David Moenning's Daily State of the Markets: 06/18
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Fed Friendly Again?
Good morning. Stocks were higher for the third day in a row on Friday as traders received bond and Fed-friendly news on both the inflation and economic fronts. The news eased fears that the Fed would be forced to raise rates in the future and put a bid under the stock and bond markets.
Stocks have been rallying on the idea that we've seen the worst of the surge in bond yields. And while the jury is still out on this question, Friday's inflation data confirmed the fact that there does not appear to be any inflation brewing in the system at the present time.
Although the headline CPI came in higher than expected on the back of a 5.4% jump in energy last month, the Core Rate actually came in below expectations at just +0.1% (or +0.149% when the rounding is removed). And on a year-over-year basis, the Core Rate fell to 2.2% from 2.3%, which is the lowest level in 14 months.
In addition to the better than expected inflation news, traders also got word that both the Consumer Sentiment and Industrial Production data came in a little on the light side. In short, these reports confirm that the economy is performing no better than expectations and actually supports the idea of a Fed easing at some point down the road.
So with yields falling and much of the fear removed from the bond market, stocks continued to rally and the bulls regained control of the game from a short-term perspective. And after all the fretting and volatility seen over the past two weeks, the major indices now find themselves right back to where they started as the Dow begins the week just 37 points shy of its all-time high.
However, let's not forget that while stocks have put away fears over interest rates and are very close to their all-time highs, yields remain above 5% and could threaten the health of the stock market and the economy if they begin to rise again. So, while it is okay to be leaning bullish, it's probably not a good idea to simply forget about the action in the bond pits.
Turning to this morning, we don't have any economic news to review before the bell. However, it would appear that Merger Monday is back as a handful of deals are keeping traders buzzing. In addition, the bulls have nice gains in Asia to work with and the futures are a bit higher in the pre-market.
Running through the rest of the pre-game indicators, the foreign markets are mostly higher. Gold futures are moving up this morning by $3.10 to $661.80.
In the oil pits, crude futures are moving down $0.55 with the latest quote at $67.45. Interest rates are moving down this morning with the yield on the 10-year currently trading at 5.14%. And finally, with about an hour before the bell, stock futures in the U.S. are looking higher. The Dow futures are currently up 43 points; the S&P's are almost 5 points above board, while the NASDAQ looks to be about 2 points above fair value at the moment.
Stocks "In Play" This Morning:
News, Upgrades/Downgrades/Brokerage Research:*
Andrew Corp (NASDAQ: ANDW) - Downgraded at Banc of America
Coventry Health Care (NYSE: CVH) - Downgraded at Bear Stearns
Ingersoll Rand (NYSE: IR) - Upgraded at Bear Stearns
Cigna (NYSE: CI) - Added to Conviction Buy List at Goldman Sachs
Amerigroup (NYSE: AGP) - Upgraded at Goldman Sachs
Arch Coal (NYSE: ACI) - Downgraded at Goldman Sachs
Halliburton (NYSE: HAL) - Downgraded at Goldman Sachs
Symantec (NASDAQ: SYMC) - Upgraded at Goldman Sachs
Tektronix (NYSE: TEK) - Upgraded at JP Morgan
Gamestop (NYSE: GME) - Upgraded at JP Morgan
Crown Castle (NYSE: CCI) - Upgraded at Morgan Stanley
American Tower (NYSE: AMT) - Downgraded at Morgan Stanley
US Steel (NYSE: X) - Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: MS, GS, X, CI
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.
Good morning. Stocks were higher for the third day in a row on Friday as traders received bond and Fed-friendly news on both the inflation and economic fronts. The news eased fears that the Fed would be forced to raise rates in the future and put a bid under the stock and bond markets.
Stocks have been rallying on the idea that we've seen the worst of the surge in bond yields. And while the jury is still out on this question, Friday's inflation data confirmed the fact that there does not appear to be any inflation brewing in the system at the present time.
Although the headline CPI came in higher than expected on the back of a 5.4% jump in energy last month, the Core Rate actually came in below expectations at just +0.1% (or +0.149% when the rounding is removed). And on a year-over-year basis, the Core Rate fell to 2.2% from 2.3%, which is the lowest level in 14 months.
In addition to the better than expected inflation news, traders also got word that both the Consumer Sentiment and Industrial Production data came in a little on the light side. In short, these reports confirm that the economy is performing no better than expectations and actually supports the idea of a Fed easing at some point down the road.
So with yields falling and much of the fear removed from the bond market, stocks continued to rally and the bulls regained control of the game from a short-term perspective. And after all the fretting and volatility seen over the past two weeks, the major indices now find themselves right back to where they started as the Dow begins the week just 37 points shy of its all-time high.
However, let's not forget that while stocks have put away fears over interest rates and are very close to their all-time highs, yields remain above 5% and could threaten the health of the stock market and the economy if they begin to rise again. So, while it is okay to be leaning bullish, it's probably not a good idea to simply forget about the action in the bond pits.
Turning to this morning, we don't have any economic news to review before the bell. However, it would appear that Merger Monday is back as a handful of deals are keeping traders buzzing. In addition, the bulls have nice gains in Asia to work with and the futures are a bit higher in the pre-market.
Running through the rest of the pre-game indicators, the foreign markets are mostly higher. Gold futures are moving up this morning by $3.10 to $661.80.
In the oil pits, crude futures are moving down $0.55 with the latest quote at $67.45. Interest rates are moving down this morning with the yield on the 10-year currently trading at 5.14%. And finally, with about an hour before the bell, stock futures in the U.S. are looking higher. The Dow futures are currently up 43 points; the S&P's are almost 5 points above board, while the NASDAQ looks to be about 2 points above fair value at the moment.
Stocks "In Play" This Morning:
News, Upgrades/Downgrades/Brokerage Research:*
Andrew Corp (NASDAQ: ANDW) - Downgraded at Banc of America
Coventry Health Care (NYSE: CVH) - Downgraded at Bear Stearns
Ingersoll Rand (NYSE: IR) - Upgraded at Bear Stearns
Cigna (NYSE: CI) - Added to Conviction Buy List at Goldman Sachs
Amerigroup (NYSE: AGP) - Upgraded at Goldman Sachs
Arch Coal (NYSE: ACI) - Downgraded at Goldman Sachs
Halliburton (NYSE: HAL) - Downgraded at Goldman Sachs
Symantec (NASDAQ: SYMC) - Upgraded at Goldman Sachs
Tektronix (NYSE: TEK) - Upgraded at JP Morgan
Gamestop (NYSE: GME) - Upgraded at JP Morgan
Crown Castle (NYSE: CCI) - Upgraded at Morgan Stanley
American Tower (NYSE: AMT) - Downgraded at Morgan Stanley
US Steel (NYSE: X) - Downgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: MS, GS, X, CI
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.
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