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Daily State of the Markets Good morning. Yesterday morning we opined that the market felt like it wanted to go higher. And after opening lower and waffling for much of the day, higher is where things finished as the S&P put in a fourth straight day of green screens. So, with that, we will call it a year in terms of making predictions about the direction stock market! Speaking of predictions, the opinions about this morning’s Jobs report seem to be leaning toward good news. The consensus is for the total job losses for the month of December to come in at zero while there are a handful of people looking for plus signs. But, more on that in a moment. Stocks opened lower yesterday on the back of China’s move to ever so slightly increase interest rates. The People’s Bank of China unexpectedly raised rates on 3-month T-bills by more than 4 basis points (0.04%), which heightened concerns that the central bank is preparing to gear up for a fight against inflation by raising rates further in the future. But, traders got some good news here at home to offset the macro global concerns in the form of same-store sales numbers from the nation’s retailers. Also known as “chain-store sales,” the numbers improved in December, as consumers caught up with their shopping plans towards the end on the holiday season. Sales rose +2.9%, according to Thompson Reuters, which was above expectations for an increase of +2.0%. Similarly, ICSC said sales rose by 2.8% year-over-year. And the total sales during the Holiday season – the period spanning November and December – rose 1.8% year-over-year; above ICSC’s estimate of +1.0% and much better than the dismal -5.8% result seen a year ago. StreetAccount, which has become an authority on the subject, reported that 19 of the 27 retailers reporting December sales over the past week have come in with results that were either in line or ahead of consensus estimates. This 70/30 beat-to-miss ratio represented a marked increase over November’s 27/73 ratio and was the second best reading of the year. Speaking of upbeat surprises, it was certainly good news to see a homebuilder actually post a profit yesterday. Believe it or not, Lennar (LEN) came in with a gain of $0.19 in Q4, which may not have been directly comparable to the Reuters estimate of -$0.54. And while it did appear to take some accounting magic, the news did lift hopes that we’re ready to see a rebound in the market in the near future. While all of the above is well and good, the bottom line is traders have been anxiously awaiting the December Jobs report. So, without further ado, let’s get to the numbers. The Labor Department reported that Nonfarm Payrolls in the month of December fell by 85,000, which was well below the consensus estimates for an unchanged reading. Many analysts had hoped to see a plus sign in front of the Nonfarm payroll numbers for the month. The nation’s Unemployment Rate was reported at 10.0%, which was on target with the consensus for 10% and November’s rate of 10.0%. However, the revisions to Nonfarm payrolls for the prior two months were interesting. In November, the government initially reported that the economy lost -11,000 jobs, but today’s revision shows a GAIN of 4,000 jobs – this is the first monthly increase in jobs since the recession began in December 2007. But unfortunately, the revisions for October offset much of the good news in November as payrolls were downwardly revised to -127K from -111K. Not surprisingly, stock futures have moved lower on the news. Running through the rest of the pre-game indicators, with the exception of London, the major overseas markets are higher. Crude futures are down with the latest quote showing oil off by $0.47 to $82.19. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.80%, while the yield on the 3-month T-Bill is at 0.04%. Next, gold is moving down by $13.20 and the dollar is higher against the Euro, but lower versus the Yen and Pound. 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 65 points; the S&P’s are down about 8 points, while the NASDAQ looks to be about 16 points below fair value at the moment. Wall Street Research Summary Upgrades: |
LM Ericsson (ERIC) – BofA/Merrill Schnitzer Steel (SCHN) – Canaccord Adams Agrium (AGU) – Citi JC Penney (JCP) – Goldman Halliburton (HAL) – Goldman Helmerich & Payne (HP) – Goldman Nabors Industries (NBR) – Goldman Alliance Data (ADS) – JP Morgan Visa (V) – Target increased at JP Morgan MasterCard (MA) – Target increased at JP Morgan AK Steel (AKS) – Estimates and Target increased at JP Morgan Arcelor Mittal (MT) – Estimates and Target increased at JP Morgan US Steel (X) – Estimates and Target increased at JP Morgan URS Corporation (URS) – JP Morgan Worthington (WOR) – KeyBanc Morgan Stanley (MS) – Macquarie Research Chipotle Mexican Grill (CMG) – Morgan Stanley Garmin (GRMN) – RBC Capital Alliant Energy (LNT) – RW Baird Health Management (HMA) – RW Baird International Paper (IP) – Target increased at UBS MeadWestvaco (MWV) – Target increased at UBS
Aeropostale (ARO) – Barclays, Oppenheimer TJX Companies (TJX) – Barclays, Oppenheimer MeadWestvaco (MWV) – Deutsche Bank FTI Consulting (FCN) – Deutsche Bank Abercrombie & Fitch (ANF) – Removed from Conviction Buy at Goldman Seagate Technology (STC) – Goldman Zimmer Holdings (ZMH) – Goldman Mylan (MYL) – Goldman Tenneco (TEN) – Goldman Human Genome (HGSI) – Goldman Macy’s (M) – Goldman Cameron Intl (CAM) – Goldman Alberto Culver (ACV) – JP Morgan Colgate-Palmolive (CL) – JP Morgan Coca-Cola (KO) – JP Morgan Boeing (BA) – Macquarie Research Wendy’s (WEN) – Morgan Stanley
Long positions in stocks mentioned: V, IP, MYL
Enjoy your Friday, have a pleasant weekend, 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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