Daily State of the Markets 
Wednesday Morning – October 21, 2009  

With the indices fresh off new 52-week highs and plenty of earnings reports being prefaced with the words “better than expected,” it would not have been surprising to see the bulls just keep on keepin’ on during Tuesday’s session. But instead of yet another up day, yet another new cycle high, and yet another day of pain for anyone tempted to stand in front of this speeding train, we got a – wait for it – decline of 50 points.

The bears quickly concluded that this so-called “bad action” on a day that by all counts should have been an up day, will be enough to create a pivot point for the market. A point from which our furry friends fully expect to see the indices dive with reckless abandon from here.

But before we don the uber bear costume and begin to gather provisions for the coming storm, we should probably keep in mind that (a) one day does not a bear market make and (b) the drop of 50 points takes the Dow all the way back to where it stood just before lunch on Monday. Thus, while we will readily admit that stocks are due for a pullback lasting more than a couple of hours, we are of the mind that it is probably a good idea to hold off on the doom and gloom chatter for a day or so yet.

To be sure, the bulls had an opportunity to stab yet another dagger into the hearts of their opponents yesterday. While the most recent breakout was readily apparent on a chart of the venerable DJIA, the squiggly lines of the S&P, NASDAQ, Russell, and Midcap indices didn’t make the case for a clean break having taken place. So, with yet another impressive display of execution from Apple (AAPL) and a report from Caterpillar (CAT) that nearly caused the earth at to shake at the corner of Broad and Wall, those seeing the glass as at least half full might have expected some fireworks to the upside yesterday morning.

However, a funny thing happened on the way to the celebration. Instead of the greenback continuing to fall and, in turn, the fast money crowd continuing to play their favorite trades derived from the demise of the dollar, our country’s currency took an odd turn northward. So, despite the long list of companies sporting EPS numbers that easily cleared the relatively low bar of analyst expectations, traders appeared confounded by the dollar’s move up and were thus unable to play their usual game.

To be fair, the bear camp did enjoy the benefit of a report on housing starts that was weak enough to raise some questions about the veracity of the recovery. And the PPI report wasn’t exactly bullish either. But the bottom line for yesterday appears to be that without the lower dollar/higher commodities trade, stock traders didn’t quite know how to act.

So, will yesterday’s “bad action” be the precursor for a dance to the downside or just another day off for the bulls? Only time will tell for sure, but a pause in the run for the roses makes some sense right about now.

Turning to this morning, we don’t have any economic data to report before the bell. But we will get the Fed’s Beige Book at 2:00 and some Fedspeak from Lacker and Rosengren this afternoon.

Running through the rest of the pre-game indicators, the foreign markets are down across the board with European Bourses off by 1% or so. Crude futures are pulling back with the latest quote showing oil trading off by $1.26 to $77.86. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.39%, while the yield on the 3-month T-Bill is currently at 0.07%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 35 points; the S&P’s are down about 3 points, while the NASDAQ looks to be about 4 points below fair value at the moment.

Yesterday’s Earnings After The Bell



CH Robinson CHRW $0.57 $0.55
Gilead Sciences GILD $0.78 $0.67
Intuitive Surgical ISRG $1.55 $1.48
Nabors Industries NBR $0.18 $0.16
SLM Corp SLM $0.26 $0.03
SanDisk SNDK $0.75 $0.24
Seagate Technology STX $0.58 $0.47
Stryker SYK $0.69 $0.69
Yahoo! YHOO $0.13 $0.07


Today’s Earnings Before The Bell



Arkansas Best ABFS -$0.23 -$0.37
Air Products APD $1.14 $1.12
Allegheny Technology ATI $0.01 $0.03
Boeing BA -$2.23 -$2.12
Freeport McMoRan FCX $2.07 $1.33
FLIR Systems FLIR $0.38 $0.35
Hudson City Bancorp HCBK $0.27 $0.26
KeyCorp KEY -$0.50 -$0.41
Eli Lilly LLY $1.20 $1.01
Altria MO $0.48 $0.46
Morgan Stanley MS $0.38 $0.29
Northrop Grumman NOC $1.52 $1.18
Northern Trust NTRS $0.72 $0.85
Omnicom OMC $0.53 $0.53
Penn Natl Gaming PENN $0.33 $0.34
Piper Jaffray PJC $0.47 $0.33
St. Jude Medical STJ $0.59 $0.58
Stanley Works SWK $0.77 $0.62
US Bancorp USB $0.30 $0.27
Wells Fargo WFC $0.56 $0.38



Stryker (SYK) – Upgraded at BofA/Merrill Intl Flavors (IFF) – Upgraded at Barclays NBTY (NTY) – Target increased at Canaccord Adams M&T Bank (MTB) – Upgraded at FBR Capital Companhia Siderurgica (SID) – Upgraded at Goldman Cardinal Health (CAH) – Target increased at Goldman Lexmark (LXK) – Upgraded at JP Morgan Cree (CREE) – Upgraded at Morgan Joseph State Street (STT) – Mentioned positively at Rochdale Hansen Natural (HANS) – Mentioned positively at UBS Sherman-Williams (SHW) – Upgraded at Stephens


Western Union (WU) – Downgraded at Calyon Securities El Paso (EP) – Downgraded at Citi Ternium (TX) – Downgraded at Goldman Brinker Intl (EAT) – Downgraded at Goldman NRG Energy (NRG) – Downgraded at Jefferies Lockheed Martin (LMT) – Downgraded at Morgan Keegan Devon Energy (DVN) – Downgraded at Morgan Stanley

Long positions in stocks mentioned: GS

Have a great day 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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