David Moenning's Daily State of the Markets 02/01
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As January Goes...
Good morning. Fans of the January Barometer can now officially breathe a sigh of relief. Yesterday’s stock market celebration pushed the S&P 500 to a gain of 1.4% for the month, which, according to stock market lore, is a precursor of good things to come over the next eleven months. And after Wednesday’s nearly triple-digit gain, which pushed the Dow to within a whisker (0.08 points to be exact) of another fresh all-time high and the small-cap and mid-cap indices to new closing records, maybe there’s something to the barometer after all.
There was an awful lot of talk on Monday and Tuesday about traders being in waiting-on-the-Fed mode and almost everyone on the planet expected little from the gathering of Mr. Bernanke’s banking buddies. However, yesterday’s admission by the FOMC that Goldilocks is alive and well sent the bulls to their buy buttons and left the bears once again scrambling for cover.
Through their statement following the two-day meeting, the Fed provided stock market investors with a best-case scenario that even the boys in the bond pits appeared happy with. As expected, the Fed kept the Fed Funds rate steady at 5.25% for the fifth consecutive meeting. And this time, the vote was unanimous as Mr. Lacker, who had dissented at every meeting last year, is not a voting member of the FOMC this year.
Despite some minor reworking of a few key phrases in their statement, the outlook provided by the Fed is basically the same as we saw in December. In short, the FOMC expects the economy to “expand at a moderate pace” and they continue to expect inflationary pressures to “moderate over time.”
One of the keys that helped get the bulls fired up yesterday was Mr. Bernanke’s acknowledgment of “somewhat firmer economic growth and tentative signs of stabilization in the housing market.” From the bull’s perspective, he might as well have used the phrase “not too hot and not too cold.” And finally, the remark that “readings on core inflation have improved” certainly didn’t hurt anybody’s feelings.
To sum up, there was nothing in yesterday’s statement to change the view that Goldilocks is alive and well and that the Fed is unlikely to do much of anything any time soon.
Turning to this morning, the celebration of yet another Goldilocks sighting helped push overseas markets up substantially. This is helping to further champion the bulls’ cause in the early going, but before we get started trading here in the U.S., there is some economic data to review.
This morning the government reported that Personal Income and Spending was in line with expectations with gains of +0.5% and +0.7% respectively. On the inflation side of the report, the PCE Deflator came in with an annual increase of 2.3%, which was a tenth higher than expectations. However, more importantly, on a monthly basis, the PCE Core Deflator rose just 0.1%, which was less than expected.
Running through the rest of the pre-game indicators, as we mentioned, the foreign markets are a sea of green. Gold is trading up $4 to $661.90. In the oil pits, crude futures are down a smidge so far with the latest quote showing the March contract off $0.20 to $57.94. Interest rates are a little lower this morning with the yield on the 10-year currently trading at 4.79%. And finally, with 45 minutes before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently higher by almost 40 points; the S&P’s are 3.20 to the good, while the NASDAQ looks to be about 5 points above fair value at the moment.
Stocks “In Play” This Morning:
Archer Daniels Midland (ADM) – Reported $0.67 vs. $0.60
Astrazeneca (AZN) – Reported $0.95 vs. $0.95
Comcast (CMCSA) – Reported $0.21 vs. $0.24
CVS Corp (CVS) – Reported $0.49 vs. $0.44
Exxon Mobil (XOM) – Reported $1.69 vs. $1.51
Gilead Sciences (GILD) – Reported $0.78 vs. $0.68
Goodrich (GR) – Reported $0.46 vs. $0.32
Google (GOOG) – Reported $3.18 vs. $2.91
Hercules (HPC) – Reported $0.31 vs. $0.25
Starwood Hotels (HOT) – Reported $0.92 vs. $0.73
JDS Uniphase (JDSU) – Reported $0.17 vs. $0.11, Upgraded at CIBC, JMP Sec
Landstar (LSTR) – Reported $0.50 vs. $0.47
Marathon Oil (MRO) – Reported $2.38 vs. $2.25
Chubb Corp (CB) – Upgraded at AG Edwards
Hovnanian Ent (HOV) – Upgraded at BofA
Cooper Companies (COO) – Upgraded at Bear Stearns
US Steel (X) – Upgraded at Bear Stearns
SL Green (SLG) – Added to Conviction Buy List at Goldman Sachs
Altria (MO) – Removed from Conviction Buy List at Goldman Sachs
United Parcel Service (UPS) – Upgraded at Merrill Lynch
Eli Lilly (LLY) – Upgraded at Prudential
Dell Inc (DELL) – CEO Kevin Rollins resigns – Michael Dell returns, Upgraded at Merrill Lynch
Note: All earnings reports compared to Reuters 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.
Good morning. Fans of the January Barometer can now officially breathe a sigh of relief. Yesterday’s stock market celebration pushed the S&P 500 to a gain of 1.4% for the month, which, according to stock market lore, is a precursor of good things to come over the next eleven months. And after Wednesday’s nearly triple-digit gain, which pushed the Dow to within a whisker (0.08 points to be exact) of another fresh all-time high and the small-cap and mid-cap indices to new closing records, maybe there’s something to the barometer after all.
There was an awful lot of talk on Monday and Tuesday about traders being in waiting-on-the-Fed mode and almost everyone on the planet expected little from the gathering of Mr. Bernanke’s banking buddies. However, yesterday’s admission by the FOMC that Goldilocks is alive and well sent the bulls to their buy buttons and left the bears once again scrambling for cover.
Through their statement following the two-day meeting, the Fed provided stock market investors with a best-case scenario that even the boys in the bond pits appeared happy with. As expected, the Fed kept the Fed Funds rate steady at 5.25% for the fifth consecutive meeting. And this time, the vote was unanimous as Mr. Lacker, who had dissented at every meeting last year, is not a voting member of the FOMC this year.
Despite some minor reworking of a few key phrases in their statement, the outlook provided by the Fed is basically the same as we saw in December. In short, the FOMC expects the economy to “expand at a moderate pace” and they continue to expect inflationary pressures to “moderate over time.”
One of the keys that helped get the bulls fired up yesterday was Mr. Bernanke’s acknowledgment of “somewhat firmer economic growth and tentative signs of stabilization in the housing market.” From the bull’s perspective, he might as well have used the phrase “not too hot and not too cold.” And finally, the remark that “readings on core inflation have improved” certainly didn’t hurt anybody’s feelings.
To sum up, there was nothing in yesterday’s statement to change the view that Goldilocks is alive and well and that the Fed is unlikely to do much of anything any time soon.
Turning to this morning, the celebration of yet another Goldilocks sighting helped push overseas markets up substantially. This is helping to further champion the bulls’ cause in the early going, but before we get started trading here in the U.S., there is some economic data to review.
This morning the government reported that Personal Income and Spending was in line with expectations with gains of +0.5% and +0.7% respectively. On the inflation side of the report, the PCE Deflator came in with an annual increase of 2.3%, which was a tenth higher than expectations. However, more importantly, on a monthly basis, the PCE Core Deflator rose just 0.1%, which was less than expected.
Running through the rest of the pre-game indicators, as we mentioned, the foreign markets are a sea of green. Gold is trading up $4 to $661.90. In the oil pits, crude futures are down a smidge so far with the latest quote showing the March contract off $0.20 to $57.94. Interest rates are a little lower this morning with the yield on the 10-year currently trading at 4.79%. And finally, with 45 minutes before the bell, stock futures in the U.S. are looking to open higher. The Dow futures are currently higher by almost 40 points; the S&P’s are 3.20 to the good, while the NASDAQ looks to be about 5 points above fair value at the moment.
Stocks “In Play” This Morning:
Archer Daniels Midland (ADM) – Reported $0.67 vs. $0.60
Astrazeneca (AZN) – Reported $0.95 vs. $0.95
Comcast (CMCSA) – Reported $0.21 vs. $0.24
CVS Corp (CVS) – Reported $0.49 vs. $0.44
Exxon Mobil (XOM) – Reported $1.69 vs. $1.51
Gilead Sciences (GILD) – Reported $0.78 vs. $0.68
Goodrich (GR) – Reported $0.46 vs. $0.32
Google (GOOG) – Reported $3.18 vs. $2.91
Hercules (HPC) – Reported $0.31 vs. $0.25
Starwood Hotels (HOT) – Reported $0.92 vs. $0.73
JDS Uniphase (JDSU) – Reported $0.17 vs. $0.11, Upgraded at CIBC, JMP Sec
Landstar (LSTR) – Reported $0.50 vs. $0.47
Marathon Oil (MRO) – Reported $2.38 vs. $2.25
Chubb Corp (CB) – Upgraded at AG Edwards
Hovnanian Ent (HOV) – Upgraded at BofA
Cooper Companies (COO) – Upgraded at Bear Stearns
US Steel (X) – Upgraded at Bear Stearns
SL Green (SLG) – Added to Conviction Buy List at Goldman Sachs
Altria (MO) – Removed from Conviction Buy List at Goldman Sachs
United Parcel Service (UPS) – Upgraded at Merrill Lynch
Eli Lilly (LLY) – Upgraded at Prudential
Dell Inc (DELL) – CEO Kevin Rollins resigns – Michael Dell returns, Upgraded at Merrill Lynch
Note: All earnings reports compared to Reuters 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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