David Moenning's Daily State of the Markets 06/28
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Fear of 50 (x2)
Good morning. Monday�s merger mania, which helped push the Dow to a gain of 56 points didn�t last long as stocks succumbed to fear yesterday and wound up with a triple-digit loss. While it was a rather light day in terms of news, it appeared that the slightly better than expected economic reports coupled with increasing chatter of not one, but two rate increases of 50 bps was to blame for the sudden change of direction.
As we�ve discussed recently, while the idea of the Fed raising rates by 50bps tomorrow might strike fear in the hearts of the investing public, the pros know that such a move would signal a pause. Or would it? Yesterday, the buzz in the market centered on the idea that Ben �Tough Guy� Bernanke might decide to raise rates by 0.5% on Thursday and then come back for a repeat performance in August.
Although most economists scoff at the idea as being irresponsible and, more importantly, not supported by the data, whenever markets are in waiting mode, it doesn�t take much to send traders scurrying in either direction. And with most buyers sitting on their hands right now, the bear team took the ball and ran with it yesterday.
Stocks initially slumped on the back of better-than expected reports from Existing Home Sales and Consumer Confidence. The relatively positive economic data suggests that neither the consumer nor the housing market is currently in dire straits, which helped foster the idea that the Fed can continue to raise rates.
Existing home sales for May did, in fact, fall from their April levels. However, the decline of -1.2% was less than the -1.8% that analysts had projected. And on a year-over-year basis, sales have fallen 6.6%, which is the biggest drop in 11 years. However, as expected, price appreciation continues to slow as the gain in home prices on a national basis is now down to the 4%, which is the slowest pace since the fall of 2001.
The Conference Board�s Consumer Confidence Index also came in a bit above expectations. The Index rose by 1 point in June to 105.7, which was higher than the consensus of 104. In addition, May was revised higher by 1.4 points. Improved sentiment towards business conditions and job prospects helped fuel the gains.
We should also take note of an issue that seems to always be lurking � oil prices. Crude futures rose for the sixth consecutive session on concerns over gasoline supplies and finished at $71.94. A tanker spill in Louisiana has blocked an important tanker channel and has caused ConocoPhillips to ask the government for a loan of 500,000 barrels from the Strategic Reserves. While the incident is relatively minor, it reminds investors that we are one major storm or mishap away from a shortage.
Turning to this morning, there is once again no economic news to review before the bell and once again, traders are likely to spend the vast majority of the day waiting on the Fed. However, it is notable that oil prices continue to rise and any further increase from here is likely to attract attention once the Fed hoopla is over.
Running through the pre-game indicators, overseas markets are mixed and with the exception of Hong Kong, which followed Wall Street lower, are little changed. Gold is moving up by $2.60 and is trading at $587 at the moment. As we mentioned, oil is higher this morning on continued supply concerns and August crude futures are currently up by $0.19 to $72.11. Interest rates are quiet this morning with the 2-year currently trading at 5.23% while the 10-yr is quoted at 5.21% right now. And finally, with about an hour before the bell, stock futures in the U.S. are heading up a smidge. The Dow futures are currently ahead by 12 points; the S&Ps are up by 2.80, and the NASDAQ is sporting a gain of almost 2 points.
Stocks �In Play� This Morning:
BE Aerospace (BEAV) � Upgraded at Jefferies
MasterCard (MA) � Mentioned positively at Credit Suisse
Hess Corp (HES) � Upgraded at Merrill Lynch
Goldman Sachs (GS) � Upgraded at Merrill Lynch
ACE Ltd (ACE) � Mentioned positively in Barron�s
CNET Networks (CNET) � Rec�d subpoena regarding granting of options
Nike (NKE) � Reports $1.39 vs. $1.39
Marvell Technology (MRVL) � Mentioned positively at UBS
Flextronics (FLEX) � Mentioned positively at BofA
Conagra Foods (CAG) � Reports $0.32 vs. $0.29
Altera (ALTR) � Downgraded at Citigroup
Ashland (ASH) � Removed from focus list at Credit Suisse
Univision Comm (UVN) � Upgraded at JP Morgan
Terex (TEX) � Upgraded at JP Morgan
Genentech (DNA) � Upgraded at Rodman & Renshaw
Express Scripts (ESRX) � Upgraded at Susquehanna
Hewitt Associates (HEW) � Upgraded at Wachovia
Positions in stocks mentioned: GS
** 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. Monday�s merger mania, which helped push the Dow to a gain of 56 points didn�t last long as stocks succumbed to fear yesterday and wound up with a triple-digit loss. While it was a rather light day in terms of news, it appeared that the slightly better than expected economic reports coupled with increasing chatter of not one, but two rate increases of 50 bps was to blame for the sudden change of direction.
As we�ve discussed recently, while the idea of the Fed raising rates by 50bps tomorrow might strike fear in the hearts of the investing public, the pros know that such a move would signal a pause. Or would it? Yesterday, the buzz in the market centered on the idea that Ben �Tough Guy� Bernanke might decide to raise rates by 0.5% on Thursday and then come back for a repeat performance in August.
Although most economists scoff at the idea as being irresponsible and, more importantly, not supported by the data, whenever markets are in waiting mode, it doesn�t take much to send traders scurrying in either direction. And with most buyers sitting on their hands right now, the bear team took the ball and ran with it yesterday.
Stocks initially slumped on the back of better-than expected reports from Existing Home Sales and Consumer Confidence. The relatively positive economic data suggests that neither the consumer nor the housing market is currently in dire straits, which helped foster the idea that the Fed can continue to raise rates.
Existing home sales for May did, in fact, fall from their April levels. However, the decline of -1.2% was less than the -1.8% that analysts had projected. And on a year-over-year basis, sales have fallen 6.6%, which is the biggest drop in 11 years. However, as expected, price appreciation continues to slow as the gain in home prices on a national basis is now down to the 4%, which is the slowest pace since the fall of 2001.
The Conference Board�s Consumer Confidence Index also came in a bit above expectations. The Index rose by 1 point in June to 105.7, which was higher than the consensus of 104. In addition, May was revised higher by 1.4 points. Improved sentiment towards business conditions and job prospects helped fuel the gains.
We should also take note of an issue that seems to always be lurking � oil prices. Crude futures rose for the sixth consecutive session on concerns over gasoline supplies and finished at $71.94. A tanker spill in Louisiana has blocked an important tanker channel and has caused ConocoPhillips to ask the government for a loan of 500,000 barrels from the Strategic Reserves. While the incident is relatively minor, it reminds investors that we are one major storm or mishap away from a shortage.
Turning to this morning, there is once again no economic news to review before the bell and once again, traders are likely to spend the vast majority of the day waiting on the Fed. However, it is notable that oil prices continue to rise and any further increase from here is likely to attract attention once the Fed hoopla is over.
Running through the pre-game indicators, overseas markets are mixed and with the exception of Hong Kong, which followed Wall Street lower, are little changed. Gold is moving up by $2.60 and is trading at $587 at the moment. As we mentioned, oil is higher this morning on continued supply concerns and August crude futures are currently up by $0.19 to $72.11. Interest rates are quiet this morning with the 2-year currently trading at 5.23% while the 10-yr is quoted at 5.21% right now. And finally, with about an hour before the bell, stock futures in the U.S. are heading up a smidge. The Dow futures are currently ahead by 12 points; the S&Ps are up by 2.80, and the NASDAQ is sporting a gain of almost 2 points.
Stocks �In Play� This Morning:
BE Aerospace (BEAV) � Upgraded at Jefferies
MasterCard (MA) � Mentioned positively at Credit Suisse
Hess Corp (HES) � Upgraded at Merrill Lynch
Goldman Sachs (GS) � Upgraded at Merrill Lynch
ACE Ltd (ACE) � Mentioned positively in Barron�s
CNET Networks (CNET) � Rec�d subpoena regarding granting of options
Nike (NKE) � Reports $1.39 vs. $1.39
Marvell Technology (MRVL) � Mentioned positively at UBS
Flextronics (FLEX) � Mentioned positively at BofA
Conagra Foods (CAG) � Reports $0.32 vs. $0.29
Altera (ALTR) � Downgraded at Citigroup
Ashland (ASH) � Removed from focus list at Credit Suisse
Univision Comm (UVN) � Upgraded at JP Morgan
Terex (TEX) � Upgraded at JP Morgan
Genentech (DNA) � Upgraded at Rodman & Renshaw
Express Scripts (ESRX) � Upgraded at Susquehanna
Hewitt Associates (HEW) � Upgraded at Wachovia
Positions in stocks mentioned: GS
** 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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