the economic front, we�ve got a slate of Fed speakers on tap today with both St. Louis Fed President William Poole and Fed Chairman Bernanke speaking at 1:20 and then Janet Yellen is scheduled to speak at 3:40 pm.
The morning�s economic data came in a bit stronger than expected with the October Empire Manufacturing index being reported at 22.9, which was much stronger than expectations for a reading of 11.2. However, as expected, there has been little reaction to the news.
Running through the pre-game indicators, the major overseas markets are fractionally higher across the board. Gold futures are moving a little higher this morning and are quoted at $595.50 right now. Crude oil futures are currently off by $0.16 at $58.41 at the moment. Interest rates are little changed with the 2-year currently quoted at 4.87% while the 10-yr is trading with a yield of 4.80% right now. And finally, with an hour before the bell, stock futures in the U.S. are hovering around breakeven. The Dow futures are currently unchanged, the S&Ps are down -0.20, and the NASDAQ is sporting a gain of about 4 points.
Stocks �In Play� This Morning:
General Electric (GE) � Downgraded at Merrill Lynch
Johnson & Johnson (JNJ) � Mentioned positively in Barron�s
US Steel (X) � Mentioned positively in Barron�s
Monster Worldwide (MNST) � Mentioned positively in Barron�s
Aqua America (WTR) � Mentioned positively in Barron�s
Lennar (LEN) � Upgraded at BB&T Capital
Posco (PKX) � Downgraded at Bear Stearns
Harrah�s Ent (HET) � Downgraded at CIBC, Keybanc
Citrix Systems (CTXS) � Mentioned positively at Goldman Sachs
Frontier Oil (FTO) � Upgraded at Deutsche Bank
News Corp (NWS) � Upgraded at Goldman Sachs
Lowes (LOW) � Upgraded at Goldman Sachs
Viacom (VIA.B) � Downgraded at Goldman
Home Depot (HD) � Downgraded at Goldman
Alcoa (AA) � Upgraded at Prudential
Panera Bread (PNRA) � Downgraded at Raymond James
Amazon.com (AMZN) � Downgraded at ThinkEquity
Sandisk (SNDK) � Mentioned positively at WR Hambrecht
Apple Computer (AAPL) � Mentioned cautiously at Prudential
Long positions in stocks mentioned: JNJ, CTXS, MER, SNDK
** 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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