David Moenning�s Daily State of the Markets: 03/31
Tweet
Share
E-mail
Balancing Act
Good morning and Happy Friday. On the last day of the first quarter, stocks suddenly find themselves in the middle of a balancing act. Traders are trying desperately to find an equilibrium point for the new outlook which includes an improving economy, the ever present issue of earnings, higher interest rates, higher oil prices, and a real question mark concerning the direction of inflation.
On the one hand, the improved growth outlook from Nokia yesterday helped everything even remotely related to the cell phone industry and explains the modest bounce higher in the NASDAQ. But on the other hand, the inflation component in the GDP report definitely got people�s attention in the bond pits.
Given that the Final Q4 GDP report represents the third run at getting the numbers right, the report generally doesn�t bring much in the way of incremental data. However, the price measures were revised higher, which brought renewed fretting about inflation. The core PCE Price Index (a measure of personal consumption) was revised up to a 2.4% annual rate from the previous level of 2.1%. This is viewed as potentially disturbing data to the Fed and led to speculation that Mr. Bernanke and friends may abandon the idea of being �one and done.�
As we�ve mentioned on many occasions, when in doubt on a topic relating to the stock market, it often helps to look to the bond pits for guidance. In short, yesterday�s markets were dominated by bond yields moving to their highest levels since June 2004. The 10-yr bond finished the day with a yield of 4.86% and is within spitting distance of the old highs. So while the bulls might try and argue that one report does not an inflation problem make, the bond market took the prices component of the GDP report very seriously.
The bears also got some help from their friends in the oil pits. The combination of the ongoing problems in Nigeria and Iran, and the latest worries over gasoline supplies sent crude futures higher for the third straight day. Oil bounced up another $0.70 to finish at $67.15. And while we all know that the market has �handled� the increase in oil prices surprisingly well over the past 2 years, we also know that there is a line in the sand that causes the consumer to sit up and take notice (and maybe cancel those vacation plans). So this is one area that continues to warrant consideration.
When it was all said and done, the Dow and S&P wound up with modest to moderate losses on the day, while the NASDAQ enjoyed some green on the screen. As you�d expect, breadth was negative and volume picked up a little, but neither were major issues. From a chart standpoint, the only item of note is that for the fourth time this month, the S&P 500 appeared to bump its head on the recent highs and then sounded the retreat. And until either team can move the ball out of the current zone, it looks the stalemate may continue.
Turning to this morning, it would appear that traders are continuing to try and balance out the conflicting issues at hand. On the economic front, the Personal Income and Spending report provided no real surprises as Income came in a tenth below expectations at +0.3%, Spending was a tenth above expectations at +0.1%, the core PCE came in right at expectations of +0.1%, and the Deflator (inflation) was dead-on at 2.9%. The markets have taken the data in stride without much movement in response.
Running through the rest of the pre-game indicators, with the exception of Japan, overseas markets are lower across the board. Oil futures are moving down before the bell and are currently trading off by -$0.51 to $66.61. Natural Gas is trading down by $0.12 to $7.37. Bond yields are little changed this morning with the 10-yr currently trading at 4.84%. And finally, stock futures in the U.S. are about $2 below fair value on the S&P 500 with 45 minutes left before the bell.
Stocks �In Play� This Morning:
GOOG � Speculation is for company to offer TV service
HANS � In discussions with BUD regarding partnership
NTAP � New Buy rating from Deutsche Bank
CVC � CMCSA and TWX backing strategy to allow consumers to record on network servers
HUM � Reiterated reduce at UBS
BA � Positive mention in Business Week
AAPL � DigiTimes says AAPL may soon offer its own music handsets
C � Being sued in Australia for insider trading
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: None
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.
Good morning and Happy Friday. On the last day of the first quarter, stocks suddenly find themselves in the middle of a balancing act. Traders are trying desperately to find an equilibrium point for the new outlook which includes an improving economy, the ever present issue of earnings, higher interest rates, higher oil prices, and a real question mark concerning the direction of inflation.
On the one hand, the improved growth outlook from Nokia yesterday helped everything even remotely related to the cell phone industry and explains the modest bounce higher in the NASDAQ. But on the other hand, the inflation component in the GDP report definitely got people�s attention in the bond pits.
Given that the Final Q4 GDP report represents the third run at getting the numbers right, the report generally doesn�t bring much in the way of incremental data. However, the price measures were revised higher, which brought renewed fretting about inflation. The core PCE Price Index (a measure of personal consumption) was revised up to a 2.4% annual rate from the previous level of 2.1%. This is viewed as potentially disturbing data to the Fed and led to speculation that Mr. Bernanke and friends may abandon the idea of being �one and done.�
As we�ve mentioned on many occasions, when in doubt on a topic relating to the stock market, it often helps to look to the bond pits for guidance. In short, yesterday�s markets were dominated by bond yields moving to their highest levels since June 2004. The 10-yr bond finished the day with a yield of 4.86% and is within spitting distance of the old highs. So while the bulls might try and argue that one report does not an inflation problem make, the bond market took the prices component of the GDP report very seriously.
The bears also got some help from their friends in the oil pits. The combination of the ongoing problems in Nigeria and Iran, and the latest worries over gasoline supplies sent crude futures higher for the third straight day. Oil bounced up another $0.70 to finish at $67.15. And while we all know that the market has �handled� the increase in oil prices surprisingly well over the past 2 years, we also know that there is a line in the sand that causes the consumer to sit up and take notice (and maybe cancel those vacation plans). So this is one area that continues to warrant consideration.
When it was all said and done, the Dow and S&P wound up with modest to moderate losses on the day, while the NASDAQ enjoyed some green on the screen. As you�d expect, breadth was negative and volume picked up a little, but neither were major issues. From a chart standpoint, the only item of note is that for the fourth time this month, the S&P 500 appeared to bump its head on the recent highs and then sounded the retreat. And until either team can move the ball out of the current zone, it looks the stalemate may continue.
Turning to this morning, it would appear that traders are continuing to try and balance out the conflicting issues at hand. On the economic front, the Personal Income and Spending report provided no real surprises as Income came in a tenth below expectations at +0.3%, Spending was a tenth above expectations at +0.1%, the core PCE came in right at expectations of +0.1%, and the Deflator (inflation) was dead-on at 2.9%. The markets have taken the data in stride without much movement in response.
Running through the rest of the pre-game indicators, with the exception of Japan, overseas markets are lower across the board. Oil futures are moving down before the bell and are currently trading off by -$0.51 to $66.61. Natural Gas is trading down by $0.12 to $7.37. Bond yields are little changed this morning with the 10-yr currently trading at 4.84%. And finally, stock futures in the U.S. are about $2 below fair value on the S&P 500 with 45 minutes left before the bell.
Stocks �In Play� This Morning:
GOOG � Speculation is for company to offer TV service
HANS � In discussions with BUD regarding partnership
NTAP � New Buy rating from Deutsche Bank
CVC � CMCSA and TWX backing strategy to allow consumers to record on network servers
HUM � Reiterated reduce at UBS
BA � Positive mention in Business Week
AAPL � DigiTimes says AAPL may soon offer its own music handsets
C � Being sued in Australia for insider trading
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: None
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.
You May Also Be Interested In
- After-Hours Movers: TEAM, NET, TWLO, DOCS, FROG, DV, TTD, ABNB, DKNG, SG, RKT
- After-Hours Stock Movers: PLTR, SNAP, ON, ICHR, WGS, WHR
- After-Hours Movers: SPCX, AMD, ANET, PINS, APPS, UPST, ZETA, BKNG, LCID, CPNG, MTCH
Create E-mail Alert Related Categories
Contributors, Special ReportsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
