Daily State of the Markets 
Tuesday Morning – October 5, 2010  

Sometimes it’s the little things that matter most to the market. Not always, mind you, but on occasion it is the weight of the minor uncertainties or a handful of modestly negative data that winds up moving the market. And in our humble opinion, such was the case on Monday.

In short, there was not an obvious catalyst that pushed the stock market down out of its little comfort zone yesterday. However, there WERE an abundance of nagging inputs that may have given the bears an edge on the session. Things such as Ireland’s central bank slashing their GDP estimate to just 0.2% in 2010 which, with some rounding here and maybe a incorrect decimal point there, could very easily turn into a negative number and lead people to start using the “R” word again when referencing the PIGI’S.

Since Europe has been a sticking point for the markets this year, we probably shouldn’t ignore the report that banks in the UK could face serious funding shortages (estimated at 25 billion pounds per month) next year and may need to ask the government for some help. And then there was the Swiss – who decided it was time to tighten up their banking rules. Reports suggest that both UBS and Credit Suisse will need to round up a big chunk of new capital.

Closer to home, traders initially seemed to brush off the decline in Factory Orders seen in August. But, there were three other little things that apparently proved problematic. First, there was the DOJ’s lawsuit against American Express (AXP). While Visa (V) and MasterCard (MA), settled their disputes with the government, Amex is taking on the DOJ. Next, there was the negative call on Mr. Softie (MSFT) from a little firm named Goldman Sachs (GS). And finally, the talk of more IOU’s being used in the State of California reminded investors that all is not well in many states.

Now toss in the overbought condition, the upbeat sentiment, and the fact that “September’s to remember” don’t usually lead to strong Octobers, and, well, it wasn’t terribly surprising to see some selling crop up.

Turning to this morning… Stock futures are heading higher this morning on the back of an interest rate cut and the announcement of quantitative easing in Japan as well as the better-than expected PMI data out of Europe.

On the economic front… we don’t have any economic data to review before the bell, but we will get reports on ISM Non-manufacturing (services sector) at 10:00 am eastern.

Finally, remember that it pays to be open minded (in more ways than one)…

Pre-Game Indicators

Here are the important indicators we review each morning before the opening bell…

  • Major Foreign Markets:
    • Australia: -0.38%
    • Shanghai: na
    • Hong Kong: +0.09%
    • Japan: +1.47%
    • France: +1.19%
    • Germany: +0.08%
    • London: +0.12%

     

  • Crude Oil Futures: + $0.53 to $82.00
  • Gold: + $12.40 to $1329.20
  • Dollar: higher against the Yen, lower vs Euro and Pound
  • 10-Year Bond Yield: Currently trading at 2.46%

     

  • Stocks Futures Ahead of Open in U.S. (relative to fair value): 
    • S&P 500: +8.52
    • Dow Jones Industrial Average: +69
    • NASDAQ Composite: +16.07  

Wall Street Research Summary

Upgrades:

PF Chang’s (PFCB) – Argus Research SunPower (SPWRA) – BofA/Merrill Marriott (MAR) – Mentioned positively at Deutsche Bank PG&E (PCG) – Deutsche Bank Ternium (TX) – Goldman Sachs Affiliated Managers Group (AMG) – Goldman Sachs Ethan Allen (ETH) – Goldman Sachs Walgreens (WAG) – Jefferies Citi (C) – Target increased at JPMorgan Wells Fargo (WFC) – Target increased at JPMorgan MEMC Electronic Materials (WFR) – RBC Capital Anheuser-Busch (BUD) – Stifel Nicolaus Atmel (ATML) – Target increased at UBS

Downgrades:

Coca-Cola Enterprises (CCE) – Argus Research Covanta Holding (CVA) – BofA/Merrill Colgate (CL) – Barclays Ryland (RYL) – Credit Suisse Peabody Energy (BTU) – Deutsche Bank ArcelorMittal (MT) – Deutsche Bank BlackRock (BLK) – Goldman Sachs Home Depot (HD) – Goldman Sachs Barnes & Noble (BKS) – Goldman Sachs Microsoft (MSFT) – Janney Capital

Long positions in stocks mentioned: none

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.

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