David Moenning's Daily State of the Markets: 1/14

Big Blue to the Rescue?

Here's a link to listen to an Audio Version of the report:

There's really no way to sugar coat it; Wall Street got slammed again on Friday as just about every single report that hit the wires caused traders to lose faith in the idea that the economy will be able to come out of the credit mess unscathed.

Although we got word from yet another FOMC member that the Fed will continue to act decisively on rates, the news flow on Friday was too much for the bulls to overcome. As we've been saying, despite what appears to be coordinated Fedspeak at the moment, the fear right now is that things may be getting away from Bernanke's boys.

For starters, we got word that Merrill Lynch (NYSE: MER) continues to find a billion here and a billion there that will need to be written off. The latest estimate is that Mother Merrill is going to have to admit to another $15 Billion in subprime problems. In addition, UBS (NYSE: UBS) came out and said that they really can't put a number on their problems. Thus, it is becoming very evident that the "kitchen sink" reports that had been all the rage last quarter were anything but.

The next problem traders struggled with on Friday was the growing evidence that the consumer may be starting to struggle. We got profit warnings from American Express (NYSE: AXP) and Tiffany's (NYSE: TIF), which doesn’t say much about the so-called high-end consumer. We heard that Capital One (NYSE: COF) reduced their guidance for the quarter due to, yep, you guessed it, slowing consumer spending. And finally, even McDonalds (NYSE: MCD), which has been a rock star in the arena of global growth lately, spoke of slowing sales comparisons.

Even the buyout (or should we say, bailout) of Countrywide Financial (NYSE: CFC) wound up being a bit discouraging. While M&A deals usually are a positive for the market, this time, the price of the deal was actually below the market price, which left little room for enthusiasm.

Looking ahead, with the indices now sitting at their lows, the earnings parade will begin to roll in earnest this week. The question of the day is what corporate America will have to say about their outlook for the future. Will companies use the lousy environment to sandbag the future? Or will we hear that things outside of financials are just fine, thank you?

Turning to this morning, IBM (NYSE: IBM) put up some positive numbers as the company earned $2.80, which was $0.20 better than the consensus estimate and then had decent things to say about their year. This has pushed Big Blue higher by 9% in the pre-market and perhaps even created some hope going forward.

Running through the rest of the pre-game indicators; the overseas markets are mixed as Asia was lower and Europe is higher across the board. Crude futures are higher so far with the latest quote showing the February contract higher by $1.06 to $93.75. Interest rates are little changed with the 10-yr trading at a yield of 3.81% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking up. The Dow futures are currently ahead by about 100 points; the S&Ps are up by about 9, while the NASDAQ looks to be about 21 points above fair value at the moment.

Stocks "In Play" This Morning:

Today’s Earnings Before the Bell:

Intl Business Machines (NYSE: IBM) – Reported $2.80 vs. $2.60

News, Upgrades/Downgrades/Brokerage Research:

Apple (Nasdaq: AAPL) – Estimates increased at Bank of America
Telecom Italia (NYSE: TI) – Downgraded at Bear Stearns
Con-Way (NYSE: CNW) – Upgraded at Bear Stearns
Heartland Express (Nasdaq: HTLD) – Upgraded at Bear Stearns
Knight Transportation (NYSE: KNX) – Upgraded at Bear Stearns
Constellation Energy (NYSE: CEG) – Added to Top Pick list at Citi
Under Armour (NYSE: UA) – Upgraded at Citi
Sears Holdings (Nasdaq: SHLD) – Downgraded at Credit Suisse, Goldman Sachs
Home Depot (NYSE: HD) – Upgraded at Credit Suisse
Lowes (NYSE: LOW) – Upgraded at Credit Suisse
Northwest Airlines (NYSE: NWA) – Upgraded at Credit Suisse
RF Microdevices (Nasdaq: RFMD) – Upgraded at Deutsche Bank
Frontier Oil (NYSE: FTO) – Upgraded at Friedman Billings
Sunoco (NYSE: SUN) – Downgraded at Friedman Billings
Infosys (Nasdaq: INFY) – Downgraded at Goldman Sachs
General Mills (NYSE: GIS) – Upgraded at JP Morgan
Express Scripts (Nasdaq: ESRX) – Downgraded at JP Morgan
POSCO (NYSE: PKX) – Upgraded at Merrill Lynch
Aeropostale (NYSE: ARO) – Downgraded at Merrill Lynch
Automatic Data Processing (NYSE: ADP) – Downgraded at UBS
Hewitt Assoc (NYSE: HEW) – Downgraded at UBS

Mr. Moenning holds Long positions in stocks mentioned: CEG, HEW, ESRX

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

• Martin Marietta prices $5.5 billion in senior notes to fund acquisition
• Savers Value Village launches secondary offering of 15M shares
• After-Hours Movers: SPCX, AMD, ANET, PINS, APPS, UPST, ZETA, BKNG, LCID, CPNG, MTCH