Daily State of the Markets 
Tuesday Morning – May 11, 2010  

Isn’t it interesting what a little market pressure can do to the stance of a political entity? Last week, investors fretted that the ECB lacked a sense of urgency with regard to providing assistance to the Eurozone countries. But after a couple of pastings in the region’s stock markets and some hysteria in the Euro, the ECB suddenly did an about-face and came into Monday morning sporting a “shock and awe” attitude toward the idea of solving Europe’s credit contagion.

Before the market opened on Monday, the Eurozone monetary and political officials announced an emergency loan package that was much more aggressive than expected. The EU announced a 750 billion Euro (or just shy of $1 trillion) emergency liquidity fund to reduce sovereign liquidity risk. The EU commission said it will contribute 60 billion Euros, the member states will provide 440 billion, and the IMF will pony up 250 billion Euros.

Although the new loan facility wasn’t terribly surprising, the global coordination involved certainly was. The fact that the ECB decided to do an about-face on the issue of their involvement in the process was an eye-opener. The European Central Bank said it will begin buying government bonds in order to provide liquidity and then hit the ground running as Germany’s Bundesbank began buying bonds immediately.

It was also interesting to note that the U.S. Federal Reserve got involved. While the U.S. Fed will not directly participate in loaning money to the lending facility, it did reopen swap lines with several countries in order to ensure that there are plenty of U.S. dollars available for the project.

Stock markets around the globe rallied furiously in response to the plan as it became clear that the Eurozone was intent on avoiding a collapse of the EU and the Euro currency. The result was the biggest one-day gains in more than a year. The Dow advanced 405 points or +3.9% while the S&P rose +4.4%, the NASDAQ gained +4.8%, and the Russell 2000 lept +5.6% on the day.

However, the bears are quick to point out that the indices were unable to build on early gains as highs of the days occurred within 15 minutes of the opening bell. Thus, our furry friends suggest that yesterday’s big blast was more fit and fury as a result of short-covering than anything else. The glass-is-half-empty gang also pointed to the action in the Euro as a reason to not immediately jump back on the bull bandwagon. After opening significantly higher in European trading, the Euro wound up giving back much of its gains as the day wore on in New York trading on worries over the actual details of the plan crept in.

So, while equity traders may have dodged a bullet on Monday with the ECB’s about-face decision to jump into the fray, the concerns about the situation in Europe have not gone away completely. Thus, we will continue to keep a close eye on the overhead resistance on the market indices here at home.

Turning to this morning… Concerns about the willingness of the EU to implement the massive bailout package is giving most markets a reason to pause in the early going. The Euro once again finds itself under pressure as a showdown between speculators appears to be shaping up.

Running through the rest of the pre-game indicators…

  • Foreign Markets: With the exception of Germany, down hard across the board
  • Crude Oil Futures: Down $1.00 to $75.80
  • Gold: Up $15.60 to $1216.40
  • Dollar: Higher against Yen, Euro, and Pound
  • 10-Year Bond Yield: Currently trading at 3.51%
  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
  • S&P 500: -14

Dow Jones Industrial Average: -110 NASDAQ Composite: -18

Finally, remember to take time to enjoy your day…

Wall Street Research Summary


Legg Mason (LM) – BofA/Merrill Home Depot (HD) – Estimates and target increased at Bernstein Lowe’s (LOW) – Estimates and target increased at Bernstein MetroPCS Communications (PCS) – Deutsche Bank Olympic Steel (ZEUS) – KeyBanc Electronic Arts (ERTS) – MKM Partners Buffalo Wild Wings (BWLD) – MKM Partners Denny’s (DENN) – MKM Partners Cheesecake Factory (CAKE) – RW Baird


Deere (DE) – Bernstein Merck (MRK) – Mentioned cautiously at Citi Pfizer (PFE) – Mentioned cautiously at Citi Tyson Foods (TSN) – Credit Suisse Alcoa (AA) – Target reduced at Deutsche Bank JC Penney (JCP) – JPMorgan Fidelity National Information (FIS) – RBC Capital Dean Foods (DF) – UBS

Long positions in stocks mentioned: none

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


The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.