David Moenning's Daily State of the Markets: 03/17
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A Tale of Two Chips
The stock market presented a tale of two chips yesterday. For the fifth straight day, the blue chips marched on to another fresh four and one-half year high. Unfortunately, the other chips, those of the micro variety, did not fare as well. The semiconductors had a rough go of it, falling -3.2% and dragged the NASDAQ to a loss on the session.
Blue chip investors were encouraged by the economic data. The CPI report showed that inflationary pressures at the core level remain relatively well contained and the Housing Starts data suggested that the fear of a collapse in the housing market is overblown. Thanks to a drop in the price of food and energy components, the core rate of inflation rose by just +0.1% last month, which was actually below the consensus expectations. And on a year-over-year basis, the core rate held steady at 2.1%, while the headline CPI rate pulled back to 3.6% from 4.0% last moth. On the housing front, while the level of housing starts fell from January�s surprisingly strong levels, the numbers actually came in above expectations.
All in all, the bulls were pleased with yesterday�s data as it argues there is little reason for the Fed to become more aggressive and supported the Goldilocks scenario for the economy.
However, the chipmakers suffered mightily after Kulicke & Soffa uttered the five words that strike fear into the hearts of growth players. The chip equipment maker told analysts, �We expect demand to soften� and lowered their expectations for the current quarter. In response, KLIC got tagged for a loss of more than -20% on the day and the negativity seemed to spread rapidly throughout the tech sector. The fear is that with preannouncement season now in full swing, we will hear more comments along these lines in coming sessions.
So while the blue chips were seen marching to new highs, the chip ladened NASDAQ, which had been a leader of late, remained stuck in its recent trading range. This type of action is typical of the current market environment as it is difficult to get the troops all marching in the same direction with any enthusiasm.
And speaking of enthusiasm, the market began to look a bit weary in the afternoon. Maybe the spike in crude oil was to blame. Crude futures moved up $1.41 to $63.58 by the close and surely attracted some attention. And maybe there was some apprehension that the move may be getting a bit extended. In any case, volume is usually a telltale sign of support for a move and while the total number of shares traded yesterday did increase modestly on the NYSE, the level has been no better than average. This suggests that while the bulls are enjoying their run, this is probably no time to throw caution to the wind.
Turning to this morning, we�ve got a quadruple expiration day on our hands today, which usually doesn�t mean much more than some extra volume on the actual day of the event. We�ll get a report on Industrial Production just after the open at 9:15 as well as sentiment data from the University of Michigan at 9:45, but there is no data before the bell today. The market is pretty much running in place at the moment in response to more discouraging news from GM (losses for the past 4 years are being restated $2 Billion higher) and AIG, whose earnings fell more than 70%.
Running through the rest of the pre-game indicators about an hour before the bell, overseas markets are all higher. Oil futures are down a little this morning with crude currently trading at $63.41. Natural Gas is trading up a dime to $7.17 right now. Gold futures are higher by +$3.10 to $558.50. Bond yields are little changed this morning with both the 2-yr yield and 10-yr currently quoted at 4.65%, which, by the way gives hope to those fearing an inverted yield curve. And finally, stock futures in the U.S. are all modestly lower at the moment. The Dow futures are currently off -17, the S&Ps are down -1.50, and the NASDAQ is lower by -1.50.
Stocks "In Play" This Morning:
INTC � DigiTimes reports manufacturers have reduced orders due to weak notebook demand
AAPL � Barron�s says new cell phone will take share from MOT
GOOG � Wins copyright case in court
VOD � Mentioned positively in Business Week
AIG � Reports $0.14 after charges
SHR � Announces FDA approval of oral contraceptive
TEK � Reports $0.33 vs. $0.33
CSCO � Morgan Stanley raises target price
STA � WSJ says merger possible with Zurich
DISH � AmTech reiterates Buy with positive comments
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: MOT, INTC, CSCO
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) 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.
The stock market presented a tale of two chips yesterday. For the fifth straight day, the blue chips marched on to another fresh four and one-half year high. Unfortunately, the other chips, those of the micro variety, did not fare as well. The semiconductors had a rough go of it, falling -3.2% and dragged the NASDAQ to a loss on the session.
Blue chip investors were encouraged by the economic data. The CPI report showed that inflationary pressures at the core level remain relatively well contained and the Housing Starts data suggested that the fear of a collapse in the housing market is overblown. Thanks to a drop in the price of food and energy components, the core rate of inflation rose by just +0.1% last month, which was actually below the consensus expectations. And on a year-over-year basis, the core rate held steady at 2.1%, while the headline CPI rate pulled back to 3.6% from 4.0% last moth. On the housing front, while the level of housing starts fell from January�s surprisingly strong levels, the numbers actually came in above expectations.
All in all, the bulls were pleased with yesterday�s data as it argues there is little reason for the Fed to become more aggressive and supported the Goldilocks scenario for the economy.
However, the chipmakers suffered mightily after Kulicke & Soffa uttered the five words that strike fear into the hearts of growth players. The chip equipment maker told analysts, �We expect demand to soften� and lowered their expectations for the current quarter. In response, KLIC got tagged for a loss of more than -20% on the day and the negativity seemed to spread rapidly throughout the tech sector. The fear is that with preannouncement season now in full swing, we will hear more comments along these lines in coming sessions.
So while the blue chips were seen marching to new highs, the chip ladened NASDAQ, which had been a leader of late, remained stuck in its recent trading range. This type of action is typical of the current market environment as it is difficult to get the troops all marching in the same direction with any enthusiasm.
And speaking of enthusiasm, the market began to look a bit weary in the afternoon. Maybe the spike in crude oil was to blame. Crude futures moved up $1.41 to $63.58 by the close and surely attracted some attention. And maybe there was some apprehension that the move may be getting a bit extended. In any case, volume is usually a telltale sign of support for a move and while the total number of shares traded yesterday did increase modestly on the NYSE, the level has been no better than average. This suggests that while the bulls are enjoying their run, this is probably no time to throw caution to the wind.
Turning to this morning, we�ve got a quadruple expiration day on our hands today, which usually doesn�t mean much more than some extra volume on the actual day of the event. We�ll get a report on Industrial Production just after the open at 9:15 as well as sentiment data from the University of Michigan at 9:45, but there is no data before the bell today. The market is pretty much running in place at the moment in response to more discouraging news from GM (losses for the past 4 years are being restated $2 Billion higher) and AIG, whose earnings fell more than 70%.
Running through the rest of the pre-game indicators about an hour before the bell, overseas markets are all higher. Oil futures are down a little this morning with crude currently trading at $63.41. Natural Gas is trading up a dime to $7.17 right now. Gold futures are higher by +$3.10 to $558.50. Bond yields are little changed this morning with both the 2-yr yield and 10-yr currently quoted at 4.65%, which, by the way gives hope to those fearing an inverted yield curve. And finally, stock futures in the U.S. are all modestly lower at the moment. The Dow futures are currently off -17, the S&Ps are down -1.50, and the NASDAQ is lower by -1.50.
Stocks "In Play" This Morning:
INTC � DigiTimes reports manufacturers have reduced orders due to weak notebook demand
AAPL � Barron�s says new cell phone will take share from MOT
GOOG � Wins copyright case in court
VOD � Mentioned positively in Business Week
AIG � Reports $0.14 after charges
SHR � Announces FDA approval of oral contraceptive
TEK � Reports $0.33 vs. $0.33
CSCO � Morgan Stanley raises target price
STA � WSJ says merger possible with Zurich
DISH � AmTech reiterates Buy with positive comments
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: MOT, INTC, CSCO
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) 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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