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Daily State of the Markets After an 8% correction and then the requisite rebound, we have to give the bulls some credit for refusing to yield last week. After all, with the Dow moving some 600 points off the February 6th low in just eight trading sessions, the market had become overbought and was vulnerable. Thus, given the plethora of lousy economic data that was released last week, it would not have been surprising to see the bears regain control of the game. But despite the surprisingly bad news from the housing sector, growing concerns about Greek debt downgrades, and reports showing that the consumer is anything but confident about the future, our heroes in horns were able to bend, but somehow not break last week. To be fair, there was some good news on Friday as we got word that the U.S. economy grew at an even faster pace than had been originally reported. However, most analysts were quick to talk about inventory rebuilding being the culprit for the better-than-expected report and as such, the sustainability of growth remains a big question mark. There was also some trepidation evident on Friday as the situation in Greece seems to grow more tenuous by the day. And then here in the U.S., we’ve got the all-important jobs report due to be released this Friday. With Greece delaying a bond offering and no one really sure when the U.S. will stop losing jobs, the word ‘uncertainty’ may crop up again in the near future. Looking at the charts, we continue to be impressed that the bulls were able to reverse what appeared at the time to be an important breakdown on Thursday. And the fact that the bulls did not give way again on Friday means that the market has established a decent little support zone on the charts at about Dow 10,290 and S&P 1095-1100. We’d be sure to keep an eye on this area whenever some selling comes in next week. The question of the day is if the data due out next week will support additional buying or if macro growth concerns will return to the forefront. We’ll be watching what happens in Greece as well as the data here in the U.S. We’ve got reports on Personal Income and Spending this morning along with Construction Spending and ISM Manufacturing after the opening bell. Turning to this morning, the mood is fairly upbeat on word that an official deal for Greece could get done this week. On the economic front, Personal Incomes grew by +0.1% in, which was below the consensus expectations for an increase of +0.4%. December’s reading was revised downward 0.1% to +0.3%. Personal Spending came in a little better at +0.5% vs. expectations for +0.4% December’s reading for spending was revised up a tenth to +0.3%. Finally, the PCE Core increased 0.2% in January, which was above the December reading of +0.1%. Running through the rest of the pre-game indicators, the overseas markets higher across the board. Crude futures are up $0.21 to $79.87. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.61%. Next, gold is moving down by $2.50 to $1116.40 and the dollar is lower against the Yen but higher against the Euro and Pound. Finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a modestly higher open. The Dow futures are currently ahead by about 30 points; the S&P’s are up about 3 points, while the NASDAQ looks to be about 5 points above fair value at the moment.
* Report includes items that make comparisons to the consensus estimate questionable Wall Street Research Summary Upgrades: |
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Harmony Gold (HMY) – BofA/Merrill Westlake Chemical (WLK) – BofA/Merrill BP (BP) – BofA/Merrill Norfolk Southern (NSC) – Barclays Apple (AAPL) – Mentioned positively at Canaccord Adams Research in Motion (RIMM) – Target increased at Canaccord Adams Abercrombie & Fitch (ANF) – Cowen & Co. AsiaInfo (ASIA) – Goldman Ensco Intl (ESV) – Added to Conviction Buy at Goldman Denbury Resources (DNR) – KeyBanc Coventry Health Care (CVH) – Morgan Stanley Pentair (PNR) – Piper Jaffray Tractor Supply (TSCO) – Piper Jaffray Rowan Companies (RDC) – RBC Capital Whole Foods (WFMI) – UBS
Downgrades:
Total (TOT) – BofA/Merrill Nokia (NOK) – Mentioned cautiously at Canaccord Adams Berkshire Hathaway (BRK.A) – Keefe, Bruyette & Woods
Long positions in stocks mentioned: AAPL
Be sure to keep everything in perspective and until next time, “May the bulls be with you!”
David D. Moenning
Founder TopStockPortfolios.com
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