David Moenning�s Daily State of the Markets: 04/12
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Is That Fear In The Air?
Stocks moved broadly lower yesterday as the term �geopolitical concerns� made a comeback in traders� vernacular. A day after reports circulated that the U.S. was talking about air strikes in Iran, yesterday�s headlines read: �Iran Hits Milestone in Nuclear Technology � Successfully Enriches Uranium.� Yikes.
With no economic news for a second straight day, traders basically looked around for guidance. And while interest rates were stable and Alcoa provided some upbeat news on the earnings front, it was the commodities markets that captured traders� attention.
Stocks opened higher as investors were encouraged by AA�s blowout quarter. However, it was as if the focus on Alcoa reminded traders that it was the increase in aluminum prices that led to the company�s strong numbers. And then one glance at the charts put some fear of commodity inflation in the air.
But the real fear stemmed from the escalating tensions with Iran and increasing oil prices as summer draws near. With Iran�s President announcing the country�s first successful enrichment of uranium yesterday and this morning�s suggestion that they will move toward enrichment on a large-scale, it isn�t much of a stretch to recognize that we could soon be entrenched in yet another conflict in the Middle East. And given the fact that Iran is OPEC�s second largest producer of oil, some fear as to how this situation might impact our economy is a logical response.
The EIA also put some fear into the markets yesterday with their prediction of average gasoline prices during the summer driving season. The agency came out with a report that projected an average price of $2.62 this summer, which represented an increase of about $0.25 from last year. While the report may strike fear into the hearts of consumers and economists alike, the real issue is that the estimate appears to be extremely optimistic. One peek at the current price of crude would suggest that consumers might be facing costs closer to $3. And if we remember anything from last year�s adventure with the price of gasoline, it is that $3 was a fairly big line in the sand.
So with fear over inflation and what the Fed might do about it, stocks took another tumble. The bulls will argue that this is just �pre-earnings jitters� and that everything will be just peachy in 3 weeks� time. On the other side of the aisle, the bears present a less encouraging point of view. Our furry friends point out that volume increased on yesterday�s pasting and suggest that the charts could soon be in trouble.
Turning to this morning, the only economic news before the bell showed that the nation�s Trade Deficit came in a bit lower than expected at $65.7 Billion, while the consensus estimate had been for a reading of $67.5B. There has been a little buying in stocks, bonds, and the dollar in reaction and it would appear that the bulls are looking to attempt some sort of a comeback after yesterday�s drop.
Running through the rest of the pre-game indicators, the overseas markets are once again lower across the board. Oil futures are currently trading lower by $0.14 to $68.84 and will likely continue to attract a lot of attention. Natural Gas is trading down by $0.04 to $6.87. Bond yields are a little lower so far with the 2-yr yield at 4.86% and 10-yr currently trading at 4.91%. And finally, an hour before the bell, stock futures in the U.S. are moving a little higher with the Dow futures sporting a gain of +26 points, the S&Ps are up by 2.00, and the NASDAQ futures are higher by 1.50
Stocks �In Play� This Morning:
LM � To replace GDT in S&P 500
MRK � Punitive damages in Vioxx case are $9M (vs. max $22.5M)
DNA � Reports $0.46 vs. $0.41, Revenues $1.99B vs. $1.96B
K � Downgraded at Goldman Sacs
MOT � Upgraded at Bear Stearns, Reiterated Overweight at Lehman
DSW � Reports $0.23 vs. $0.24
ELX � Reduces guidance
GOOG � Says will follow Chinese censorship laws, Downgraded at JMP Sec
MSFT � Bloomberg reports co developing software for CHL
SNDK � Goldman expects company to reduce guidance, suggests shorting stock
NOK � Lehman upgrades forecast for global handsets, raises target
QCOM � Reiterated overweight at Lehman
CHL � Will launch Blackberry service by mid-year
FTO � Downgraded at BofA
CHKP � Downgraded at Prudential
CC � Reports $0.84 vs. $0.77, Revenues $3.91B vs. $3.88B
STN � Downgraded by Calyon
VZ � Will purchase VOD�s stake in Verizon Wireless
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: GS, MOT, LEH, BSC, CHL, QCOM, CC
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.
Stocks moved broadly lower yesterday as the term �geopolitical concerns� made a comeback in traders� vernacular. A day after reports circulated that the U.S. was talking about air strikes in Iran, yesterday�s headlines read: �Iran Hits Milestone in Nuclear Technology � Successfully Enriches Uranium.� Yikes.
With no economic news for a second straight day, traders basically looked around for guidance. And while interest rates were stable and Alcoa provided some upbeat news on the earnings front, it was the commodities markets that captured traders� attention.
Stocks opened higher as investors were encouraged by AA�s blowout quarter. However, it was as if the focus on Alcoa reminded traders that it was the increase in aluminum prices that led to the company�s strong numbers. And then one glance at the charts put some fear of commodity inflation in the air.
But the real fear stemmed from the escalating tensions with Iran and increasing oil prices as summer draws near. With Iran�s President announcing the country�s first successful enrichment of uranium yesterday and this morning�s suggestion that they will move toward enrichment on a large-scale, it isn�t much of a stretch to recognize that we could soon be entrenched in yet another conflict in the Middle East. And given the fact that Iran is OPEC�s second largest producer of oil, some fear as to how this situation might impact our economy is a logical response.
The EIA also put some fear into the markets yesterday with their prediction of average gasoline prices during the summer driving season. The agency came out with a report that projected an average price of $2.62 this summer, which represented an increase of about $0.25 from last year. While the report may strike fear into the hearts of consumers and economists alike, the real issue is that the estimate appears to be extremely optimistic. One peek at the current price of crude would suggest that consumers might be facing costs closer to $3. And if we remember anything from last year�s adventure with the price of gasoline, it is that $3 was a fairly big line in the sand.
So with fear over inflation and what the Fed might do about it, stocks took another tumble. The bulls will argue that this is just �pre-earnings jitters� and that everything will be just peachy in 3 weeks� time. On the other side of the aisle, the bears present a less encouraging point of view. Our furry friends point out that volume increased on yesterday�s pasting and suggest that the charts could soon be in trouble.
Turning to this morning, the only economic news before the bell showed that the nation�s Trade Deficit came in a bit lower than expected at $65.7 Billion, while the consensus estimate had been for a reading of $67.5B. There has been a little buying in stocks, bonds, and the dollar in reaction and it would appear that the bulls are looking to attempt some sort of a comeback after yesterday�s drop.
Running through the rest of the pre-game indicators, the overseas markets are once again lower across the board. Oil futures are currently trading lower by $0.14 to $68.84 and will likely continue to attract a lot of attention. Natural Gas is trading down by $0.04 to $6.87. Bond yields are a little lower so far with the 2-yr yield at 4.86% and 10-yr currently trading at 4.91%. And finally, an hour before the bell, stock futures in the U.S. are moving a little higher with the Dow futures sporting a gain of +26 points, the S&Ps are up by 2.00, and the NASDAQ futures are higher by 1.50
Stocks �In Play� This Morning:
LM � To replace GDT in S&P 500
MRK � Punitive damages in Vioxx case are $9M (vs. max $22.5M)
DNA � Reports $0.46 vs. $0.41, Revenues $1.99B vs. $1.96B
K � Downgraded at Goldman Sacs
MOT � Upgraded at Bear Stearns, Reiterated Overweight at Lehman
DSW � Reports $0.23 vs. $0.24
ELX � Reduces guidance
GOOG � Says will follow Chinese censorship laws, Downgraded at JMP Sec
MSFT � Bloomberg reports co developing software for CHL
SNDK � Goldman expects company to reduce guidance, suggests shorting stock
NOK � Lehman upgrades forecast for global handsets, raises target
QCOM � Reiterated overweight at Lehman
CHL � Will launch Blackberry service by mid-year
FTO � Downgraded at BofA
CHKP � Downgraded at Prudential
CC � Reports $0.84 vs. $0.77, Revenues $3.91B vs. $3.88B
STN � Downgraded by Calyon
VZ � Will purchase VOD�s stake in Verizon Wireless
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: GS, MOT, LEH, BSC, CHL, QCOM, CC
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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