David Moenning's Daily State of the Markets: 2/27

Just about the time the bulls appeared to be poised to make a break for it to the upside, a batch of very big numbers from a variety of sources apparently caused them to lose their nerve. One might have thought that getting some details on the banking situation would have been a plus for the market this week. However, the bottom line is that it is still tough to look ahead when faced with the type of numbers we got yesterday.

For starters, while everybody knew that General Motors (GM) was going to lose money – a LOT of money – when you see an earnings report like this one, it takes your breath away. We won’t bore you with the gory details, but when a company the size of GM loses $9.65 per share, you know there are some very big numbers, as well as some very big problems, involved.

Investors were also treated to the Obama “budget blueprint” yesterday. The President’s new budget, which he claims will be break from the troubled past, totals some $3.6 Trillion dollars. While the budget for 2010 is filled with some very good ideas and admirable intentions including helping stabilize the banking system, ending the war in Iraq, providing national health care, and boosting a commitment to education, the concept of spending $3.6 Trillion dollars in a single year is mind boggling to say the least. And for those of you keeping score at home, the budget calls for spending $986,301,370 each and every day for the next fiscal year.

While we’re on the subject of the President’s budget, the stock market also appears to be troubled by the idea of raising taxes on the so-called wealthiest Americans during an economic crisis. In addition, one look at the health care sector tells you that the plans to provide health care for everyone is not considered to be a good thing for stocks of health care companies.

Then there were yesterday’s economic numbers. Everybody knows that the economy is bad and that the job market stinks. However, it is still disturbing to realize that continuing unemployment claims for the last week soared by 114,000 to a record 5,112,000 people. And then, initial jobless claims rose by 36,000 to 667,000, which was the most since October 1982.

On the housing front, although the numbers don’t fit into this morning’s theme, the tally of homes sold continues to be the problem. In short, the number of new homes sold fell for the sixth straight month. The report showed that new home sales slumped -10.2% in January to a 309,000 annual rate, which is the lowest level since at least 1963. And while it can be argued that potential buyers had been waiting on the Obama stimulus proposals, which included a tax credit for first-time home buyers, the problem is that the declining trend of new home sales does not appear to be moderating at this point.

Turning to this morning, we’ve got some additional numbers to look at. By now, we all know that the fourth quarter GDP wasn’t exactly good. However, this morning’s data shows that the economy slowed at a rate of -6.2% in the fourth quarter, which was below the estimates for a decline of -5.4 and well off the initial report of -3.8%.

However, the big news this morning is that Citi (C) reached a deal with the government to convert the preferred stock recently injected into the bank into common. While the move is supposed to upgrade the bank’s capital position, investors are now more than a little concerned about who’s next and that the situation is still spiraling downward.

Running through the rest of the pre-game indicators, with the exception of Japan, the major foreign markets are down across the board. Crude futures are lower with the latest quote showing oil trading down by $2.14 to $43.08. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.93%, while overnight LIBOR is at 0.36% and the yield on the 3-month T-Bill is trading at 0.26%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to another rough open. The Dow futures are currently off by about 150 points; the S&P’s are down by about 19 points, while the NASDAQ looks to be about 20 points below fair value at the moment.

Stocks “In Play” This Morning:

Yesterday’s Earnings After the Bell:

Autodesk (Nasdaq: ADSK) – Reported $0.31 vs. $0.21
Bio Rad Labs (NYSE: BIO) – Reported $0.98 vs. $0.90
Covanta Holdings (NYSE: CVA) – Reported $0.22 vs. $0.25
Deckers Outdoor Corp (Nasdaq: DECK) – Reported $4.05 vs. $3.95
Dell (Nasdaq: DELL) – Reported $0.29 vs. $0.28
Fannie Mae (NYSE: FNM) – Reported -$4.47 vs. -$2.69
Gap Inc (NYSE: GPS) – Reported $0.34 vs. $0.32
Hansen Natural (Nasdaq: HANS) – Reported -$0.25 vs. $0.42
Kohls (NYSE: KSS) – Reported $1.10 vs. $1.02
Novell (Nasdaq: NOVL) – Reported $0.07 vs. $0.06
Public Storage (NYSE: PSA) – Reported $1.39 vs. $1.27
SBA Communications (Nasdaq: SBAC) – Reported -$0.18 vs. -$0.10
Southwestern Energy (NYSE: SWN) – Reported $0.30 vs. $0.32
Titanium Metals (NYSE: TIE) – Reported $0.19 vs. $0.18

Today’s Earnings Before the Bell:

AES Corp (NYSE: AES) – Reported $0.18 vs. $0.25
Calpine Corp (NYSE: CPN) – Reported -$0.27 vs. -$0.08
Interpublic Group (NYSE: IPG) – Reported $0.39 vs. $0.28
Magellan Health Services (Nasdaq: MGLN) – Reported $0.61 vs. $0.55
Warner Chilcott Ltd (Nasdaq: WCRX) – Reported $0.18 vs. $0.37
Aqua America (NYSE: WTR) – Reported $0.19 vs. $0.20

Today’s Corporate News, Upgrades/Downgrades/Brokerage Research:
Energizer Holdings (NYSE: ENR) – Upgraded at Bank of America Merrill
SLM Corp (NYSE: SLM) – Downgraded at Barclays
Chesapeake Energy (NYSE: CHK) – Upgraded at Calyon Securities
Packaging Corp (NYSE: PKG) – Downgraded at Deutsche Bank
O’Reilly Automotive (Nasdaq: ORLY) – Downgraded at Deutsche Bank
Chicos FAS (NYSE: CHS) – Upgraded at Friedman Billings Ramsey
Principal Financial Group (NYSE: PFG) – Added to Conviction Sell list at Goldman
Federated Investors (NYSE: FII) – Downgraded at Goldman
Paychex (Nasdaq: PAYX) – Downgraded at Goldman
Rio Tinto (NYSE: RTP) – Downgraded at Goldman
Anglo American (Nasdaq: AAUK) – Upgraded at Goldman
NII Holdings (Nasdaq: NIHD) – Downgraded at Piper Jaffray
Genworth Financial (NYSE: GNW) – Rating cut at S&P
Hartford Financial Services (NYSE: HFG) – Rating cut at S&P
Lincoln National (NYSE: LNC) – Rating cut at S&P
MetLife (NYSE: MET) – Rating cut at S&P
Prudential (NYSE: PRU) – Rating cut at S&P
Adobe Systems (Nasdaq: ADBE) – Downgraded at Wachovia

Disclosure: Mr. Moenning and/or related firms hold long positions in: none

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.TopStockPortfolios.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

• Rubrik IPO: 5 key things to know
• Deutsche Bank Upgrades Medical Properties Trust (MPW) to Hold, 'Debt Maturity Likely Resolved Until At Least 2025'
• Netflix's subscribers, TSMC, Tesla upside - what's moving markets