David Moenning's Daily State of the Markets 07/06
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A Trifecta of Troubles
Good morning. Stocks retreated yesterday as traders returned to their desks to find a Trifecta of new issues to worry about. Less than a week after a dovish Fed statement gave the bulls a big lift, worries over a new record in oil prices, a new jobs report, and a new (well, relatively new) geopolitical issue caused the bulls to fumble the ball.
With oil reaching a new record over $75, a brand new economic report suggesting that the economy is creating a bunch of new jobs, and North Korea trying to bully its way to the concessions table, the bulls were simply unable to mount much of a defense and stocks gave back all of Monday�s gains.
Oil rallied above the old record high water mark on the usual worries of Iran and supplies. With the summer driving season upon us, there continues to be concern that shortages could spring up if any additional supply surprises occur. And on the subject of surprises, the fact that hurricane season is underway is forcing traders to keep one eye on the weather radar. Then there is the subject of Iran. While North Korea is attempting to attract some attention, it is the situation in Iran that wields the power in the oil pits. Iran�s latest move to delay a meeting with EU officials upped the tension level once again, which has contributed to the �risk premium� in oil prices. And when everything was said and done, crude for August delivery closed at $75.19.
The economic news also gave traders pause yesterday. With the market clearly in a mode where good news is actually bad news, the better than expected report on Factory Orders and a new employment survey from ADP, which was decidedly upbeat, definitely got some attention. Factory orders rose +0.7% in May, which was well above expectations for an increase of +0.3%.
In only its 3rd reporting period, a new employment report from ADP is quickly gaining traction with traders. And unfortunately for the bulls, yesterday�s ADP National Employment Report suggests that Friday�s jobs report may be much stronger than the consensus. Such an outcome would run counter to the Fed�s assessment of a slower economy and definitely opens the door for further rate hikes.
Finally, while North Korea�s long-range missile test was reportedly a dud, the fact that another nation isn�t playing nice with the global community gave traders pause yesterday. While no one really expects the U.S. to run over and start bombing military installations in North Korea, it doesn�t take much in the way of mental gymnastics to project that this situation could get messy in a hurry.
Turning to this morning, there is once again no economic news before the bell in the U.S. However, we will get reports on the ISM Non-Manufacturing Index as well as Pending Home Sales at 10:00 am. Across the pond, the ECB left interest rates unchanged as expected, which has helped support a rally in Europe.
Running through the rest of the pre-game indicators, with the exception of Japan the major overseas markets are sporting solid gains. Gold is moving a little lower this morning and is currently off by $3.40 to $626.30 at the moment. Oil is also a bit lower this morning with the August crude contract trading off by -$0.34 to $74.85 right now. Interest rates are moving down 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 a little higher. The Dow futures are currently ahead by 31 points; the S&Ps are up by 2.80, and the NASDAQ is sporting a gain of almost 5 points.
Stocks �In Play� This Morning:
Panera Bread (PNRA) � Reported June same store sales +3.9% vs. 3.1%
Echostar Comm (DISH) � Downgraded at Bear Stearns
Microchip Tech (MCHP) � Upgraded at Citigroup
Analog Devices (ADI) � Downgraded at Citigroup
Linear Technology (LLTC) � Downgraded at Citigroup
Maxim Integrated (MXIM) � Downgraded at Citigroup
UnumProvident (UNM) � Downgraded at Lehman
Masco (MAS) � Downgraded at Lehman
Par Pharma (PRX) � Target reduced at Piper Jaffray
Tibco Software (TIBX) � Upgraded at Merrill Lynch
Lennar (LEN) � Downgraded at BB&T Capital
Opsware (OPSW) � Mentioned positively at Jefferies
Kraft (KFT) � Downgraded at Merrill
JC Penney (JCP) � Reports June same store sales +4.3% vs. 3.0%
Positions in stocks mentioned: BSC, JCP
** 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. Stocks retreated yesterday as traders returned to their desks to find a Trifecta of new issues to worry about. Less than a week after a dovish Fed statement gave the bulls a big lift, worries over a new record in oil prices, a new jobs report, and a new (well, relatively new) geopolitical issue caused the bulls to fumble the ball.
With oil reaching a new record over $75, a brand new economic report suggesting that the economy is creating a bunch of new jobs, and North Korea trying to bully its way to the concessions table, the bulls were simply unable to mount much of a defense and stocks gave back all of Monday�s gains.
Oil rallied above the old record high water mark on the usual worries of Iran and supplies. With the summer driving season upon us, there continues to be concern that shortages could spring up if any additional supply surprises occur. And on the subject of surprises, the fact that hurricane season is underway is forcing traders to keep one eye on the weather radar. Then there is the subject of Iran. While North Korea is attempting to attract some attention, it is the situation in Iran that wields the power in the oil pits. Iran�s latest move to delay a meeting with EU officials upped the tension level once again, which has contributed to the �risk premium� in oil prices. And when everything was said and done, crude for August delivery closed at $75.19.
The economic news also gave traders pause yesterday. With the market clearly in a mode where good news is actually bad news, the better than expected report on Factory Orders and a new employment survey from ADP, which was decidedly upbeat, definitely got some attention. Factory orders rose +0.7% in May, which was well above expectations for an increase of +0.3%.
In only its 3rd reporting period, a new employment report from ADP is quickly gaining traction with traders. And unfortunately for the bulls, yesterday�s ADP National Employment Report suggests that Friday�s jobs report may be much stronger than the consensus. Such an outcome would run counter to the Fed�s assessment of a slower economy and definitely opens the door for further rate hikes.
Finally, while North Korea�s long-range missile test was reportedly a dud, the fact that another nation isn�t playing nice with the global community gave traders pause yesterday. While no one really expects the U.S. to run over and start bombing military installations in North Korea, it doesn�t take much in the way of mental gymnastics to project that this situation could get messy in a hurry.
Turning to this morning, there is once again no economic news before the bell in the U.S. However, we will get reports on the ISM Non-Manufacturing Index as well as Pending Home Sales at 10:00 am. Across the pond, the ECB left interest rates unchanged as expected, which has helped support a rally in Europe.
Running through the rest of the pre-game indicators, with the exception of Japan the major overseas markets are sporting solid gains. Gold is moving a little lower this morning and is currently off by $3.40 to $626.30 at the moment. Oil is also a bit lower this morning with the August crude contract trading off by -$0.34 to $74.85 right now. Interest rates are moving down 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 a little higher. The Dow futures are currently ahead by 31 points; the S&Ps are up by 2.80, and the NASDAQ is sporting a gain of almost 5 points.
Stocks �In Play� This Morning:
Panera Bread (PNRA) � Reported June same store sales +3.9% vs. 3.1%
Echostar Comm (DISH) � Downgraded at Bear Stearns
Microchip Tech (MCHP) � Upgraded at Citigroup
Analog Devices (ADI) � Downgraded at Citigroup
Linear Technology (LLTC) � Downgraded at Citigroup
Maxim Integrated (MXIM) � Downgraded at Citigroup
UnumProvident (UNM) � Downgraded at Lehman
Masco (MAS) � Downgraded at Lehman
Par Pharma (PRX) � Target reduced at Piper Jaffray
Tibco Software (TIBX) � Upgraded at Merrill Lynch
Lennar (LEN) � Downgraded at BB&T Capital
Opsware (OPSW) � Mentioned positively at Jefferies
Kraft (KFT) � Downgraded at Merrill
JC Penney (JCP) � Reports June same store sales +4.3% vs. 3.0%
Positions in stocks mentioned: BSC, JCP
** 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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