|
Daily State of the Markets The bears were finally able to gain some traction yesterday as the move out of China, some weak earnings news, and the President’s latest tax idea converged to put our furry friends in play. Up until that point, the bear camp had been strangely quiet and unable to do anything with their possessions. However, renewed concerns on any number of topics put some fear back in play and pushed the S&P into the red for the first time this year. It is safe to say that sentiment has become a little too one-sided lately. With money managers putting money to work, the dollar back in a downtrend, the Fed yammering on about keeping rates low ad infinitum, and spirits running high for a solid season of earnings reports, it is little wonder that we saw stocks move steadily higher since the middle of December. However, yesterday’s action proved that there are indeed two teams in the game. Things got started off on the wrong foot after Alcoa (AA) kicked off the earnings parade with a thud. While hopes are high for this quarter’s earnings season, the aluminum producer started things off with a big, fat miss. This created instant concerns about the global recovery trade and gave the commodity bulls reason to question their conviction. Next up, the People’s Bank of China announced post-close Monday night that they were increasing Reserve Requirements for bank deposits by 0.5% to 16.0% effective immediately. This was a clear sign that the Chinese central bank is ready, willing and able to play the role of “bubble police” as the country is not anxious to see a repeat of the credit excesses experienced in Japan and the U.S. The move is designed to dampen the supply of loans and is likely the first step toward hiking rates. Not to be outdone, the President also lent the bears a hand by running another tax idea up the flagpole. With his annual budget due out shortly, the administration is looking for ways to beef up the revenue side of the ledger. So, apparently the President is looking to raise cash from one his favorite groups of constituents, the “fat cat bankers.” There has been a flurry of reports that the Obama administration is considering a new tax/fee/levy on banks and financial institutions to recoup cash spent on TARP. Needless to say, this talk has created some uncertainty about a banking industry that is busy trying to get back on its feet and back to the business of making loans. Finally, the action in the technology sector seems to be a good example of the concerns about the market getting ahead of itself in terms of the fundamentals. The selling in the tech sector in general and the semis in particular seemed to stem from a BofA/Merrill Lynch note that was expressed concern about the level of inventories and orders. But then again, after the semiconductor index had run 20% in about a month, a pullback was to be expected. Speaking of expected pullbacks, it would appear that this is exactly what is occurring in the stock market at the moment. After moving up 5% without interruption since the middle of December, some profit taking is natural. Thus, the question of the day is if yesterday’s dance to the downside was merely a pause that refreshes or the start of something more meaningful? Stay tuned. Turning to this morning, we don’t have any economic data to review before the bell and the flow of earnings is all but nonexistent today. However, we will get Intel’s (INTC) report after the close tomorrow and then the results from JP Morgan (JPM) before the bell on Friday. Running through the rest of the pre-game indicators, with the exception of France and Germany, the overseas markets are lower. Crude futures are down with the latest quote showing oil off by $0.76 to $80.03. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.74%, while the yield on the 3-month T-Bill is at 0.04%. Next, gold is moving up by $5.60 and the dollar is higher lower against the Yen, 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 28 points; the S&P’s are up about 4 points, while the NASDAQ looks to be about 7 points above fair value at the moment. Wall Street Research Summary Upgrades: |
BT Group (BT) – ABN Amro Massey Energy (MEE) – BofA/Merrill Freeport-McMoRan (FCX) – Target increase at Canaccord Adams BHP Billiton (BHP) – Canaccord Adams Rio Tinto (RTP) – Canaccord Adams Merck (MRK) – Credit Suisse AstraZeneca (AZN) – Credit Suisse Werner Enterprises (WERN) – Deutsche Bank MetroPCS Communications (PCS) – Deutsche Bank Baidu (BIDU) – Deutsche Bank Wyndham Worldwide (WYN) – Deutsche Bank Interactive Corp (IACI) – Goldman Sachs Google (GOOG) – Mentioned positively at Jefferies Raymond James (RJF) – Keefe, Bruyette & Woods Accenture (ACN) – Initiated Overweight at Morgan Stanley Cognizant Technology (CTSH) – Initiated Overweight at Morgan Stanley MasterCard (MA) – Initiated Overweight at Morgan Stanley Visa (V) – Initiated Overweight at Morgan Stanley Western Union (WU) – Initiated Overweight at Morgan Stanley Triumph Group (TGI) – Oppenheimer Check Point Software (CHKP) – Target increased RBC Capital UPS (UPS) – RBC Capital Joy Global (JOYG) – UBS Symantec (SYMC) – Wells Fargo
Telecom Italia (TI) – ABN Amro Southern Copper (PCU) – BofA/Merrill GlaxoSmithKline (GSK) – Credit Suisse Olympic Steel (ZEUS) – KeyBanc Spectra Energy (SE) – Wells Fargo
Long positions in stocks mentioned: MEE, WERN, GOOG, V, JOYG
Be sure to take time to breathe 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
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.
