David Moenning�s Daily State of the Markets: 08/09
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Already Baked In
Good morning. Credit Ben Bernanke for preparing the markets for the Fed�s latest move. He pledged that the FOMC would be more transparent and that is exactly what has occurred. For example, while the decision was far from obvious, most everyone agreed that the Fed would pause their hike down the measured path yesterday. The problem, at least as far as the market is concerned, was that the news of a pause was already �baked in� to the market.
Stocks had already rallied 500 points from the July low on the idea that the Fed was going to, at the very least, take a break in the rate hike campaign. Therefore, when the move actually occurred, it was hardly a surprise and there was little buying power left. So stocks kind of wilted yesterday following the announcement.
After yesterday�s move, the moniker �Gentle Ben� may be back to stay as the Fed seemed to take a �dovish� approach to the issue of whether to worry more about the economy or inflation. While the inflation hawks are bound to be unhappy with the move, the Fed decided that the risks to the economy outweighed the risks of further inflation. So, after raising rates 17 times and armed with the knowledge that rookie Fed Chairmen have a history of �going too far,� Mr. Bernanke and Co. decided it was time to see the effects of their handiwork before doing any more hiking.
There wasn�t an awful lot of new information provided in the accompanying statement and frankly, no one really expected much. The Fed kept the possibility of further rate increases open by saying that further tightening may be needed as �some inflation risks remain.� However, they did not actually commit to further hikes by reiterating that any additional firming will depend on the data. In short, yesterday�s pause buys the Fed more time to assess the situation.
On the subject of inflation, the FOMC acknowledged, once again, that core inflation remains elevated and that high levels of resource utilization and energy prices have the potential to add to inflationary pressures. However, the key phrase in the statement was that �inflation pressure seems likely to moderate over time.� The committee feels that the cumulative effects of prior rate hikes and the moderation in economic growth will keep inflation expectations contained.
Given the lackluster response by the market to the announcement, the argument can be made that traders have now shifted their focus to the reason the Fed decided to pause. The Fed admits that economic growth is moderating and most economists expect the economy to slow further during the second half of the year. One look at cyclicals such railroads, truckers, and even the housing stocks makes it clear that traders are concerned about the extent of the slowdown at the current time. Thus, it is likely that we have now exited the �bad news is good news� mode and returned to an environment where good economic news might actually be cheered again (unless, of course, the news is too good or inflationary).
Turning to this morning, the mood is much improved in the stock market. While it is not the market leader it once was, Cisco Systems seems to be helping all things technology this morning. The company beat expectations by not one, but two cents and had good things to say about the future. The stock is being rewarded with an increase of about 9%.
Running through the rest of the pre-game indicators, the major overseas markets are higher across the board this morning, with solid moves in Asia and fractional gains in Europe. Gold futures are moving a smidge lower at the moment and are currently exchanging hands at $656.50. Oil continues to be supported by worries over supply and the conflict in the Middle East. Crude futures are trading up by $0.27 to $76.58 right now. Interest rates are a little higher this morning with the 2-year currently quoted at 4.92% while the 10-yr is trading with a yield of 4.95% right now. And finally, with about an hour before the bell, stock futures in the U.S. are looking to advance. The Dow futures are currently up by 53, the S&Ps are ahead by more than 6 points, and the NASDAQ is sporting a gain of about 14 points.
Stocks �In Play� This Morning:
Cisco (CSCO) � Reported $0.30 vs. $0.28, Upgraded at JMP Securities
Hess Corp (HES) � Mentioned cautiously in Barron�s
Dollar General (DG) � Upgraded at Bear Stearns
Openwave (OPWV) � Upgraded at CIBC
Brightpoint Inc (CELL) � Upgraded at Jefferies
Edison Intl (EIX) � Added to �Focus 1� list at Merrill Lynch
Teva Pharmaceuticals (TEVA) � Downgraded at Piper Jaffray
Global Signal (GSL) � Downgraded at RBC Capital
Bausch & Lomb (BOL) � Downgraded at Rochdale
Echostar (DISH) � Downgraded at Bernstein
Direct TV (DTV) � Downgraded at Bernstein
Disney (DIS) � Reported $0.53 vs. $0.44 (includes one time items)
Long positions in stocks mentioned: MER, CSCO, BSC
** 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.
Good morning. Credit Ben Bernanke for preparing the markets for the Fed�s latest move. He pledged that the FOMC would be more transparent and that is exactly what has occurred. For example, while the decision was far from obvious, most everyone agreed that the Fed would pause their hike down the measured path yesterday. The problem, at least as far as the market is concerned, was that the news of a pause was already �baked in� to the market.
Stocks had already rallied 500 points from the July low on the idea that the Fed was going to, at the very least, take a break in the rate hike campaign. Therefore, when the move actually occurred, it was hardly a surprise and there was little buying power left. So stocks kind of wilted yesterday following the announcement.
After yesterday�s move, the moniker �Gentle Ben� may be back to stay as the Fed seemed to take a �dovish� approach to the issue of whether to worry more about the economy or inflation. While the inflation hawks are bound to be unhappy with the move, the Fed decided that the risks to the economy outweighed the risks of further inflation. So, after raising rates 17 times and armed with the knowledge that rookie Fed Chairmen have a history of �going too far,� Mr. Bernanke and Co. decided it was time to see the effects of their handiwork before doing any more hiking.
There wasn�t an awful lot of new information provided in the accompanying statement and frankly, no one really expected much. The Fed kept the possibility of further rate increases open by saying that further tightening may be needed as �some inflation risks remain.� However, they did not actually commit to further hikes by reiterating that any additional firming will depend on the data. In short, yesterday�s pause buys the Fed more time to assess the situation.
On the subject of inflation, the FOMC acknowledged, once again, that core inflation remains elevated and that high levels of resource utilization and energy prices have the potential to add to inflationary pressures. However, the key phrase in the statement was that �inflation pressure seems likely to moderate over time.� The committee feels that the cumulative effects of prior rate hikes and the moderation in economic growth will keep inflation expectations contained.
Given the lackluster response by the market to the announcement, the argument can be made that traders have now shifted their focus to the reason the Fed decided to pause. The Fed admits that economic growth is moderating and most economists expect the economy to slow further during the second half of the year. One look at cyclicals such railroads, truckers, and even the housing stocks makes it clear that traders are concerned about the extent of the slowdown at the current time. Thus, it is likely that we have now exited the �bad news is good news� mode and returned to an environment where good economic news might actually be cheered again (unless, of course, the news is too good or inflationary).
Turning to this morning, the mood is much improved in the stock market. While it is not the market leader it once was, Cisco Systems seems to be helping all things technology this morning. The company beat expectations by not one, but two cents and had good things to say about the future. The stock is being rewarded with an increase of about 9%.
Running through the rest of the pre-game indicators, the major overseas markets are higher across the board this morning, with solid moves in Asia and fractional gains in Europe. Gold futures are moving a smidge lower at the moment and are currently exchanging hands at $656.50. Oil continues to be supported by worries over supply and the conflict in the Middle East. Crude futures are trading up by $0.27 to $76.58 right now. Interest rates are a little higher this morning with the 2-year currently quoted at 4.92% while the 10-yr is trading with a yield of 4.95% right now. And finally, with about an hour before the bell, stock futures in the U.S. are looking to advance. The Dow futures are currently up by 53, the S&Ps are ahead by more than 6 points, and the NASDAQ is sporting a gain of about 14 points.
Stocks �In Play� This Morning:
Cisco (CSCO) � Reported $0.30 vs. $0.28, Upgraded at JMP Securities
Hess Corp (HES) � Mentioned cautiously in Barron�s
Dollar General (DG) � Upgraded at Bear Stearns
Openwave (OPWV) � Upgraded at CIBC
Brightpoint Inc (CELL) � Upgraded at Jefferies
Edison Intl (EIX) � Added to �Focus 1� list at Merrill Lynch
Teva Pharmaceuticals (TEVA) � Downgraded at Piper Jaffray
Global Signal (GSL) � Downgraded at RBC Capital
Bausch & Lomb (BOL) � Downgraded at Rochdale
Echostar (DISH) � Downgraded at Bernstein
Direct TV (DTV) � Downgraded at Bernstein
Disney (DIS) � Reported $0.53 vs. $0.44 (includes one time items)
Long positions in stocks mentioned: MER, CSCO, BSC
** 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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