David Moenning's Daily State of the Markets: 12/11
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Cuts Are Off the Table
Good Monday morning. Not only was Friday�s Employment report the most watched number of the week, the data took on added meaning as it was the last bit of information members of the FOMC would get before Tuesday�s December Fed meeting. And while the report didn�t produce any big surprises, it did have an impact on the market just the same.
To review, the report showed that the economy added 132,000 jobs in November, which was only modestly better than the expectations for 105,000 new jobs. However, both the September and October numbers were revised higher, which added another 42,000 jobs. Thus, the inflation hawks will argue that the report effectively showed job gains of 184,000.
Up until late in the week, the recent economic data had been coming in on the punk side. This led to speculation that the Fed would follow historical tendencies and cut rates sometime in the first half of 2007. And with bond yields sitting at their lowest levels since early January, the boys in the bond pits appeared to embrace this thesis.
At first glance, many analysts heralded Friday�s Employment report to be very Goldi-esque. However, with the Fed admittedly focused on wage pressures and the street�s line in the sand set somewhere around the 150,000 new jobs mark, one can easily argue that the report was actually a little hotter than expected. Thus, the data appears to have effectively taken any hope for a rate cut in the next six months off the table. The bond market seemed to agree with this view as the yield on the 10-year spiked up to the 4.55% level during Friday�s session.
Turning to stocks, after initially following bonds and the dollar lower, stock traders appeared to be heartened by new Treasury Secretary Henry Paulson�s comments around mid-morning. Paulson sounded upbeat on the state of the economy which helped the greenback stabilize and encouraged the bulls to do some buying. The holiday spirit as well as a drop in oil prices helped the major indices close with modest gains.
At the end of the day, it looks as if the report did little to change the big picture outlook. The Goldilocks scenario remains in play, inflation continues to be a non-factor, and the Fed doesn�t appear ready to make a move in either direction.
Turning to this morning, the pre-market activity is on the positive side so far as the usual Monday morning M&A activity reminds traders of the value in the market. There is no economic data before the bell, but we will get a peek at the Wholesale Inventory numbers at 10:00. But, the big economic data of the week, the CPI report, will have to wait until Friday.
Running through the rest of the pre-game indicators, the overseas markets are all higher before the open here in the U.S. Gold futures are a little lower again this morning and are quoted at $625 right now. Crude futures are lower this morning with the latest quote showing the January contract off $0.47 to $61.56. Interest rates are doing little higher this morning with the 10-yr currently trading with a yield of 4.55% right now. And finally, with little more than an hour before the bell, stock futures in the U.S. are looking to open a little higher. The Dow futures are currently ahead by about 28 points; the S&Ps are 2.60 ahead of breakeven, and the NASDAQ looks to be about 2 points above fair value at the moment.
Stocks �In Play� This Morning:
Federated Dept. Stores (FD) � Downgraded at BofA
Estee Lauder (EL) � Downgraded at BofA
AT&T (T) � Bear Stearns says merger could be completed by year-end
Biogen (BIIB) � Downgraded at Cowen
DirecTV (DTV) � Upgraded at Deutsche Bank
NYSE Group (NYX) � Target increased at Goldman Sachs
Intercontinental Exchange (ICE) � Target increased at Goldman Sachs
Adobe Systems (ADBE) � Upgraded at Jefferies
Autodesk (ADSK) � Downgraded at Jefferies
Wendy�s (WEN) � Downgraded at JP Morgan
Anadarko Petroleum (APC) � Upgraded at Merrill Lynch
Time Warner (TWX) � Upgraded at Prudential
Triad Hospitals (TRI) � Downgraded at Prudential
Health Net (HNT) � Downgraded at Prudential
Astrazeneca (AZN) � Downgraded at UBS
Steel Dynamics (STLD) � Downgraded at UBS
Long positions in stocks mentioned: MER, BSC, GS, ADBE
** 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. Not only was Friday�s Employment report the most watched number of the week, the data took on added meaning as it was the last bit of information members of the FOMC would get before Tuesday�s December Fed meeting. And while the report didn�t produce any big surprises, it did have an impact on the market just the same.
To review, the report showed that the economy added 132,000 jobs in November, which was only modestly better than the expectations for 105,000 new jobs. However, both the September and October numbers were revised higher, which added another 42,000 jobs. Thus, the inflation hawks will argue that the report effectively showed job gains of 184,000.
Up until late in the week, the recent economic data had been coming in on the punk side. This led to speculation that the Fed would follow historical tendencies and cut rates sometime in the first half of 2007. And with bond yields sitting at their lowest levels since early January, the boys in the bond pits appeared to embrace this thesis.
At first glance, many analysts heralded Friday�s Employment report to be very Goldi-esque. However, with the Fed admittedly focused on wage pressures and the street�s line in the sand set somewhere around the 150,000 new jobs mark, one can easily argue that the report was actually a little hotter than expected. Thus, the data appears to have effectively taken any hope for a rate cut in the next six months off the table. The bond market seemed to agree with this view as the yield on the 10-year spiked up to the 4.55% level during Friday�s session.
Turning to stocks, after initially following bonds and the dollar lower, stock traders appeared to be heartened by new Treasury Secretary Henry Paulson�s comments around mid-morning. Paulson sounded upbeat on the state of the economy which helped the greenback stabilize and encouraged the bulls to do some buying. The holiday spirit as well as a drop in oil prices helped the major indices close with modest gains.
At the end of the day, it looks as if the report did little to change the big picture outlook. The Goldilocks scenario remains in play, inflation continues to be a non-factor, and the Fed doesn�t appear ready to make a move in either direction.
Turning to this morning, the pre-market activity is on the positive side so far as the usual Monday morning M&A activity reminds traders of the value in the market. There is no economic data before the bell, but we will get a peek at the Wholesale Inventory numbers at 10:00. But, the big economic data of the week, the CPI report, will have to wait until Friday.
Running through the rest of the pre-game indicators, the overseas markets are all higher before the open here in the U.S. Gold futures are a little lower again this morning and are quoted at $625 right now. Crude futures are lower this morning with the latest quote showing the January contract off $0.47 to $61.56. Interest rates are doing little higher this morning with the 10-yr currently trading with a yield of 4.55% right now. And finally, with little more than an hour before the bell, stock futures in the U.S. are looking to open a little higher. The Dow futures are currently ahead by about 28 points; the S&Ps are 2.60 ahead of breakeven, and the NASDAQ looks to be about 2 points above fair value at the moment.
Stocks �In Play� This Morning:
Federated Dept. Stores (FD) � Downgraded at BofA
Estee Lauder (EL) � Downgraded at BofA
AT&T (T) � Bear Stearns says merger could be completed by year-end
Biogen (BIIB) � Downgraded at Cowen
DirecTV (DTV) � Upgraded at Deutsche Bank
NYSE Group (NYX) � Target increased at Goldman Sachs
Intercontinental Exchange (ICE) � Target increased at Goldman Sachs
Adobe Systems (ADBE) � Upgraded at Jefferies
Autodesk (ADSK) � Downgraded at Jefferies
Wendy�s (WEN) � Downgraded at JP Morgan
Anadarko Petroleum (APC) � Upgraded at Merrill Lynch
Time Warner (TWX) � Upgraded at Prudential
Triad Hospitals (TRI) � Downgraded at Prudential
Health Net (HNT) � Downgraded at Prudential
Astrazeneca (AZN) � Downgraded at UBS
Steel Dynamics (STLD) � Downgraded at UBS
Long positions in stocks mentioned: MER, BSC, GS, ADBE
** 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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