David Moenning�s Daily State of the Markets: 04/25
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Wilting or Hanging Tough?
Stocks paused yesterday after last week�s Fed and expiration-induced run up. A mixed batch of earnings news and a lower dollar were cited as the reasons for the pause. But whenever stocks pull back after a nice run higher, the question is always the same: Does the action indicate that stocks are hanging tough or is the momentum wilting?
We�ll get to that in a minute, but first, let�s examine the action. With oil prices falling sharply and strong earnings from Caterpillar, one might have expected the bulls to resume their romp higher. But with no economic data to provide any clues and another Bernanke testimony on tap for Thursday, the traders basically took the day off.
The market�s leadership took the day as well, as oil, mining, and metal shares took it on the chin. Tech also had a rough day as traders appear to be rotating out of tele-tech. This brought the NASDAQ down by nearly 10 points, which represented roughly double the decline of the S&P 500.
Over in the oil pits, traders decided to take some profits. With no real fundamental news to justify prices at $75, oil encountered a rather sharp selloff and finished the day down $-1.84 to $73.33. And after a run of more than +6% last week, some profit-taking was to be expected.
The greenback was another key aspect to trading yesterday. The U.S. Dollar fell after the Group of Seven industrialized nations called for China and other Asian countries to strengthen their currencies over the weekend. The proclamation created a big drop in Asian stock markets as weak currencies help those countries provide cheap exports, which strengthens trade. The Dollar fell -1.9% against the Yen, finishing the session at its lowest levels since January.
Getting back to the question at hand, before taking a stand, let�s look at the facts. First, stocks enjoyed a Fed-inspired blast higher last week. The move created a modestly overbought condition and has prices sitting at the top end of the range on the Dow, S&P, and NASDAQ. So, given last week�s fireworks, it is completely natural to expect stocks to do some backing and filling for a while. This gives the bulls a chance to regroup for their next attempt to push through resistance and join the small cap and mid cap issues in new-high territory.
Turning to this morning, there is no economic data scheduled before the bell, but at 10:00 we will get Consumer Confidence numbers, the Richmond Fed Index, and a report on Existing Home Sales. In short, stocks have a modestly stronger tone and there are no big moves to report.
Running through the rest of the pre-game indicators, with the exception of Hong Kong, overseas markets are enjoying green numbers. Oil futures are currently trading higher by $0.32 to $73.65. Natural Gas is trading lower by $0.15 to $7.41. Gold is rebounding by $6.90 this morning to $630.80. Interest rates are steady with the yield on the 2-year trading at 4.8% right now, while the 10-year is at 5.00%. And finally, stock futures in the U.S. are pointing to a modestly positive open with the Dow futures about 10 points ahead of fair value, the S&Ps are ahead by 1.5 points, and the NASDAQ futures are gaining 2.50.
Stocks �In Play� This Morning:
Yum Brands (YUM) � Reported $0.59 vs. $0.57, Revenues $2.08B vs. $2.11B
DuPont (DD) � Reported $0.93 vs. $0.81, Revenues $7.39B vs. $7.45B, Guides full year up
Caterpillar (CAT) � Downgraded at RW Baird
Whirlpool (WHR) � Reported $1.70 vs. $1.51, Revenues $3.5B vs. $3.38B
Nextel Partners (NXTP) � Removed from JP Morgan Focus List
Crown Castle (CCI) � Added to JP Morgan Focus List
Nokia (NOK) � Looking for smartphone market to double by 2008
Anglo American (AAUK) � Raises dividend by 29%, Announces special div of $0.33
Reynolds American (RAI) � To purchase Conwood for $3.5B
Autodesk (ADSK) � Top pick in sector at Citigroup
Infineon Tech (IFX) � Upgraded at Lehman
EBay (EBAY) � NY Post reports agreements with 4 music labels
BP PLC (BP) � Reported Q1 profits of $5.27B vs. $5.2B
Coach (COH) � Reported $0.28 vs. $0.27
Crane Co. (CR) � Reported $0.61 vs. $0.52, Revenues $549.8 vs. $518.9, Guides higher
Health Mgmt Assoc (HMA) � Reported $0.37 vs. $0.40
Jacobs Engineering (JEC) � Reported $0.98 vs. $0.73, Revenues $1.8B vs. $1.68B
Netflix (NFLX) � Reported $0.10 vs. $0.06
Sun Microsystems (SUNW) � Reported ($0.01) vs. ($0.03), Revenues $3.1B vs. $3.2B
Disclosure: Long positions in stocks mentioned: LEH, CAT
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 paused yesterday after last week�s Fed and expiration-induced run up. A mixed batch of earnings news and a lower dollar were cited as the reasons for the pause. But whenever stocks pull back after a nice run higher, the question is always the same: Does the action indicate that stocks are hanging tough or is the momentum wilting?
We�ll get to that in a minute, but first, let�s examine the action. With oil prices falling sharply and strong earnings from Caterpillar, one might have expected the bulls to resume their romp higher. But with no economic data to provide any clues and another Bernanke testimony on tap for Thursday, the traders basically took the day off.
The market�s leadership took the day as well, as oil, mining, and metal shares took it on the chin. Tech also had a rough day as traders appear to be rotating out of tele-tech. This brought the NASDAQ down by nearly 10 points, which represented roughly double the decline of the S&P 500.
Over in the oil pits, traders decided to take some profits. With no real fundamental news to justify prices at $75, oil encountered a rather sharp selloff and finished the day down $-1.84 to $73.33. And after a run of more than +6% last week, some profit-taking was to be expected.
The greenback was another key aspect to trading yesterday. The U.S. Dollar fell after the Group of Seven industrialized nations called for China and other Asian countries to strengthen their currencies over the weekend. The proclamation created a big drop in Asian stock markets as weak currencies help those countries provide cheap exports, which strengthens trade. The Dollar fell -1.9% against the Yen, finishing the session at its lowest levels since January.
Getting back to the question at hand, before taking a stand, let�s look at the facts. First, stocks enjoyed a Fed-inspired blast higher last week. The move created a modestly overbought condition and has prices sitting at the top end of the range on the Dow, S&P, and NASDAQ. So, given last week�s fireworks, it is completely natural to expect stocks to do some backing and filling for a while. This gives the bulls a chance to regroup for their next attempt to push through resistance and join the small cap and mid cap issues in new-high territory.
Turning to this morning, there is no economic data scheduled before the bell, but at 10:00 we will get Consumer Confidence numbers, the Richmond Fed Index, and a report on Existing Home Sales. In short, stocks have a modestly stronger tone and there are no big moves to report.
Running through the rest of the pre-game indicators, with the exception of Hong Kong, overseas markets are enjoying green numbers. Oil futures are currently trading higher by $0.32 to $73.65. Natural Gas is trading lower by $0.15 to $7.41. Gold is rebounding by $6.90 this morning to $630.80. Interest rates are steady with the yield on the 2-year trading at 4.8% right now, while the 10-year is at 5.00%. And finally, stock futures in the U.S. are pointing to a modestly positive open with the Dow futures about 10 points ahead of fair value, the S&Ps are ahead by 1.5 points, and the NASDAQ futures are gaining 2.50.
Stocks �In Play� This Morning:
Yum Brands (YUM) � Reported $0.59 vs. $0.57, Revenues $2.08B vs. $2.11B
DuPont (DD) � Reported $0.93 vs. $0.81, Revenues $7.39B vs. $7.45B, Guides full year up
Caterpillar (CAT) � Downgraded at RW Baird
Whirlpool (WHR) � Reported $1.70 vs. $1.51, Revenues $3.5B vs. $3.38B
Nextel Partners (NXTP) � Removed from JP Morgan Focus List
Crown Castle (CCI) � Added to JP Morgan Focus List
Nokia (NOK) � Looking for smartphone market to double by 2008
Anglo American (AAUK) � Raises dividend by 29%, Announces special div of $0.33
Reynolds American (RAI) � To purchase Conwood for $3.5B
Autodesk (ADSK) � Top pick in sector at Citigroup
Infineon Tech (IFX) � Upgraded at Lehman
EBay (EBAY) � NY Post reports agreements with 4 music labels
BP PLC (BP) � Reported Q1 profits of $5.27B vs. $5.2B
Coach (COH) � Reported $0.28 vs. $0.27
Crane Co. (CR) � Reported $0.61 vs. $0.52, Revenues $549.8 vs. $518.9, Guides higher
Health Mgmt Assoc (HMA) � Reported $0.37 vs. $0.40
Jacobs Engineering (JEC) � Reported $0.98 vs. $0.73, Revenues $1.8B vs. $1.68B
Netflix (NFLX) � Reported $0.10 vs. $0.06
Sun Microsystems (SUNW) � Reported ($0.01) vs. ($0.03), Revenues $3.1B vs. $3.2B
Disclosure: Long positions in stocks mentioned: LEH, CAT
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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