David Moenning's Daily State of the Markets: 11/20
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Imelda's Closet?
At this point in the game, the bulls have to be wondering just how many shoes are going to drop in this thing we call the credit crisis. Despite the fact that we now have a decent handle on the extent of the potential damage to banks and brokerage firms, it seems that each day brings a new concern to fret over.
For example, yesterday brought fresh fears that the subprime mess was spreading as a report from Swiss Re (RUKN.VX) showed that the company would take a writedown in excess of $1B related to its subprime exposure. Although the idea of writedowns is hardly anything new, this was the first such announcement from a major reinsurance firm. And the fact that the news came from Europe reminded investors that the subprime monster is not just a local issue here in the U.S.
Speaking of news from across the pond, Northern Rock (NRK.LN) became the latest disappointment as the troubled mortgage lender said that the recent expressions of interest in the company were at valuations materially below Friday's market close. In other words, the chances of a quick bailout for this subprime poster child is becoming less likely by the day.
The shoes also kept falling here in the US, as Goldman Sachs downgraded Citigroup (C) early in the session and estimated that that the company will incur additional writedowns in the coming quarters. This, of course, is above and beyond what Citi has disclosed thus far. Further, Goldman lowered earnings estimates across the board for the big investment banks. And in case you don’t follow such things, when Goldman speaks, people listen.
While worry over the housing market, the consumer, and the holiday shopping season don’t exactly qualify as a new shoes dropping in this dilemma, Lowe's (LOW) offered another somber take on the housing market yesterday with a disappointing third quarter earnings report. And when you couple the report with what we heard from Home Depot (HD) and the likes of JC Penney (JCP), it is fairly easy to take a negative stance on the shopping season.
The bears also have some technical action to crow about after yesterday’s 200 point rout. With the Dow and S&P 500 both closing below the recent lows, our furry friends now argue that a retest of the August lows is in order. And with the number of new 52-week lows expanding, it is getting tough to stay upbeat about the charts.
However, there is some encouraging action in the pre-market this morning that is causing the bulls to start talking about a holiday rally. First, Hewlett Packard’s (HPQ) report after the close was a positive as the company beat estimates and raised guidance. Next, China’s comments about the benefits of a stronger dollar are providing hopes that the greenback’s decline may be nearing an end. And finally, CNBC has reported several times on recent rumors that the Fed is currently holding discussions on how to deal with the global credit crisis.
Running through the rest of the pre-game indicators; the overseas markets are higher across the board Crude futures are heading higher again with the latest quote showing the December contract up $1.06 to $95.70. Interest rates are a little lower this morning with the 10-yr trading at a yield of 4.08% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open a bit higher. The Dow futures are currently ahead by about 50 points; the S&Ps are up by about 6 points, while the NASDAQ looks to be about 13 points above fair value at the moment.
Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Hewlett-Packard (NYSE: HPQ) – Reported $0.86 vs. $0.82, Raises guidance for 2008
Today’s Earnings Before the Bell:
Dicks Sporting Goods (NYSE: DKS) – Reported $0.10 vs. $0.06
Dillards Department Stores (NYSE: DDS) – Reported ($0.21) vs. ($0.14)
Freddie Mac (NYSE: FRE) – Reported ($3.29) vs. ($2.15)
Office Depot (NYSE: ODP) – Reported $0.43 vs. $0.40
Target (NYSE: TGT) – Reported $0.56 vs. $0.62, Authorizes $10B buyback
News, Upgrades/Downgrades/Brokerage Research:
Starbucks (Nasdaq: SBUX) – Downgraded at CIBC, – Upgraded at Friedman Billings
Wellcare Health Plans (NYSE: WCG) – Upgraded at CIBC
Google (Nasdaq: GOOG) – Target increased to $900 at Credit Suisse
Citigroup (NYSE: C) – Target decreased at Deutsche Bank
Crown Castle (NYSE: CCI) – Added to Conviction Buy list at Goldman Sachs
Cabot Oil & Gas (NYSE: COG) – Upgraded at Goldman Sachs
Hewlett Packard (NYSE: HPQ) – Target increased at Goldman Sachs
Safeway (NYSE: SWY) – Upgraded at Goldman Sachs
McAfee (NYSE: MFE) – Upgraded at Jefferies
Wynn Resorts (Nasdaq: WYNN) – Upgraded at Jefferies
Pepsico (NYSE: PEP) – Removed from Focus List at JP Morgan
Dollar Tree Stores (Nasdaq: DLTR) – Upgraded at Lehman
Under Armour (NYSE: UA) – Upgraded at UBS
Sasol Ltd (NYSE: SSL) – Upgraded at UBS
China Petroleum & Chemical (NYSE: SNP) – Upgraded at UBS
Exxon Mobil (NYSE: XOM) – Upgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: MER, JCP, HPQ
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.
At this point in the game, the bulls have to be wondering just how many shoes are going to drop in this thing we call the credit crisis. Despite the fact that we now have a decent handle on the extent of the potential damage to banks and brokerage firms, it seems that each day brings a new concern to fret over.
For example, yesterday brought fresh fears that the subprime mess was spreading as a report from Swiss Re (RUKN.VX) showed that the company would take a writedown in excess of $1B related to its subprime exposure. Although the idea of writedowns is hardly anything new, this was the first such announcement from a major reinsurance firm. And the fact that the news came from Europe reminded investors that the subprime monster is not just a local issue here in the U.S.
Speaking of news from across the pond, Northern Rock (NRK.LN) became the latest disappointment as the troubled mortgage lender said that the recent expressions of interest in the company were at valuations materially below Friday's market close. In other words, the chances of a quick bailout for this subprime poster child is becoming less likely by the day.
The shoes also kept falling here in the US, as Goldman Sachs downgraded Citigroup (C) early in the session and estimated that that the company will incur additional writedowns in the coming quarters. This, of course, is above and beyond what Citi has disclosed thus far. Further, Goldman lowered earnings estimates across the board for the big investment banks. And in case you don’t follow such things, when Goldman speaks, people listen.
While worry over the housing market, the consumer, and the holiday shopping season don’t exactly qualify as a new shoes dropping in this dilemma, Lowe's (LOW) offered another somber take on the housing market yesterday with a disappointing third quarter earnings report. And when you couple the report with what we heard from Home Depot (HD) and the likes of JC Penney (JCP), it is fairly easy to take a negative stance on the shopping season.
The bears also have some technical action to crow about after yesterday’s 200 point rout. With the Dow and S&P 500 both closing below the recent lows, our furry friends now argue that a retest of the August lows is in order. And with the number of new 52-week lows expanding, it is getting tough to stay upbeat about the charts.
However, there is some encouraging action in the pre-market this morning that is causing the bulls to start talking about a holiday rally. First, Hewlett Packard’s (HPQ) report after the close was a positive as the company beat estimates and raised guidance. Next, China’s comments about the benefits of a stronger dollar are providing hopes that the greenback’s decline may be nearing an end. And finally, CNBC has reported several times on recent rumors that the Fed is currently holding discussions on how to deal with the global credit crisis.
Running through the rest of the pre-game indicators; the overseas markets are higher across the board Crude futures are heading higher again with the latest quote showing the December contract up $1.06 to $95.70. Interest rates are a little lower this morning with the 10-yr trading at a yield of 4.08% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are looking to open a bit higher. The Dow futures are currently ahead by about 50 points; the S&Ps are up by about 6 points, while the NASDAQ looks to be about 13 points above fair value at the moment.
Stocks "In Play" This Morning:
Yesterday’s Earnings After the Bell:
Hewlett-Packard (NYSE: HPQ) – Reported $0.86 vs. $0.82, Raises guidance for 2008
Today’s Earnings Before the Bell:
Dicks Sporting Goods (NYSE: DKS) – Reported $0.10 vs. $0.06
Dillards Department Stores (NYSE: DDS) – Reported ($0.21) vs. ($0.14)
Freddie Mac (NYSE: FRE) – Reported ($3.29) vs. ($2.15)
Office Depot (NYSE: ODP) – Reported $0.43 vs. $0.40
Target (NYSE: TGT) – Reported $0.56 vs. $0.62, Authorizes $10B buyback
News, Upgrades/Downgrades/Brokerage Research:
Starbucks (Nasdaq: SBUX) – Downgraded at CIBC, – Upgraded at Friedman Billings
Wellcare Health Plans (NYSE: WCG) – Upgraded at CIBC
Google (Nasdaq: GOOG) – Target increased to $900 at Credit Suisse
Citigroup (NYSE: C) – Target decreased at Deutsche Bank
Crown Castle (NYSE: CCI) – Added to Conviction Buy list at Goldman Sachs
Cabot Oil & Gas (NYSE: COG) – Upgraded at Goldman Sachs
Hewlett Packard (NYSE: HPQ) – Target increased at Goldman Sachs
Safeway (NYSE: SWY) – Upgraded at Goldman Sachs
McAfee (NYSE: MFE) – Upgraded at Jefferies
Wynn Resorts (Nasdaq: WYNN) – Upgraded at Jefferies
Pepsico (NYSE: PEP) – Removed from Focus List at JP Morgan
Dollar Tree Stores (Nasdaq: DLTR) – Upgraded at Lehman
Under Armour (NYSE: UA) – Upgraded at UBS
Sasol Ltd (NYSE: SSL) – Upgraded at UBS
China Petroleum & Chemical (NYSE: SNP) – Upgraded at UBS
Exxon Mobil (NYSE: XOM) – Upgraded at UBS
Mr. Moenning holds Long positions in stocks mentioned: MER, JCP, HPQ
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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