David Moenning's Daily State of the Markets: 08/02
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Not What They Wanted to Hear
Good morning. With the major indices sitting right at important resistance levels and talk of an end to the rate hikes becoming prominent, surprisingly strong economic data and news that inflation is percolating was NOT what the bulls wanted to hear yesterday. Since market players and the Fed are completely �data dependent� at the present time, one look at the reports from the ISM, Personal Income and Spending, and Pending Home Sales was all it took for the bears to grab the ball.
For the second straight day, it was stronger than expected economic news that was the catalyst for a modest decline. While the news that both Personal Income and Personal Spending were better than expected raised some eyebrows, it was the news that inflation-adjusted consumer spending rose to its highest level in 4 years that got the bears stirring.
While we recognize that reviewing the details of every economic report may not be the most exciting reading each morning, we need to remember that economic data is the name of the game right now. In short, if you want to understand why the markets are moving on a daily basis, then you�ve got to learn to love some of the relatively inane data such as the PCE Price Index, the ISM Composite, and my personal favorite, the non-defense ex-aircraft orders for durable goods.
Speaking of the ISM Composite, the index, which was formerly called the Purchasing Managers Index (this measures the activity of purchasing managers, who are the guys that actually do the ordering of stuff), came in much higher than expected yesterday. While there is a great deal of talk amongst the Fed and economists about a slowing economy, some of the data that has been released recently offers an opposing view. According to the ISM, �Manufacturing is proving to be quite resilient,� which was a sentiment mirrored by last week�s Beige Book report.
But the recent good news hasn�t been limited to manufacturing as Pending Home Sales and Construction Spending both came in above expectations.
Couple this with the Personal Income report and the recent Consumer Sentiment readings, and it appears that a dire economic condition isn�t exactly the picture that is being painted by the data.
The solid economic data, higher than expected inflation readings, relentlessly high oil prices, and the rather upbeat mood of the consumer doesn�t seem to promote the idea that the Fed needs to cease and desist right this second. And with the Fed apparently split on the topic of whether or not to raise rates for the 18th straight time next Tuesday, all this good news is not what the bulls are looking to hear.
So with some renewed concern about inflation and the Fed going too far, stocks probed the downside yesterday. The bulls will continue to argue that yesterday�s result didn�t really change much of anything and that the past two sloppy sessions have been merely a �pause that refreshes.� On the other hand, the bears continue to mumble about growing uncertainty and the fact that uncertainty is usually an item that winds up in their column.
Turning to this morning, although there is no economic data, or perhaps because there is no economic data, slated for today, traders appear to be in a better mood before the bell. Earnings are the primary catalysts so far, however, investors may be turning their attention to the weather channel soon as Tropical Storm Chris is attracting some attention in the oil pits.
Running through the rest of the pre-game indicators, overseas markets are higher across the board with both French and German bourses sporting gains of 1% so far. Gold futures are moving up a little this morning and are currently exchanging hands at $659.50. Oil is moving up again this morning, this time on the weather news, and crude futures are currently trading higher by $0.63 to $75.54. Interest rates are lower this morning with the 2-year currently quoted at 4.95% while the 10-yr is trading with a yield at 4.97% right now. And finally, with about an hour before the bell, stock futures in the U.S. are a little higher. The Dow futures are currently up by 17; the S&Ps are ahead by 1.80, and the NASDAQ is sporting an advance of about 4 points.
Stocks �In Play� This Morning:
Tiffany (TIF) � Mentioned positively in Barron�s
Sprint Nextel (S) � Mentioned positively in WSJ
Transocean (RIG) � Upgraded at BofA
Simon Property Group (SPG) � Downgraded at BofA
Ensco (ESV) � Upgraded at BofA, Also PDE, RDC
Marathon Oil (MRO) � Downgraded at C
Barrick Gold (ABX) � Added to Buy list at GS, Also FCX, TIN, X
Franklin Resources (BEN) � Mentioned positively at GS
Vornado Realty (VNO) � Downgraded at Merrill Lynch
Mobile Telesystems (MBT) � Upgraded at Merrill Lynch
Blue Nile (NILE) � Upgraded at Piper Jaffray
CBRL Group (CBRL) � Upgraded at Raymond James
US Steel (X) � Downgraded at UBS
Lowes (LOW) � Downgraded at UBS
Weatherford Intl (WFT) � Upgraded at Wachovia
Baker Hughes (BHI) � Downgraded at Wachovia
Automatic Data (ADP) � Reported $0.44 vs. $0.46, Authorizes buyback
Time Warner (TWX) � Reported $0.20 vs. $0.19
Procter & Gamble (PG) � Reported $0.55 vs. $0.54
CIGNA (CI) � Reported $2.31 vs. $1.93
Long positions in stocks mentioned: GS, MRO, BHI
** 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. With the major indices sitting right at important resistance levels and talk of an end to the rate hikes becoming prominent, surprisingly strong economic data and news that inflation is percolating was NOT what the bulls wanted to hear yesterday. Since market players and the Fed are completely �data dependent� at the present time, one look at the reports from the ISM, Personal Income and Spending, and Pending Home Sales was all it took for the bears to grab the ball.
For the second straight day, it was stronger than expected economic news that was the catalyst for a modest decline. While the news that both Personal Income and Personal Spending were better than expected raised some eyebrows, it was the news that inflation-adjusted consumer spending rose to its highest level in 4 years that got the bears stirring.
While we recognize that reviewing the details of every economic report may not be the most exciting reading each morning, we need to remember that economic data is the name of the game right now. In short, if you want to understand why the markets are moving on a daily basis, then you�ve got to learn to love some of the relatively inane data such as the PCE Price Index, the ISM Composite, and my personal favorite, the non-defense ex-aircraft orders for durable goods.
Speaking of the ISM Composite, the index, which was formerly called the Purchasing Managers Index (this measures the activity of purchasing managers, who are the guys that actually do the ordering of stuff), came in much higher than expected yesterday. While there is a great deal of talk amongst the Fed and economists about a slowing economy, some of the data that has been released recently offers an opposing view. According to the ISM, �Manufacturing is proving to be quite resilient,� which was a sentiment mirrored by last week�s Beige Book report.
But the recent good news hasn�t been limited to manufacturing as Pending Home Sales and Construction Spending both came in above expectations.
Couple this with the Personal Income report and the recent Consumer Sentiment readings, and it appears that a dire economic condition isn�t exactly the picture that is being painted by the data.
The solid economic data, higher than expected inflation readings, relentlessly high oil prices, and the rather upbeat mood of the consumer doesn�t seem to promote the idea that the Fed needs to cease and desist right this second. And with the Fed apparently split on the topic of whether or not to raise rates for the 18th straight time next Tuesday, all this good news is not what the bulls are looking to hear.
So with some renewed concern about inflation and the Fed going too far, stocks probed the downside yesterday. The bulls will continue to argue that yesterday�s result didn�t really change much of anything and that the past two sloppy sessions have been merely a �pause that refreshes.� On the other hand, the bears continue to mumble about growing uncertainty and the fact that uncertainty is usually an item that winds up in their column.
Turning to this morning, although there is no economic data, or perhaps because there is no economic data, slated for today, traders appear to be in a better mood before the bell. Earnings are the primary catalysts so far, however, investors may be turning their attention to the weather channel soon as Tropical Storm Chris is attracting some attention in the oil pits.
Running through the rest of the pre-game indicators, overseas markets are higher across the board with both French and German bourses sporting gains of 1% so far. Gold futures are moving up a little this morning and are currently exchanging hands at $659.50. Oil is moving up again this morning, this time on the weather news, and crude futures are currently trading higher by $0.63 to $75.54. Interest rates are lower this morning with the 2-year currently quoted at 4.95% while the 10-yr is trading with a yield at 4.97% right now. And finally, with about an hour before the bell, stock futures in the U.S. are a little higher. The Dow futures are currently up by 17; the S&Ps are ahead by 1.80, and the NASDAQ is sporting an advance of about 4 points.
Stocks �In Play� This Morning:
Tiffany (TIF) � Mentioned positively in Barron�s
Sprint Nextel (S) � Mentioned positively in WSJ
Transocean (RIG) � Upgraded at BofA
Simon Property Group (SPG) � Downgraded at BofA
Ensco (ESV) � Upgraded at BofA, Also PDE, RDC
Marathon Oil (MRO) � Downgraded at C
Barrick Gold (ABX) � Added to Buy list at GS, Also FCX, TIN, X
Franklin Resources (BEN) � Mentioned positively at GS
Vornado Realty (VNO) � Downgraded at Merrill Lynch
Mobile Telesystems (MBT) � Upgraded at Merrill Lynch
Blue Nile (NILE) � Upgraded at Piper Jaffray
CBRL Group (CBRL) � Upgraded at Raymond James
US Steel (X) � Downgraded at UBS
Lowes (LOW) � Downgraded at UBS
Weatherford Intl (WFT) � Upgraded at Wachovia
Baker Hughes (BHI) � Downgraded at Wachovia
Automatic Data (ADP) � Reported $0.44 vs. $0.46, Authorizes buyback
Time Warner (TWX) � Reported $0.20 vs. $0.19
Procter & Gamble (PG) � Reported $0.55 vs. $0.54
CIGNA (CI) � Reported $2.31 vs. $1.93
Long positions in stocks mentioned: GS, MRO, BHI
** 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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