David Moenning's Daily State of the Markets: 11/19

News vs. Views

Although it took some late-day expiration heroics from the bull camp, stocks finished a bit higher on Friday as positive company news in the tech sector wound up trumping the negative big-picture view of what the economy and the Fed might be doing in the next few months.

Traders came into Friday's option expiration event with the outcome of the week on the line and stocks having fallen in six of the last seven sessions. And while the bulls had briefly regained their confidence following Tuesday’s furious rally, by Friday, the worry about credit, the Fed, and the economy had created a rather nervous market environment.

While one day does not a trend make, the bulls went home Friday breathing a little easier in the knowledge that they had been able to produce a winning week, which, by the way, was just the second up week in the last five.

The key to the session wound up being that two positive news items in tech were able to overcome the cautious outlooks from FedEx (FDX), Starbucks (SBUX), Fannie Mae (FNM), and Kohl’s (KSS), as well as an unexpectedly weak report on Industrial Production and comments from not one but two Fed Governors who suggested that a rate cut may not be in the cards next month.

Speaking of the Fed, hopes for a third appearance of the Bernanke cavalry were squelched on Friday after Federal Reserve Governor Kroszner said that a rate cut would present “upside risks to inflation.” Not to be outdone, St. Louis Fed President William Poole chimed in with something equally as discouraging to the bulls. Therefore, it appears that Mr. Bernanke’s boys are trying talking down expectations of further rate cuts, so we should probably expect more of the same in the coming weeks.

But despite the negative overhang, Cisco's (CSCO) announcement that they were going to buy back $10 billion worth of stock and an upgrade of Hewlett Packard (HPQ) over at Morgan Stanley seemed to do the trick and induce some expiration-induced buying.

Turning to this morning, the worries over the big-picture view have returned after Goldman downgraded Citigroup (C) and said that the company will have to take additional write-downs in the vicinity of $15 Billion. And while we don’t have any economic data to review before the bell, we will get another look at the housing market via the NAHB Housing Market Index at 1:00 pm Eastern.

Running through the rest of the pre-game indicators; the overseas markets are lower across the board. Crude futures are heading higher with the latest quote showing the December contract up $0.91 to $94.75. Interest rates are a little lower this morning with the 10-yr trading at a yield of 4.14% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open down. The Dow futures are currently off by about 85 points; the S&Ps are down by about 11 points, while the NASDAQ looks to be about 21 points below fair value at the moment.

Stocks "In Play" This Morning:

Today's Earnings Before the Bell:

Lowe's (NYSE: LOW) – Reported $0.43 vs. $0.41, Reduces full-year guidance

News, Upgrades/Downgrades/Brokerage Research:

Apria Health (NYSE: AHC) – Upgraded at BofA
UBS (NYSE: UBS) – Downgraded at CIBC
Echostar (Nasdaq: DISH) – Upgraded at Citi
NYMEX Holdings (NYSE: NMX) – Upgraded at Citi
Fannie Mae (NYSE: FNM) – Downgraded at Friedman Billings
Citigroup (NYSE: C) – Downgraded at Goldman Sachs
Rohm & Haas (NYSE: ROH) – Added to Conviction Buy List at Goldman
Discover Financial Services (NYSE: DFS) – Downgraded at Goldman
Joy Global (Nasdaq: JOYG) – Upgraded at Goldman
Qualcomm (Nasdaq: QCOM) – Upgraded at JP Morgan
Tidewater (NYSE: TDW) – Upgraded at Lehman
Pitney Bowes (NYSE: PBI) – Upgraded at Merrill Lynch
Yahoo! (Nasdaq: YHOO) – Upgraded at Merrill Lynch
Laboratory Corp (NYSE: LH) – Upgraded at UBS
Caterpillar (NYSE: CAT) – Upgraded at UBS
Best Buy (NYSE: BBY) – Upgraded at Wachovia

Mr. Moenning holds Long positions in stocks mentioned: MER, CSCO, HPQ

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.

You May Also Be Interested In

• After-Hours Movers: AMAT, DLO, GLOB, YSS, ETON
• After-Hours Movers: CSCO, COHR, HLIT, CBRS, STUB, ENS