Daily State of the Markets 
Thursday Morning – September 10, 2009  

Although the bulls prevailed yesterday with a couple of new cycle highs and you wouldn’t know it by simply checking the end-of-day numbers, the bears actually spent a fair amount of time on Wednesday taking their shots. And while our furry friends were able to make a game of it after lunch by pushing Dow back to breakeven, ultimately the dip buyers proved once again that they are be a force to be reckoned with.

After stumbling out of the gate, buyers showed up in response to some new M&A activity, better-than-expected global economic data out of China, positive comments on the conglomerates, increased guidance from the semis, and word that the credit cycle had begun to recover for credit cards.

Just before lunch it looked like the bulls were on a roll as the NASDAQ was stepping lively into new cycle high territory and the S&P was pushing hard against the August high water mark. But then, all of a sudden, the bears took their shot. And for a while, it looked like they had indeed hit the mark as stocks took a dive and the day’s gains were all but history. Some say it was the Beige Book report the spurred the bout of selling while the politically inclined crowd suggested that stocks got hit in response to Barney Frank saying the Democrats had the votes on health care. But in any event, the quick dive definitely gave the buyers a scare.

Although the initial headline from the Fed’s Beige Book report suggested that the economy was in the process of stabilizing, as they say, the devil is in the details. Apparently traders did not particularly care for the fact that consumer spending remained soft with the majority of Fed Districts reporting that shoppers were focusing on essentials and discount items. They probably didn’t like the tidbit on the labor market remaining slack across the country, that the housing market remains a problem, or that lending activity has weakened.

It would appear that the bears used the not-so encouraging details from the Beige Book to start shooting some holes in the recovery theme. And for a while there, it looked like the glass-is-half-empty crowd just might prevail as the Dow gave up every inch of its 75 point gain and moved briefly into the red.

While it was touch-and-go for a while, the bulls did ultimately prevail as some buying came in during the last 90 minutes. The day’s gains pushed both the S&P and NASDAQ to new closing highs for the current cycle and we should note that NASDAQ has apparently resumed its leadership role by stepping lively past the old intraday highs as well.

Turning to this morning, Initial Jobless Claims for the week ending August 29th came in a 550K, which was a bit better than the consensus for 560K and last week’s revised total of 576K. Continuing claims for unemployment insurance totaled 6.088M for the week versus expectations for 6.2M and last week’s revised 6.247M.

Running through the rest of the pre-game indicators, the foreign markets are mixed by region with Asia mostly higher while Europe is down a fraction. Crude futures are moving up with the latest quote showing oil trading higher by $0.41 to $71.72. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.46%, while the yield on the 3-month T-Bill is currently at 0.13%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a flat-to-slightly-higher open. The Dow futures are currently ahead by about 5 points; the S&P’s are up about a single point, while the NASDAQ looks to be about even with fair value at the moment.

Upgrades/Downgrades/Brokerage Research:

Yahoo! (YHOO) – Upgraded at BofA/Merrill Illinois Tool (ITW) – Downgraded at BofA/Merrill Talbots (TLB) – Upgraded at Citi KB Home (KBH) – Estimates and target raised at Credit Suisse Tiffany & Co (TIF) – Upgraded at Credit Suisse Mylan (MYL) – Target increased at Goldman Lazard (LAZ) – Added to Conviction Buy list at Goldman Blackstone Group (BX) – Added to Conviction Buy list at Goldman Stifel Financial (SF) – Removed from Conviction Buy at Goldman Time Warner (TWX) – Added to Conviction Buy list at Goldman Electronic Arts (ERTS) – Downgraded at Goldman News Corp (NWS) – Estimates and target increased at Goldman Viacom (VIA.B) – Estimates and target increased at Goldman CBS Corp (CBS) – Estimates and target increased at Goldman Disney (DIS) – Estimates and target increased at Goldman BP (BP) – Downgraded at HSBC Royal Dutch Shell (RDS.A) – Downgraded at HSBC Apple Inc (AAPL) – Upgraded at JMP Securities UAL Corp (UAUA) – Upgraded at JP Morgan US Airways (LLC) – Upgraded at JP Morgan JetBlue Airways (JBLU) – Downgraded at JP Morgan Navistar (NAV) – Downgraded at JP Morgan Radio Shack (RSH) – Upgraded at Morgan Stanley Cardinal Health (CAH) – Downgraded at Oppenheimer ON Semiconductor (ONNN) – Target increased at UBS VimpelCom (VIP) – Upgraded at UBS

Long positions in stocks mentioned: GS, AAPL

Make the decision to have a great 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


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