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Daily State of the Markets |
While this is clearly just one man’s opinion, I’m of the mind that the bears missed out on a pretty decent opportunity yesterday. In baseball terms, the bear’s batter had a good look at a belt-high fastball – otherwise known as a “fat pitch” – and instead of driving the ball into the gap, wound up fouling the thing off. The bulls’ pitcher breathed a sigh of relief because he knew darn well that he had gotten away with a “miss” while the bears’ batter wondered if he’d get another pitch to hit in the at-bat.
Returning to the English language, it is true that the Dow wound up in the red yesterday. But after a run up of 540 points over the past two and one-half weeks, a decline of 41 points was a mere drop in the bucket and didn’t exactly send the bulls running for cover. And then, the fact that the NASDAQ actually finished up on the session put the day’s modest pullback into perspective.
Once again, the “setup” was there for the bears to get something going. Stocks were overbought from both the near-term and intermediate-term perspective. Traders knew the day following a quadruple-witch options expiration event is historically weak. The overseas markets were down. Valuation concerns started to crop up again in the press. The dollar rebounded, sending commodity prices lower. And the banks struggled with the idea that the G-20 meeting would likely create more stringent capital requirements.
Thus, the quick drop on nearly 90 points out of the gate wasn’t exactly surprising. And with the bulls having enjoyed more than their fair share of fun in the sun lately, it wouldn’t have taken much for the buyers to temporarily sit on their hands and let the bears have their way for a while.
But instead of a scary down day, the tech sector caught a batch of upbeat reports and the dip buyers, once again, did their thing. For example, Credit Suisse upgraded Novellus (NVLS) and suggested that Samsung will increase their 2010 capital expenditures. Barclays and Morgan Stanley (MS) both said they expect semiconductor equipment shares to move higher, with the latter noting that consensus estimates are not reflecting a material pick-up in NAND spending in 2010. In addition, Goldman Sachs raised its PC sales forecast and I.T. spending numbers, while also upgrading shares of NetApp (NTAP), citing expectations that estimates will move higher on a combination of better-than-expected revenue growth and operating margins.
While the reports out of the technology sector oftentimes sound like a bunch of mumbo-jumbo, the theme from these reports is fairly clear – Credit Suisse, Barclays, Morgan Stanley, and Goldman Sachs all expect things to continue to recover in the technology sector. And since technology often viewed as a cyclical sector… well, you get the idea.
Turning to this morning, we don’t have any economic data to review before the bell. However, we will get a report on the Richmond Fed and July Home Prices at 10:00 am.
Running through the rest of the pre-game indicators, the foreign markets are mixed by region with Asia lower and Europe higher. Crude futures are moving up with the latest quote showing oil trading higher by $1.54 to $71.25. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.50%, while the yield on the 3-month T-Bill is currently at 0.07%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently ahead by about 50 points; the S&P’s are up about 6 points, while the NASDAQ looks to be about 8 points above fair value at the moment.
Upgrades/Downgrades/Brokerage Research:
Tellabs (TLAB) – Target increased at Auriga US Steel (X) – Upgraded at BofA/Merrill Google (GOOG) –Target increased at Canaccord Adams Alpha Natural Resources (ANR) – Upgraded at Citi Peabody Energy (BTU) – Upgraded at Citi Macy’s (M) – Upgraded at Citi Applied Materials (AMAT) – Mentioned positively at Citi for a trade Dow Chemical (DOW) – Target increased at Credit Suisse, UBS Hewlett Packard (HPQ) – Upgraded at Credit Suisse Dell (DELL) – Downgraded at Credit Suisse Covance (CVD) – Upgraded at Jefferies Perot Systems (PER) – Downgraded at Jefferies Grupo Televisa (TV) – Upgraded at JP Morgan Red Hat (RHT) – Mentioned positively at Morgan Stanley Darden Restaurants (DRI) – Estimates increased at Morgan Stanley Bank of America (BAC) – Target increased at Rochdale Expedia (EXPE) – Target increased to $30 from $25 at Soleil Allergan (AGN) – Target increased at UBS Vulcan Materials (VMC) – Downgraded at UBS Martin Marietta Materials (MLM) – Downgraded at UBS DISH Network (DISH) – Upgraded at Wells Fargo
Long positions in stocks mentioned: GS, EXPE
Wishing you all the best today 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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