Daily State of the Markets 
Wednesday Morning – September 9, 2009  

If you came into Monday’s session looking for fireworks based on the early futures activity, the results of the overseas markets, or the good economic news from across the pond, you undoubtedly went home disappointed. Instead of a blast to the upside, the bulls put in a very workmanlike effort but did manage to come away with a third straight “W.”

In reality though, one might have thought that the return of the “A-Team” traders would have produced some downside action. After all, it was the day after Labor Day, which is traditionally weak, as well as the first opportunity for those who had been on the beach to embrace what has historically been the worst month on the calendar.

But instead of a big batch of volatility, the bulls employed the old three-yards-and-a-cloud-of-dust offense based on a handful of positive factors. Although there wasn’t any one specific driver to the day’s gains, there were several positive items at work. First, there were a couple of M&A deals. A company buying another company is always a good sign as it is an indication that businesses feel confident enough about the future to put some cash on the line. It also suggests that the prices available in the current market remain favorable enough to warrant a bid.

It also didn’t hurt that the G-20 had pledged over the weekend to support the global recovery with stimulus efforts or that we saw some decent economic news out of the UK, Germany, and Taiwan. And it was certainly a plus that GE (GE) caught an upgrade from JP Morgan based on attractive valuations.

But perhaps the biggest story of the day was found in the commodity pits. A combination of dollar weakness, positive sentiment regarding the recovery trade, and some good tidings from Goldman Sachs produced a gain of 2% in the CRB as gold, silver, and oil all enjoyed big days. Goldman raised its price forecasts for the base metals citing evidence of a stronger-than-expected recovery in global industrial activity.

Although the gains for both the Dow and S&P 500 didn’t really do much to help the bulls’ cause on a chart basis, it is worth noting that the NASDAQ quietly moved to a new cycle high. And given that up until just recently, the NASDAQ had been the leader of the pack, the bulls will argue that this possible resumption of the leadership role bodes well for their cause.

Turning to this morning, once again we don’t have any economic data on tap for today. However, the Treasury’s auction of 10-year notes is likely to draw some attention with the results being announced at around 1:00 pm eastern.

Running through the rest of the pre-game indicators, the foreign markets are mixed by region with Asia mostly lower while Europe is higher. Crude futures are moving up with the latest quote showing oil trading higher by $0.81 to $71.91. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.49%, while the yield on the 3-month T-Bill is currently at 0.14%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a slightly higher open. The Dow futures are currently ahead by about 16 points; the S&P’s are up about 3 points, while the NASDAQ looks to be about 2 points above fair value at the moment.

Today’s Earnings Before the Bell:

Korn/Ferry (KFY) – Reported -$0.05 vs. -$0.06 United Natural Foods (UNFI) – Reported $0.36 vs. $0.35

Upgrades/Downgrades/Brokerage Research:

Monsanto (MON) – Estimates reduced at Barclays Fortress Investment (FIG) – Upgraded at Barclays Invesco (IVZ) – Upgraded at Barclays Blackstone Group (BX) – Upgraded at Barclays eBay (EBAY) – Upgraded at Bernstein Capital One (COF) – Upgraded at Citi MasterCard (MA) – Upgraded at Citi SanDisk (SNDK) – Upgraded at Deutsche Bank F5 Networks (FFIV) – Upgraded at Deutsche Bank Stryker (SYK) – Upgraded at Deutsche Bank Illinois Tool (ITW) – Upgraded to Conviction Buy at Goldman WW Grainger (GWW) – Downgraded at Goldman DuPont (DD) – Downgraded at Goldman Goldman Sachs (GS) – Upgraded at JMP Securities UPS (UPS) – Upgraded at JP Morgan Morgan Stanley (MS) – Upgraded at JP Morgan Wynn Resorts (WYNN) – Upgraded at Oppenheimer Gen Probe (GPRO) – Upgraded at Oppenheimer

Long positions in stocks mentioned: GS

Best of luck today and until next time, “may the bulls be with you!”

David D. Moenning
Founder TopStockPortfolios.com

For more “top stock” portfolios and research, visit TopStockPortfolios.com


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