|
Daily State of the Markets |
One of my absolute favorite Wall Street-isms goes toward the short-term – no, make that A.D.D-like thought process that traders possess. It goes like this: Once is a trend; twice is a tradition; and three times is a commandment!
So, it looks like we just might have a new “tradition” in the stock market: Start each month with a big down day that scares the bajeebers out of anyone who has purchased stocks in the last two months. As Exhibit A, I offer August 3rd. The S&P plunged -2.2%, while the Dow dove nearly 200 points and the Russell Small Caps got clocked for more than -2.4%.
From there, though, the markets turned around within two days and proceeded to make a mockery of all those folks counseling caution for the market’s worst month of the year. Instead of heading for the hills, traders decided to discount better days ahead in the economy – to the tune of +3.6% for the S&P in September and +5.6% for the NASDAQ. So, if you had followed the prevailing prognosis and sold in order to avoid the big bad month of September, you would have felt more than a little foolish by the time the closing bell rang on Wednesday.
So, in light of the fact that October has started off on an equally bad note, should we expect the bulls to work their magic once again? After all, the S&P dove -2.6% yesterday while the NASDAQ was hit for a loss of -3.1%, and the Russell was trashed by -3.4%. So, repeat after me… “Once it a trend, twice is a tradition…”
Shelving the foolishness for a moment, we should probably point out that yesterdays big dive was sponsored by a pause in the economic recovery theme. After the Chicago PMI came in below expectations on Wednesday, the bulls were hoping that the national version of the report would prove it a fluke. But instead, the ISM (they now call themselves the Institute for Supply Management) Manufacturing Index came in with a reading of 52.6. While this level does indicate that the manufacturing sector continues to expand, the reading was below August’s 52.9 and the consensus expectations for 54.
So, despite the fact that we had not one, but two reports from the housing market that came in better than expected (both Pending Home Sales and Construction Spending were above consensus) and the fact that the miss by the ISM was only the second in the last 9 months, traders focused on the dark side. And in light of the fact that we haven’t had a meaningful pullback in quite some time, the dip buyers likely went into “stand aside” mode for the day.
Speaking of dip buyers, it is a safe bet that the relative performance chase is still on, but since buyers were likely aware of the new tradition to start each month, it looks like they took the day off.
Turning to this morning, we’ve got the Big Kahuna of economic data – the September Employment report. The Labor Department reported that the economy lost 263K jobs last month, which was well below the expectations for 187K. The Unemployment Rate came in up a tenth at 9.8%, which was in-line with the consensus. Not surprisingly, stock futures have moved lower in response.
Running through the rest of the pre-game indicators, the foreign markets followed Wall Street lower across the board. Crude futures are moving down with the latest quote showing oil trading off by $1.17 to $69.65. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.12%, while the yield on the 3-month T-Bill is currently at 0.10%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to another lower open. The Dow futures are currently off by about 85 points; the S&P’s are down about 10 points, while the NASDAQ looks to be about 10 points below fair value at the moment.
Upgrades/Downgrades/Brokerage Research:
Polycom (PLCM) – Target increased at Barclays China Unicom (CHU) – Upgraded at Credit Suisse Southwestern Energy (SWN) – Upgraded at Deutsche Bank XTO Energy (XTO) – Downgraded at Deutsche Bank Accenture (CAN) – Added to Conviction Buy list at Goldman DreamWorks Animation (DWA) – Added to Conviction Buy at Goldman Telmex (TMX) – Downgraded at JP Morgan Repsol (REP) – Upgraded at JP Morgan BB&T Corp (BBT) – Upgraded at Keefe, Bruyette & Woods US Bancorp (USB) – Upgraded at Keefe, Bruyette & Woods PNC Bank (PNC) – Downgraded at Keefe, Bruyette & Woods AK Steel (AKS) – Named Short research idea by Morgan Stanley U.S. Steel (X) – Named Short research idea by Morgan Stanley Intel (INTC) – Upgraded at Oppenheimer Brightpoint (CELL) – Downgraded at Piper Jaffray Nokia (NOK) – Downgraded at Piper Jaffray Costco (COST) – Upgraded at RW Baird Winnebago (WGO) – Downgraded at RW Baird Apple (AAPL) – Upgraded at UBS Comcast (CMCSA) – Upgraded at Wells Fargo
Long positions in stocks mentioned: GS, CHU, AAPL
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
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.
