David Moenning's Daily State of the Markets: 11/27
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Price: $16.17 -0.8%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 3%
Revenue Growth %: +7.0%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 3%
Revenue Growth %: +7.0%
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Overmatched, Overwhelmed, and Overrun
In the early going yesterday, it looked as if the bulls might have recovered their long lost mojo. There was some anecdotal evidence that the consumer was indeed alive and shopping and the feeling was that maybe, just maybe the recent negativity might have been a little overdone.
However, the warm and fuzzy feeling didn’t last long as the bulls were simply overrun by their opponents with a very long list of bad news. For starters, there were the articles in both the Wall Street Journal and Fortune Magazine focusing on recession. Next, former Treasury Secretary Lawrence Summers wrote in the Financial Times that a recession in the U.S. appeared likely and that, of course, global growth would be significantly impacted – and not in a good way.
Next up, while Bernanke's Boys are busy talking about the need to stay vigilant against the threat of inflation, the FOMC acknowledged the need for liquidity and quietly pumped $8 Billion into the banking system yesterday morning.
Then the troubles with the banking sector began again. Although the news stories were numerous, the biggies involved Citigroup (C) and HSBC Holdings (HBC). Citigroup warned that it is looking to cut costs after a weekend article speculated on further subprime writedowns. HSBC Holdings (HBC) announced that it would need to bail out two of its funds and planned to move a mere $45 Billion around the books to help cover the problems. But the troubles at HBC didn’t stop there as Goldman downgraded the massive bank and estimated that there would be an additional $12 Billion in writedowns to come.
Still before lunch, Senator Charles Schumer, who happens to be a key member of the Senate finance and banking committee, decided to weigh in with his opinion on Countrywide Financial’s (CFC) dealings with the Federal Home Loan Bank. Senator Schumer questioned the loans being made to Countrywide, which, of course, sparked concerns about liquidity to the nation’s biggest lender as well as bankruptcy.
So, with the financials playing a game of how-low-can-they-go, worries over the state of the economy growing, and the Bernanke cavalry nowhere to be found, the bulls were simply overmatched in yesterday’s contest. The end result was a crushing decline of 237 points, which erased all of Friday’s little holiday bounce and took the Dow to a new low for cycle.
About the only positive the bulls were able to come up with is that none of the other major indices followed suit to new lows. However, we should point out that it would take less than a point to push the S&P past its August closing lows.
Turning to this morning, the bulls are getting an early lift from a faraway land as Abu Dhabi has confirmed that it will invest $7.5 Billion in Citigroup in exchange for convertible stock yielding 11% for the next 2-3 years. However, with two speeches from Fed Governors on tap this afternoon (Plosser at 12:20 pm and new Chicago Fed President Charles Evans at 1:30), and the realization that the bears have owned the afternoons lately, investors are keeping their enthusiasm curbed at the moment.
Running through the rest of the pre-game indicators; the overseas markets are lower across the board. Crude futures are also lower this morning with the latest quote showing the December contract off $2.02 to $95.68. Interest rates are a little higher this morning with the 10-yr trading at a yield of 3.87% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open a little higher. The Dow futures are well off their best levels of the morning but are currently ahead by about 20 points; the S&Ps are up by about 5 points, while the NASDAQ looks to be about 12 points above fair value at the moment.
Stocks "In Play" This Morning:
Today’s Earnings Before the Bell:
American Eagle Outfitters (NYSE: AEO) – Reported $0.45 vs. $0.45
Staples (Nasdaq: SPLS) – Reported $0.42 vs. $0.40
News, Upgrades/Downgrades/Brokerage Research:
Xerox (NYSE: XRX) – Initiated Buy at BofA
Pitney Bowes (NYSE: PBI) – Initiated Buy at BofA
Marathon Oil (NYSE: MRO) – Upgraded at Bear Stearns
Chevron (NYSE: CVX) – Upgraded at Bear Stearns
BP PLC (NYSE: BP) – Upgraded at Bear Stearns
Occidental Petroleum (NYSE: OXY) – Target increased at Citi
Barrick Gold (NYSE: ABX) – Added to Conviction Buy list at Goldman
Altria (NYSE: MO) – Added to Conviction Buy list at Goldman
Gilead Sciences (Nasdaq: GILD) – Added to Conviction Buy list at Goldman
TRW Automotive (NYSE: TRW) – Downgraded at Goldman
Borg Warner (NYSE: BWA) – Target reduced at Goldman
General Motors (NYSE: GM) – Target reduced at Goldman
Johnson Controls (NYSE: JCI) – Target reduced at Goldman
Target (NYSE: TGT) – Estimates reduced at Goldman
Bed Bath & Beyond (Nasdaq: BBBY) – Estimates reduced at Goldman
Dillards (NYSE: DDS) – Estimates reduced at Goldman
Dollar Tree Stores (Nasdaq: DLTR) – Estimates reduced at Goldman
OfficeMax (NYSE: OMX) – Estimates reduced at Goldman
Mylan Labs (NYSE: MYL) – Upgraded at Goldman
Adobe Systems (Nasdaq: ADBE) – Target reduced at Goldman
Macrovision (Nasdaq: MVSN) – Target reduced at Goldman
Dell (Nasdaq: DELL) – Estimates and target increased at WR Hambrecht
Mr. Moenning holds Long positions in stocks mentioned: MRO, CVX, OXY, GILD
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.
In the early going yesterday, it looked as if the bulls might have recovered their long lost mojo. There was some anecdotal evidence that the consumer was indeed alive and shopping and the feeling was that maybe, just maybe the recent negativity might have been a little overdone.
However, the warm and fuzzy feeling didn’t last long as the bulls were simply overrun by their opponents with a very long list of bad news. For starters, there were the articles in both the Wall Street Journal and Fortune Magazine focusing on recession. Next, former Treasury Secretary Lawrence Summers wrote in the Financial Times that a recession in the U.S. appeared likely and that, of course, global growth would be significantly impacted – and not in a good way.
Next up, while Bernanke's Boys are busy talking about the need to stay vigilant against the threat of inflation, the FOMC acknowledged the need for liquidity and quietly pumped $8 Billion into the banking system yesterday morning.
Then the troubles with the banking sector began again. Although the news stories were numerous, the biggies involved Citigroup (C) and HSBC Holdings (HBC). Citigroup warned that it is looking to cut costs after a weekend article speculated on further subprime writedowns. HSBC Holdings (HBC) announced that it would need to bail out two of its funds and planned to move a mere $45 Billion around the books to help cover the problems. But the troubles at HBC didn’t stop there as Goldman downgraded the massive bank and estimated that there would be an additional $12 Billion in writedowns to come.
Still before lunch, Senator Charles Schumer, who happens to be a key member of the Senate finance and banking committee, decided to weigh in with his opinion on Countrywide Financial’s (CFC) dealings with the Federal Home Loan Bank. Senator Schumer questioned the loans being made to Countrywide, which, of course, sparked concerns about liquidity to the nation’s biggest lender as well as bankruptcy.
So, with the financials playing a game of how-low-can-they-go, worries over the state of the economy growing, and the Bernanke cavalry nowhere to be found, the bulls were simply overmatched in yesterday’s contest. The end result was a crushing decline of 237 points, which erased all of Friday’s little holiday bounce and took the Dow to a new low for cycle.
About the only positive the bulls were able to come up with is that none of the other major indices followed suit to new lows. However, we should point out that it would take less than a point to push the S&P past its August closing lows.
Turning to this morning, the bulls are getting an early lift from a faraway land as Abu Dhabi has confirmed that it will invest $7.5 Billion in Citigroup in exchange for convertible stock yielding 11% for the next 2-3 years. However, with two speeches from Fed Governors on tap this afternoon (Plosser at 12:20 pm and new Chicago Fed President Charles Evans at 1:30), and the realization that the bears have owned the afternoons lately, investors are keeping their enthusiasm curbed at the moment.
Running through the rest of the pre-game indicators; the overseas markets are lower across the board. Crude futures are also lower this morning with the latest quote showing the December contract off $2.02 to $95.68. Interest rates are a little higher this morning with the 10-yr trading at a yield of 3.87% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open a little higher. The Dow futures are well off their best levels of the morning but are currently ahead by about 20 points; the S&Ps are up by about 5 points, while the NASDAQ looks to be about 12 points above fair value at the moment.
Stocks "In Play" This Morning:
Today’s Earnings Before the Bell:
American Eagle Outfitters (NYSE: AEO) – Reported $0.45 vs. $0.45
Staples (Nasdaq: SPLS) – Reported $0.42 vs. $0.40
News, Upgrades/Downgrades/Brokerage Research:
Xerox (NYSE: XRX) – Initiated Buy at BofA
Pitney Bowes (NYSE: PBI) – Initiated Buy at BofA
Marathon Oil (NYSE: MRO) – Upgraded at Bear Stearns
Chevron (NYSE: CVX) – Upgraded at Bear Stearns
BP PLC (NYSE: BP) – Upgraded at Bear Stearns
Occidental Petroleum (NYSE: OXY) – Target increased at Citi
Barrick Gold (NYSE: ABX) – Added to Conviction Buy list at Goldman
Altria (NYSE: MO) – Added to Conviction Buy list at Goldman
Gilead Sciences (Nasdaq: GILD) – Added to Conviction Buy list at Goldman
TRW Automotive (NYSE: TRW) – Downgraded at Goldman
Borg Warner (NYSE: BWA) – Target reduced at Goldman
General Motors (NYSE: GM) – Target reduced at Goldman
Johnson Controls (NYSE: JCI) – Target reduced at Goldman
Target (NYSE: TGT) – Estimates reduced at Goldman
Bed Bath & Beyond (Nasdaq: BBBY) – Estimates reduced at Goldman
Dillards (NYSE: DDS) – Estimates reduced at Goldman
Dollar Tree Stores (Nasdaq: DLTR) – Estimates reduced at Goldman
OfficeMax (NYSE: OMX) – Estimates reduced at Goldman
Mylan Labs (NYSE: MYL) – Upgraded at Goldman
Adobe Systems (Nasdaq: ADBE) – Target reduced at Goldman
Macrovision (Nasdaq: MVSN) – Target reduced at Goldman
Dell (Nasdaq: DELL) – Estimates and target increased at WR Hambrecht
Mr. Moenning holds Long positions in stocks mentioned: MRO, CVX, OXY, GILD
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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