David Moenning's Daily State of the Markets:

Don't Blame Shoppers

Good morning. Stocks were lower yesterday, but given the record run the market has enjoyed recently, the decline could have been much worse. One of the catalysts for the drop was the slew of same-store sales numbers reported by retailers. Although the data was expected to be weak due to the weather and a shift in Easter, the numbers were largely disappointing.

There was also more talk about recession yesterday, but the discussion was limited to the slight possibility that the nation’s GDP could dip into negative territory at some point this year. And then overnight, Mr. Alan Greenspan put the chances of a recession this year at 33%.

So, with the stock market overbought and the sentiment bordering on exuberant, it was not exactly a surprise to see the bears come out and play a bit. The question now, of course, is if the drop of 150 points was a one-day wonder or if there is more selling to come.

The answer may depend on the economic data and we’ve got some to review this morning. The PPI report came in mixed with the headline PPI reported at +0.7% versus expectations for an increase of +0.6%. However, the Core Rate (excluding food and energy) was better than expected with an unchanged reading versus expectations of an increase of +0.4%.

The other data released this morning shows that Retail Sales were a bit weaker than expected. The report came in at -0.2% versus the consensus estimate of +0.4%. And when you strip out the sale of autos, the story remains the same with the numbers coming in at 0.0% vs. +0.5%.

This morning's data has resurrected hopes that the Fed will ease sooner rather than later. Our take is we probably shouldn’t expect to see any action until later in the year (perhaps in the fall). But in any event, the data has improved the mood on Wall Street in both stocks and bonds.

Running through the rest of the pre-game indicators, the overseas markets were lower across the board. Gold futures are higher this morning with the last trade up $3.30 to $670.30. Crude futures are moving up a bit this morning with the latest quote showing the futures contract up $0.43 to $62.34. Interest rates are a smidge lower today as the yield on the 10-year currently stands at 4.62%. And finally, with about 30 minutes before the bell, stock futures in the U.S. are looking to open modestly higher. The Dow futures are currently ahead by about 40 points; the S&Ps are a little more than 4 points above board, and the NASDAQ looks to be about 3 points ahead of fair value at the moment.

Stocks “In Play” This Morning:

Yesterday’s Earnings After the Bell:
American Intl Group (NYSE: AIG) – Reported $1.68 vs. $1.55
Nvidia (NASDAQ: NVDA) – Reported $0.33 vs. $0.30

News, Upgrades/Downgrades/Brokerage Research:
News Corp (NYSE: NWS) – Mentioned positively in Business Week
Trinity Industries (NYSE: TRN) – Mentioned positively in Business Week
Leap Wireless (NASDAQ: LEAP) – Price Target increased at BofA
Intl Securities Exchange (NYSE: ISE) – Downgraded at BofA
CSX (NYSE: CSX) – Target increased at Citigroup
Fluor Corp (NYSE: FLR) – Target increased at Citigroup
Wendy’s (NYSE: WEN) – Downgraded at Citigroup
Amgen (NASDAQ: AMGN) – Downgraded at Citigroup, JP Morgan, Morgan Stanley
Alcatel Lucent (NYSE: ALU) – Upgraded at Credit Suisse
Applied Materials (NASDAQ: AMAT) – Upgraded at UBS

Mr. Moenning holds Long positions in stocks mentioned: TRN, FLR, AMAT

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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