|
Daily State of the Markets Good morning. Trying to interpret the message the market may or may not be sending on any given day can be a very tricky business – especially when the markets don’t do much. For example, the market basically closed flat on Wednesday and it would be easy to simply call it a day of rest after a nice rally to start the New Year. However, we are going to take two things away from yesterday’s session: First, traders are obviously waiting on data and second, the market feels like it wants to go higher. Is there a degree of subjectivity involved here? In a word, yes. However, given the trepidation over the Holiday Shopping Season and the anticipation of Friday’s Jobs report, the fact that stocks have done little over the past two days suggests that traders may need some additional input (such as the data from the nation’s retailers today) before bidding stocks up. And if you take a peek at the chart of the DJIA the recent stall becomes quite clear. Speaking of charts, take a gander at a charts of the S&P, the NASDAQ, the Russell, and the S&P 400 Midcap Index. The “stall” does not appear as important here and unlike the DJIA, these indices are all in solid uptrends. Hence our statement that the market “feels” like it wants to head higher. For the Dow, a bad economic report that triggers some selling would likely push the index back into its trading range. Whereas with rest of the indices, if a bad day occurs, the decline will represent a pullback in a confirmed uptrend. So, while we don’t like to make predictions, we’ll suggest that investors continue to give the bulls the benefit of any doubt for a while. Yesterday’s data was a mixed bag, which likely added to the lack of movement on the session. ADP reported that private sector payrolls fell by 84K in December, which, while weaker than expectations, was a solid improvement over the 145K drop seen in November. In addition, December marked the 9th consecutive month in which the pace of job cuts had declined. In addition, the ISM reported that the services sector was able to move up into the expansion zone with the reading from their Non-Manufacturing Index breaking above the all-important 50 mark at 50.1 (from 48.7 in November). However, the result was slightly below expectations and the New Orders component – which obviously looks to the future – fell to 52.1 from 55.1. One more piece of data that highlights the good news/bad news mode of the day was the Employment component of ISM report. Although the index improved to a reading of 44 (up from 41.6), the absolute level of the index reminds us that employment remains in contraction territory. Turning to this morning, we’ve got the results from some of the nation’s retailers with TJX Companies (TJX), American Eagle (AEO), Aeropostale (ARO), Children’s Place (PLCE), Wet Seal (WTSLA), Zumiez (ZMZ), Costco (COST), JC Penney (JCP), Nordstrom’s (JWN), Target (TGT), and Macy’s (M) all coming in above expectations so far while the numbers from Abercrombie (ANF), Gap (GPS), BJ’s (BJ) were weaker. On the economic front, the Labor Department reported that initial claims for unemployment insurance for the week ending January 2nd increased by 1,000 to 434K, but were below the expectations for a reading of 439K. Continuing Claims for the week ending December 26th were below consensus at 4.802M vs. expectations for 4.975M and last week’s unrevised total of 4.981M. Running through the rest of the pre-game indicators, with the exception of Shanghai, the overseas markets are down fractionally. Crude futures are down with the latest quote showing oil off by $0.55 to $82.63. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.84%, while the yield on the 3-month T-Bill is at 0.04%. Next, gold is moving down by $5.50 and the dollar is higher against the Euro and Pound, but lower versus the Yen. 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 25 points; the S&P’s are down about 3 points, while the NASDAQ looks to be about 2 points below fair value at the moment. Wall Street Research Summary Upgrades: |
Zimmer Holdings (ZMH) – BofA/Merrill Chubb (CB) – BofA/Merrill Marsh & McLennan (MMC) – BofA/Merrill Tenet Healthcare (THC) – BofA/Merrill Humana (HUM) – Barclays Chubb (CB) – Citi Cymer (CYMI) – Credit Suisse Bank of America (BAC) – Credit Suisse Perkin Elmer (PKI) – Deutsche Bank Charles River Laboratories (CRL) – Deutsche Bank McKesson (MCK) – Deutsche Bank Teva Pharmaceutical (TEVA) – Goldman Praxair (PX) – Estimates and target increased at Jefferies Dover Corp (DOV) – JP Morgan SPX Corp (SPW) – JP Morgan Ford (F) – Estimates and target increased at UBS
CNA Financial (CNA) – BofA/Merrill Tessera Technologies (TSRA) – BofA/Merrill BHP Billiton (BHP) – Cazenove Alcoa (AA) – Citi Progressive (PGR) – Credit Suisse Netease.com (NTES) – Credit Suisse Life Technologies (LIFE) – Deutsche Bank AmerisourceBergen (ABC) – Deutsche Bank Reynolds America (RAI) – Goldman Banco Santander (STD) – HSBC Infosys (INFY) – Jefferies 3M (MMM) – JP Morgan Roper Industries (ROP) – JP Morgan Rite Aid (RAD) – JP Morgan Alcon (ACL) – UBS Dr. Pepper Snapple (DPS) – Estimates reduced at UBS
Long positions in stocks mentioned: BAC, ABC, INFY, DPS, MMM
Best wishes for a pleasant 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
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.
