David Moenning's Daily State of the Markets: 08/09

Learning >From the Volatility

It was yet another wild ride on Wall Street yesterday afternoon. But for the third day in a row, the bulls went home happy. However, while the day got started on an upbeat note from Cisco Systems (NASDAQ: CSCO), our heroes in horns had quite a scare thrown at them in the final hour as the DJIA went from +190 to -30 and then back to +153 - all in just 90 minutes.

John Chambers of Cisco Systems told the bulls exactly what they wanted to hear yesterday morning before the bell. It wasn't so much that Cisco had once again figured out a way to beat the estimates by a penny, but rather the comment the perennially upbeat CEO offered regarding the economy. Although Mr. Chambers is traditionally a "glass is half full" kind of guy, when he said that this is "the best global economy he's ever seen in his career," people sat up and took notice.

Then when you toss in some not-as-dire-as-we-thought comments from a homebuilder or two and soothing words from both President Bush and Secretary of State Paulson, traders began to realize that the big-picture global growth story is likely to trump the short-term difficulties in the credit market.

So, with an hour and a half left in the day, anybody who had taken any defensive action was kicking themselves for falling victim to their emotions. But then, out of nowhere, stocks started to move steadily lower. Every tick was down and it felt like the buyers had just disappeared.

As it turned out, the buyers had indeed taken a step back because a rumor started to make the rounds that Goldman Sachs (NYSE: GS) was going to preannounce to the downside after the bell. This was enough to bring fear back to the forefront of traders' minds and within an hour, the day's gains had evaporated and the Dow was seeing red.

However, with less than 15 minutes left in the session, Goldman told CNBC that the rumors were not true. Then, before you could blink, stocks were blasting higher again. And when it was all said and done, the bulls could boast about a third straight day of gains as the Dow finished 153 points higher.

What we learned from yet another day of violent swings is that while we've got a nice rebound on our hands right now, there remains an underlying uneasiness about the problems in the credit market. In short, investors just don't know what else might be lurking out there and will sell on any hint of more bad news.

Turning to this morning, word that three BNP funds in Europe have suspended redemptions due to the "complete evaporation of liquidity in segments of the US markets" has put fear and uncertainty back into the mix. The fact that funds can't get pricing on certain types of mortgage backed securities has stocks moving down hard in the early going.

Running through the rest of the pre-game indicators, with the exception of Japan, foreign markets are lower across the board. In the oil pits, crude futures are moving down as the summer driving season winds down and the latest quote is off $0.55 to $71.60. Interest rates are lower this morning with the yield on the 10-year currently trading at 4.79%. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a rough open at the present time. The Dow futures are currently off by 115 points; the S&P's are lower by about 15 points, while the NASDAQ looks to be about 12 points below fair value at the moment.

Stocks "In Play" This Morning:

Yesterday's Earnings After the Bell:

American Intl Group (NYSE: AIG) - Reported $1.77 vs. $1.62
News Corp (NYSE: NWS.A) - Reported $0.28 vs. $0.28

Today's Earnings Before the Bell:

Archstone Smith (NYSE: ASN) - Reported $0.45 vs. $0.57
Cardinal Health (NYSE: CAH) - Reported $0.89 vs. $0.86
Dynegy (NYSE: DYN) - Reported $0.08 vs. $0.05
Holly Corp (NYSE: HOC) - Reported $2.84 vs. $2.43
Nordic American Tankers (NYSE: NAT) - Reported $0.78 vs. $0.66
Urban Outfitters (NASDAQ: URBN) - Reported $0.19 vs. $0.19
Vonage (NYSE: VG) - Reported <$0.12> vs. <$0.34>

News, Upgrades/Downgrades/Brokerage Research:*

Alcoa (NYSE: AA) - Upgraded at Friedman Billings
UnitedHealth Group (NYSE: UNH) - Upgraded at Goldman Sachs
Sunoco (NYSE: SUN) - Upgraded at Goldman Sachs
Hess Corp (NYSE: HES) - Upgraded at Goldman Sachs
NBTY Inc (NYSE: NTY) - Upgraded at JP Morgan Eaton (NYSE: ETN) - Upgraded at JP Morgan
Marathon Oil (NYSE: MRO) - Upgraded at Lehman Brothers
Forest Labs (NYSE: FRX) - Upgraded at Merrill Lynch
American Financial Group (NYSE: AFG) - Upgraded at Merrill Lynch
Humana (NYSE: HUM) - Upgraded at Merrill Lynch
Wellcare Group (NYSE: WCG) - Downgraded at Merrill Lynch
Mattel (NYSE: MAT) - Upgraded at Piper Jaffray
Chesapeake Energy (NYSE: CHK) - Downgraded at Wachovia

Mr. Moenning holds Long positions in stocks mentioned: CSCO

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.

You May Also Be Interested In

• Midday movers: Netflix, Super Micro fall; Paramount Global gains
• After-hours movers: United Airlines, J.B. Hunt, and more
• After-hours movers: Alcoa rises; Equifax and Las Vegas Sands fall