David Moenning's Daily State of the Markets: 10/24

Tech Saves Tuesday, But...

In listening to the earnings reports this season, so far at least, there have been two common themes. First, international business continues to be strong, thanks in part to the falling dollar, while here in the U.S. things seem to be slowing down. And second, tech earnings have been better than expected across the board.

So, although the bears appear to have a lot of ammunition these days thanks to the slowdown here at home, record oil prices, a housing market that worsens daily, trouble in retail, and no real end to the subprime mess, it has been technology that has been keeping the bulls in business.

Apple (Nasdaq: AAPL) was the latest company to lend our heroes in horns a hand lately. With the market looking like it was ready to come apart at the seams, the company which is clearly the king of all things cool, simply blew away the already hyped earnings estimates. And in short, this argues that if Apple is selling more iPods, iPhones, and Macs than even the most optimistic analysts had expected, then things must not be too bad out there.

This is not to say that it’s been an easy road to profits on Wall Street lately. In short, the markets have been erratic and it is difficult to know which way the indices will head next from minute to minute.

Yesterday was a perfect example of this schizophrenic environment. Stocks opened higher on Apple’s blowout quarter and a little help from our friends overseas. But shortly after the open, there were reports of a large index seller hitting the market on word that Merrill’s write-down was going to be double expectations. This resurrected worries about whether we’ve seen the worst of the subprime and credit mess, and before you could fathom the impact of a company writing down $10 billion in a single quarter, the green screens were gone. (But to be fair, Merrill announced this morning that the write-down was closer to $8 billion.)

It also didn't help that Wal-Mart lowered its spending forecast, or that Coach (COH) is "concerned about retail traffic trends in North America," or that DuPont’s CEO said the company doesn’t see a recovery in the housing market until next year.

However, by the end of the day, the bulls somehow prevailed despite all of the negativity swirling around the markets. Perhaps it was the strength in tech. Perhaps it was the realization that the reports on housing and a slowing economy aren’t exactly new. Or maybe it was the expectation that Mr. Bernanke’s cavalry just might be getting ready to ride next week. But in any event, the markets ended higher and the bulls went home happy.

Turning to this morning once again we don’t have any economic data to review before the bell, but the earnings reports continue to roll in. And while Tech saved the day on Tuesday, it appears to be the source of the problem in the early going here this morning as investors don’t appear to be overly pleased with what Amazon (Nasdaq: AMZN), RF Micro (Nasdaq: RFMD), and Altera (Nasdaq: ALTR) had to say.

Running through the rest of the pre-game indicators; the overseas markets are fractionally mixed this morning. Crude futures are heading down a bit with the latest quote off $0.20 to $85.07. Interest rates are moving down this morning with the 10-yr trading at a yield of 4.38% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open lower. The Dow futures are currently off by about 67 points; the S&Ps are down by about 10 points, while the NASDAQ looks to be about 25 points below fair value at the moment.

Stocks “In Play” This Morning:

Yesterday’s Earnings After the Bell:

AFLAC (NYSE: AFL) – Reported $0.85 vs. $0.82
Altera (Nasdaq: ALTR) – Reported $0.20 vs. $0.20
Amazon.com (Nasdaq: AMZN) – Reported $0.19 vs. $0.18
CR Bard (NYSE: BCR) – Reported $0.93 vs. $0.92
Broadcom (Nasdaq: BRCM) – Reported $0.05 vs. $0.07
Chubb (NYSE: CB) – Reported $1.68 vs. $1.44
Centex (NYSE: CTX) – Reported ($5.26) vs. ($5.52)
Flextronics (Nasdaq: FLEX) – Reported $0.24 vs. $0.23
Juniper Networks (Nasdaq: JNPR) – Reported $0.22 vs. $0.21
Nabors Inds (NYSE: NBR) – Reported $0.76 vs. $0.72
Novellus Systems (Nasdaq: NVLS) – Reported $0.41 vs. $0.38
Panera Bread (Nasdaq: PNRA) – Reported $0.37 vs. $0.36
Qlogic (Nasdaq: QLGC) – Reported $0.19 vs. $0.14

Today’s Earnings Before the Bell:

Air Products (NYSE: APD) – Reported $1.17 vs. $1.15
Allegheny Technologies (NYSE: ATI) – Reported $1.88 vs. $1.86
Boeing (NYSE: BA) – Reported $1.44 vs. $1.24
CME Group (NYSE: CME) – Reported $4.31 vs. $4.12
Quest Diagnostics (NYSE: DGX) – Reported $0.77 vs. $0.76
Freeport-McMoRan (FCX) – Reported $2.52 vs. $2.28
Moody’s Corp (NYSE: MCO) – Reported $0.51 vs. $0.55
Merrill Lynch (NYSE: MER) – Reported ($2.85). vs. ($0.45)
National Oilwell Varco (NYSE: NOV) – Reported $1.02 vs. $0.94
Norfolk Southern (NYSE: NSC) – Reported $0.97 vs. $0.97
Occidental Petroleum (NYSE: OXY) – Reported $1.45 vs. $1.32
Tribune (NYSE: TRB) – Reported $0.38 vs. $0.26

News, Upgrades/Downgrades/Brokerage Research:

Wachovia (NYSE: WB) – Downgraded at BofA
CR Bard (NYSE: BCR) – Downgraded at Bear Stearns
Smith Intl (NYSE: SII) – Upgraded at Calyon
MGM Mirage (NYSE: MGM) – Target increased at Calyon
Amgen (Nasdaq: AMGN) – Upgraded at Credit Suisse
Weatherford Intl (NYSE: WFT) – Upgraded at Credit Suisse
Burlington Northern (NYSE: BNI) – Downgraded at Credit Suisse
Broadcom (Nasdaq: BRCM) – Downgraded at Deutsche Bank, Wachovia
Abbott Labs (NYSE: ABT) – Upgraded at Goldman Sachs
Boston Scientific (NYSE: BSX) – Downgraded at Goldman Sachs
Shaw Group (NYSE: SGR) – Upgraded at Goldman Sachs
Biogen Idec (Nasdaq: BIIB) – Downgraded at HSBC
Vodafone (NYSE: VOD) – Upgraded at JP Morgan
Blockbuster (NYSE: BBI) – Downgraded at JP Morgan
Astrazeneca (NYSE: AZN) – Downgraded at Merrill Lynch
Research in Motion (Nasdaq: RIMM) – Target increased at UBS

Mr. Moenning holds Long positions in stocks mentioned: MER, BIIB, AFL, JNPR, APD, FCX, MGM, NOV, 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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