David Moenning�s Daily State of the Markets: 10/27
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Are They Finally Listening?
For months now, members of the FOMC have been attempting to jawbone interest rates higher. Recently, it has been nearly impossible for a Fed official to open his/her mouth without warning about the evils of inflation and then suggest that rates will have to rise further. But in the last three trading sessions alone, yields have spiked up by almost 20 basis points, with 10 of them coming yesterday. Thus, it would appear that just maybe the bond market is finally listening to the message from the Fed. But, in reality, there are other factors affecting the bond market besides inflation. A collapse of the German Bund, rising commodity costs, new supply, concerns that Bernanke may be too dovish, and finally, the ever-popular breakdown of technical levels all have contributed to the increase in rates.
Despite a fall of -$1.78 in crude oil, it was this move higher in interest rates that caused the stock market to give up its early gains and finish with a loss of -33 points. The weight of higher rates, when added to worries over inflation, high energy costs, and the consumer, appeared to be simply more than the market could bear.
Turning to this morning, problems at GM are causing problems for the markets. It was reported that the country�s largest car maker received subpoenas from the SEC over pension accounting and their dealings with now-bankrupt Delphi. The announcement has added to concerns over the financial health of the company and adds fuel to rumors about bankruptcy that have been floating around recently.
On the economic front, the report on orders for Durable Goods was weaker than expected in September as orders came in at -2.1% which was below the consensus expectation of -1.5%. Ex-transportation, orders were down -1% versus estimates of +0.8%. And the non-defense capital goods category (which is a proxy for business investment) was also lower by -1.2%.
So with stocks set to open lower, the question of the day is whether the bears will seize the opportunity to grab the ball or will the bulls will be able to hang on to possession here?
Stocks "In Play" This Morning:
(NYSE: UNP) � Reports $0.94 vs. $0.91 on revenues of $3.46B vs. $3.40B
(NYSE: DOW) � EPS of $0.82 vs. $0.75
(NASDAQ: ESRX) � Reported $0.67 vs. $0.61 and guided higher
(NASDAQ: BIIB) � Earnings and revenue miss: $0.36 vs. $0.42
(NASDAQ: BIDU) � Missed badly $0.03 vs. $0.06 � stock down -15.3% in pre-market
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: none
To see David Moenning�s Trading Record, his (Strong Buy) List, or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
For months now, members of the FOMC have been attempting to jawbone interest rates higher. Recently, it has been nearly impossible for a Fed official to open his/her mouth without warning about the evils of inflation and then suggest that rates will have to rise further. But in the last three trading sessions alone, yields have spiked up by almost 20 basis points, with 10 of them coming yesterday. Thus, it would appear that just maybe the bond market is finally listening to the message from the Fed. But, in reality, there are other factors affecting the bond market besides inflation. A collapse of the German Bund, rising commodity costs, new supply, concerns that Bernanke may be too dovish, and finally, the ever-popular breakdown of technical levels all have contributed to the increase in rates.
Despite a fall of -$1.78 in crude oil, it was this move higher in interest rates that caused the stock market to give up its early gains and finish with a loss of -33 points. The weight of higher rates, when added to worries over inflation, high energy costs, and the consumer, appeared to be simply more than the market could bear.
Turning to this morning, problems at GM are causing problems for the markets. It was reported that the country�s largest car maker received subpoenas from the SEC over pension accounting and their dealings with now-bankrupt Delphi. The announcement has added to concerns over the financial health of the company and adds fuel to rumors about bankruptcy that have been floating around recently.
On the economic front, the report on orders for Durable Goods was weaker than expected in September as orders came in at -2.1% which was below the consensus expectation of -1.5%. Ex-transportation, orders were down -1% versus estimates of +0.8%. And the non-defense capital goods category (which is a proxy for business investment) was also lower by -1.2%.
So with stocks set to open lower, the question of the day is whether the bears will seize the opportunity to grab the ball or will the bulls will be able to hang on to possession here?
Stocks "In Play" This Morning:
(NYSE: UNP) � Reports $0.94 vs. $0.91 on revenues of $3.46B vs. $3.40B
(NYSE: DOW) � EPS of $0.82 vs. $0.75
(NASDAQ: ESRX) � Reported $0.67 vs. $0.61 and guided higher
(NASDAQ: BIIB) � Earnings and revenue miss: $0.36 vs. $0.42
(NASDAQ: BIDU) � Missed badly $0.03 vs. $0.06 � stock down -15.3% in pre-market
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: none
To see David Moenning�s Trading Record, his (Strong Buy) List, or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
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