David Moenning's Daily State of the Markets: 02/20
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Never Fear, Private Equity is Here
Good morning. Although there has been a great deal of talk lately about the market being overbought and thus susceptible to some sort of corrective action, the bulls have simply refused to yield the right of way. It doesn’t seem to matter what the news brings, there has always been a way to spin the data to the plus side. For example, during Friday’s session we got disappointing results from the housing market, what amounts to a warning from Microsoft, and a much larger than expected drop in Consumer Sentiment. And yet, the Dow managed to finish in the green for the fourth straight day and closed at another new all-time high.
Forget the fact that Housing Starts plummeted 14.3% in January, to the lowest rate in almost 10 years. Never mind that the University of Michigan’s Consumer Sentiment Index was nearly 3 points below consensus. And I guess we can just call Mr. Ballmer’s discussion of the outlook for Vista a case of sandbagging because through it all the Dow, Russell 2000, and S&P Small and Mid Cap indices all trudged on to new high ground.
At the beginning of the month, it appeared that the correction was finally here. Over the first 7 trading days of February, the indices made nary a new high and the Dow actually wound up declining 120 points (or -0.97%) from its high set on February 1. And while the 3 straight down days that ended on the 8th seem like ancient history now, we do recall that there was a slight amount of uncertainty in the air at that time.
But never fear dear investors because Private Equity is here. With a long weekend offering some additional time to mull things over, the question of why stocks have not experienced even a mild pullback in more than 7 months kept surfacing. Think about this for a moment. The Dow has not pulled back from its string of new highs by even -2% since mid-July. How can this be?
From where we sit at least, the answer appears to be the massive bag of money that Private Equity keeps tossing around these days. With billions sitting in Buffet-like hedge funds just looking for a home, it seems that no deal is too big right now. Simply put, it is the willingness of Private Equity Funds and companies looking to merge that has propped stocks up on a daily basis.
This morning alone we’ve got no fewer than seven deals going. Not the least of which is the merger of XM and Sirius Satellite Radio as well as word that DaimlerChrysler is looking to shorten their name by beginning the auctioning process for Chrysler.
Turning to this morning’s pre-market activity, after last week’s deluge of economic data, investors will have to look elsewhere for stimuli as the calendar is considerably quieter this week. While we will get the CPI and LEI numbers on Thursday, that’s about it for the week and there is no data scheduled for release today.
On the news front, it will be interesting to see how the world reacts to Iran’s rejection of the UN deadline to stop enriching uranium. The country’s President has stated that it is the country’s right to go nuclear and that there’s nothing we can do about it. Hmmm…
Running through the pre-game indicators, the major overseas markets are a little lower. Gold futures are trading down $2.80 to $670 right now. In the oil pits, crude futures are off $1.15 this morning with the latest quote at $58.24. Interest rates are a little higher this morning with the yield on the 10-year currently trading at 4.71%. And finally, with an hour before the bell, stock futures in the U.S. are looking to open flat to a little lower. The Dow futures are currently off by about 3 points; the S&P’s are fractionally lower at the moment, while the NASDAQ looks to be about 3 points below fair value at the moment.
Stocks "In Play" This Morning:
DaimlerChrysler (NYSE: DCX) – London Times reports DCX will begin auction of Chrysler
XM Satellite Radio (Nasdaq: XMSR) – Announces plans to merge with Sirius Sat Radio (SIRI)
Brown Forman (NYSE: BF.A) – Mentioned positively in Barron’s
Sony Corp (NYSE: SNE) – Mentioned positively in Barron’s
Alcoa (NYSE: AA) – Mentioned positively in Barron’s
Florida Rock (NYSE: FRK) – Will be acquired by Vulcan Materials (VMC)
Wal-Mart (NYSE: WMT) – Reported $0.93 vs. $0.90
Home Depot (NYSE: HD) – Reported $0.50 vs. $0.51
Universal Health Services (NYSE: UHS) – Downgraded at Bear Stearns
Motorola (NYSE: MOT) – Estimates reduced at Deutsche Bank
Sunoco Inc (NYSE: SUN) – Upgraded at Deutsche Bank
Sandisk (Nasdaq: SNDK) – Upgraded at Goldman Sachs, – Downgraded at RW Baird
JetBlue Airways (Nasdaq: JBLU) – Downgraded at Morgan Stanley
Chipotle Mexican Grill (NYSE: CMG) – Downgraded at Raymond James
Zimmer Holdings (NYSE: ZMH) – Upgraded at RW Baird
Mr. Moenning holds Long positions in stocks mentioned: GS, BSC, MS
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. Although there has been a great deal of talk lately about the market being overbought and thus susceptible to some sort of corrective action, the bulls have simply refused to yield the right of way. It doesn’t seem to matter what the news brings, there has always been a way to spin the data to the plus side. For example, during Friday’s session we got disappointing results from the housing market, what amounts to a warning from Microsoft, and a much larger than expected drop in Consumer Sentiment. And yet, the Dow managed to finish in the green for the fourth straight day and closed at another new all-time high.
Forget the fact that Housing Starts plummeted 14.3% in January, to the lowest rate in almost 10 years. Never mind that the University of Michigan’s Consumer Sentiment Index was nearly 3 points below consensus. And I guess we can just call Mr. Ballmer’s discussion of the outlook for Vista a case of sandbagging because through it all the Dow, Russell 2000, and S&P Small and Mid Cap indices all trudged on to new high ground.
At the beginning of the month, it appeared that the correction was finally here. Over the first 7 trading days of February, the indices made nary a new high and the Dow actually wound up declining 120 points (or -0.97%) from its high set on February 1. And while the 3 straight down days that ended on the 8th seem like ancient history now, we do recall that there was a slight amount of uncertainty in the air at that time.
But never fear dear investors because Private Equity is here. With a long weekend offering some additional time to mull things over, the question of why stocks have not experienced even a mild pullback in more than 7 months kept surfacing. Think about this for a moment. The Dow has not pulled back from its string of new highs by even -2% since mid-July. How can this be?
From where we sit at least, the answer appears to be the massive bag of money that Private Equity keeps tossing around these days. With billions sitting in Buffet-like hedge funds just looking for a home, it seems that no deal is too big right now. Simply put, it is the willingness of Private Equity Funds and companies looking to merge that has propped stocks up on a daily basis.
This morning alone we’ve got no fewer than seven deals going. Not the least of which is the merger of XM and Sirius Satellite Radio as well as word that DaimlerChrysler is looking to shorten their name by beginning the auctioning process for Chrysler.
Turning to this morning’s pre-market activity, after last week’s deluge of economic data, investors will have to look elsewhere for stimuli as the calendar is considerably quieter this week. While we will get the CPI and LEI numbers on Thursday, that’s about it for the week and there is no data scheduled for release today.
On the news front, it will be interesting to see how the world reacts to Iran’s rejection of the UN deadline to stop enriching uranium. The country’s President has stated that it is the country’s right to go nuclear and that there’s nothing we can do about it. Hmmm…
Running through the pre-game indicators, the major overseas markets are a little lower. Gold futures are trading down $2.80 to $670 right now. In the oil pits, crude futures are off $1.15 this morning with the latest quote at $58.24. Interest rates are a little higher this morning with the yield on the 10-year currently trading at 4.71%. And finally, with an hour before the bell, stock futures in the U.S. are looking to open flat to a little lower. The Dow futures are currently off by about 3 points; the S&P’s are fractionally lower at the moment, while the NASDAQ looks to be about 3 points below fair value at the moment.
Stocks "In Play" This Morning:
DaimlerChrysler (NYSE: DCX) – London Times reports DCX will begin auction of Chrysler
XM Satellite Radio (Nasdaq: XMSR) – Announces plans to merge with Sirius Sat Radio (SIRI)
Brown Forman (NYSE: BF.A) – Mentioned positively in Barron’s
Sony Corp (NYSE: SNE) – Mentioned positively in Barron’s
Alcoa (NYSE: AA) – Mentioned positively in Barron’s
Florida Rock (NYSE: FRK) – Will be acquired by Vulcan Materials (VMC)
Wal-Mart (NYSE: WMT) – Reported $0.93 vs. $0.90
Home Depot (NYSE: HD) – Reported $0.50 vs. $0.51
Universal Health Services (NYSE: UHS) – Downgraded at Bear Stearns
Motorola (NYSE: MOT) – Estimates reduced at Deutsche Bank
Sunoco Inc (NYSE: SUN) – Upgraded at Deutsche Bank
Sandisk (Nasdaq: SNDK) – Upgraded at Goldman Sachs, – Downgraded at RW Baird
JetBlue Airways (Nasdaq: JBLU) – Downgraded at Morgan Stanley
Chipotle Mexican Grill (NYSE: CMG) – Downgraded at Raymond James
Zimmer Holdings (NYSE: ZMH) – Upgraded at RW Baird
Mr. Moenning holds Long positions in stocks mentioned: GS, BSC, MS
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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