|
Daily State of the Markets What a difference a day makes. At this time yesterday, the bulls were busy suggesting that Monday’s reversal meant the corrective phase had ended and that things were looking up. However, with the situation in Europe causing desperate measures to be taken, it is now the bears’ turn to crow about the outlook being less than optimistic. Once again, the key to the U.S. stock market was the action in the Euro. And with the EU currency breaking down to fresh four-year lows yesterday, stocks simply continued to follow along. U.S. Stocks started off to the upside Tuesday as there appeared to be some follow-through buying on the back of Monday’s strong finish. However, the fun didn’t last long the situation in Europe continued to worsen. First, there was word that swap spreads were “blowing out,” which was quickly followed by Chancellor Merkel’s announcement that Germany was banning naked short selling and pushing for a financial transaction tax to be implemented globally. At first blush, one might have thought that the introduction of the ban on short selling would be a good thing. However, given that the ban on naked shorting was expanded to government bonds and Credit Default Swaps not used in a hedging strategy, the measure reminded investors of September 2008 and was quickly viewed as desperate move by the EU’s strongest economy. Talk of a transaction tax didn’t help much either. U.S. bank stocks were already reeling from a Goldman Sachs (GS) report that bank earnings could fall by 20% once financial regulatory reform was implemented. Thus, the idea of yet another tax on the investment banks caused many to look for safer havens with their trading capital. To be fair, most of the negative action in the stock market right now appears to be tied to fear of what could happen going forward. The talk on the street is that what we are seeing now is round two of the Credit Crisis. But this time, instead of investment banks biting the dust, the glass-is-half-empty crowd fully expects to see countries effectively going into bankruptcy. As the thinking goes, the debt crisis in Europe and the resulting austerity measures being put in play to stem the tide of the crisis, will put the kibosh on the global economic recovery. Thus, traders appear to be discounting a slowdown in growth – just as it appears to be getting started. Where do we go from here? The technicians tell us to watch the May 7th closing low. If the bears are able to take out the 10,380 level on the Dow, most chartists would agree that we would see more selling start to come in. Turning to this morning… While things are looking lower at the open, rumors of an imminent announcement from the ECB has pulled European stocks as well as U.S. stock market futures up off of their lows. On the economic front, the Consumer Price Index for April fell by -0.1%, which was below the consensus for +0.1% and higher than March’s reading of +0.1%. When you strip out food and energy, the so-called Core CPI came in unchanged, which was a tenth below expectations. Finally, remember that there is more to life than increasing its pace… Pre-Game Indicators Here are the important indicators we review each morning before the opening bell…
* Report includes items that make comparisons to the consensus estimate questionable Wall Street Research Summary Upgrades: |
||||||||||||||||||||||||||||||||||||
StanCorp Financial (SFG) – Barclays Torchmark Corp (TMK) – Barclays Rackspace (RAX) – Initiated Outperform at Cowen, Buy at Deutsche Bank Verisign (VRSN) – Goldman Macy’s (M) – Goldman Canadian National Railway (CNI) – Estimates increased at JPMorgan CSX Corp (CSX) – Estimates increased at JPMorgan Norfolk Southern (NSC) – Estimates increased at JPMorgan Union Pacific (UNP) – Estimates increased at JPMorgan Watson Pharmaceuticals (WPI) – JPMorgan Limited Brands (LTD) – JPMorgan
Principal Financial (PFG) – Barclays Prudential Financial (PRU) – Barclays MDC Holdings (MDC) – Removed from Conviction Buy at Goldman DR Horton (DHI) – Removed from Conviction Buy at Goldman JC Penney (JCP) – Removed from America’s Conviction Buy at Goldman TJX Companies (TJX) – Goldman Under Armour (UA) – Serne, Agee
Long positions in stocks mentioned: NSC
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.
