David Moenning�s Daily State of the Markets: 02/27

Rimming, Yes

Stocks started lower on Friday morning as a double dose of bad news put the bulls back on their heels a bit at the opening bell. Reports of a terrorist attack against a Saudi Arabian oil refinery reminded investors that the risk premium currently factored into a barrel of crude is there for a reason. And as if that weren�t enough to shake the bulls� confidence, soon thereafter, the government reported that orders for Durable Goods plummeted 10.2% in January, which was the biggest drop in more than five and one-half years.

However, the bulk of the bad news dissipated quickly. Although Al-Qaeda was quick to claim responsibility for the explosions, Saudi officials immediately announced that the attack on their oil installation had been thwarted. And while the report soothed the nerves of the stock markets, the morning�s events were not lost on crude traders. Oil surged +$2.37 to $62.91 in response to the attack and recognition of the ongoing difficulties in Nigeria.

In addition, the Durable Goods report wasn�t nearly as bad as the headline suggested. Sure, the drop of -10.2% was a big surprise. However, upon further review, it became obvious that drop was almost completely attributable to aircraft orders. And once these very big-ticket items were removed from the formula, the numbers were pretty much in-line with expectations.

Despite a new terrorist attack, the resulting surge in oil, and what appeared to be a punk economic report, the session�s focus, at least from a media standpoint, was on the legal happenings of Blackberry device maker Research In Motion (RIMM). And while there was no final verdict, the facts that (1) the NTP patents were rejected and (2) that the judge failed to impose an injunction seem to indicate that Blackberry users around the world can breathe easier.

Finally, the bulls got a little help late in the day from St. Louis Fed President William Poole, who made comments suggesting that the economy was in good shape and that rates were close to where they needed to be.

So despite all the noise, for the most part, the indices (all except for the Dow) recovered from the shaky start to finish a smidge higher on the session. And from the where the bulls sit, this was a pretty darn good result.

Looking ahead, there will be a fairly large dose of economic data this week for traders (and the Fed) to ponder.

Monday: New Home Sales

Tuesday: Preliminary GDP, Consumer Confidence, Existing Home Sales, Chicago Purchasing Managers

Wednesday: Personal Income and Spending (includes the PCE deflator, which is a Fed favorite), Construction Spending, ISM Index

Thursday: Jobless Claims (normally not important, but traders will be watching for ongoing tightness in labor market)

Friday: Univ of Michigan Consumer Sentiment, ISM Non-Manufacturing, Factory Orders

Turning to this morning, stocks appear set for a modestly higher open on the back of a pullback in oil, strong overseas markets, and a Barron�s report suggesting that Walt Disney may be the target of a buyout from Apple Computer. (Nothing says "bull market" like a big Monday morning buyout rumor!)

Running through the rest this morning�s indicators, overseas markets are green across the board. Gold futures are lower by -$4.40 this morning to $556.80. Oil futures are moving lower with crude currently trading down by -$0.57 to $62.34. Natural Gas is also quoted down a bit to $7.13 right now. Bond yields are fairly steady ahead of the week�s barrage of data with the 2-yr yield at 4.72% and 10-yr at 4.56%. And finally, stock futures in the U.S. are up a bit with the Dow currently ahead by 7, while the S&P�s are up a fraction, and the NASDAQ is stronger by +2.50.

Stocks "In Play" This Morning:

AMAT � Citigroup downgrades sector
GOOG � Rumored to be ready to launch a Finance Channel
MSFT � WSJ reports company guilty in South Korea of unfair business practices
ANF � Upgraded at Goldman Sachs
HAL � NY Times reports US Army will pay disputed fees
LOW � Reported $0.87 vs. $0.80, Revenues of $10.8B vs. $10.41B, Guides higher
MER � Authorizes repurchase of $6B
INTC � Upgraded at JMP
SNDK � Upgraded at Citigroup

Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: INTC, AMAT, MER

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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