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Daily State of the Markets |
Good morning. It is important to understand that not every day is a seminal event in the stock market. While it is also important not to fall into the habit of dismissing action out of hand when it goes against you, every once in a while, we do encounter days that don’t appear to mean a whole heck of a lot. And as you have probably guessed by now, it is our humble opinion that Wednesday’s session was one of those days.
This is not to say that there weren’t some happenings worthy of note. But with the Dow having sprinted higher to the tune of 725 points and rising in nine of the past eleven days, it wasn’t exactly surprising to see the bulls take a break.
In light of the fact that we’ve been yammering on lately about the linkage between the dollar and the stock market, we should probably point out that the relationship wasn’t quite as tight yesterday as both the greenback and the market indices wound up down on the day. However, it should be noted that there was some corresponding intraday movements after the opening bell. And as such, we are reluctant to declare this relationship dead at this time.
Part of the reason for the dollar’s dive was the commentary from St. Louis Fed President James Bullard. Bullard opined that by using history as a guide, we could expect to see the FOMC begin raising interest rates in 2012. His comments were not predictive in nature and were merely an extrapolation of the timing of such moves in the past. However, Bullard, who is not a voting member of the FOMC this year (but will be in 2010), suggested that based on the recent memory of the housing bubble, there is a decent chance that the Fed might take action sooner than they have in the past.
Yesterday’s data on housing probably didn’t help the stronger dollar case or the stock market bulls’ hope for economic improvement either. For example, Housing starts fell by 10.6% in October, to an annualized rate of 529K units, which was well below the expectations for 600K units. The data on Building Permits was no better as permits fell to a five-month low.
However, despite the negative data and the fact that stocks had become overbought and overdue for a rest, the buy-the-dip mentality seemed to prevail once again as early losses were all but erased by the time the closing bell rang. While we wouldn’t be surprised to see the bears produce a better effort in the near term as trader types may want to start locking up their gains for the year, the fact that the bulls can point to a second successful test of the 1100 area was a modest positive. In short, we continue to see the 1100 level as the line in the sand for the near term.
Turning to this morning, it would appear that it’s “game on” with regard to the battle for 1100 as the futures are following Europe lower in the pre-market.
On the economic front, Weekly Jobless Claims for the week ending November 14th were reported at 505K, which was a smidge higher the consensus for a reading of 504K, but in line with last week’s revised total of 505K (revised higher from 502K). The total for those filing Ongoing Claims for Unemployment Insurance for the week ending November 7th came in at 5.611M; a bit above the expectations for 5.598M but below last week’s revised total 5.65M (revised higher from 5.631M).
Running through the rest of the pre-game indicators, with the exception of Australia and Shanghai, the foreign markets are lower across the board. Crude futures are lower with the latest quote showing oil trading down by $0.38 to $79.20. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.35%, while the yield on the 3-month T-Bill is currently at 0.02%. 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 55 points; the S&P’s are down by about 8 points, while the NASDAQ looks to be about 11 points below fair value at the moment.
| Yesterday’s Earnings After The Bell | |||
Company |
Symbol |
EPS |
Reuters Estimate |
| Limited Brands | LTD | $0.02 | -$0.01 |
| NetApp | NTAP | $0.37 | $0.30 |
| Earnings Before The Bell | |||
| Gamestop | GME | $0.32 | $0.30 |
| Dick’s Sporting Goods | DKS | $0.16 | $0.09 |
| Patterson Companies | PDCO | $0.41 | $0.41 |
| Ross Stores | ROST | $0.84 | $0.84 |
| Sears Holdings | SHLD | -$0.81 | -$1.09 |
Wall Street Research Summary
Upgrades:
XL Capital (XL) – Bernstein Microsoft (MSFT) – Goldman Campbell Soup (CPB) – Estimates increased at Morgan Stanley, UBS Mid-America (MAA) – RBC Capital AvalonBay (AVB) – RBC Capital Google (GOOG) – Target increased to $700 from $635 at UBS ConAgra (CAG) – Estimates increased at UBS General Mills (GIS) – Estimates increased at UBS
Aon Corp (AOC) – BofA/Merrill Marsh McLennan (MMC) – BofA/Merrill Progressive (PGR) – BofA/Merrill Intel (INTC) – BofA/Merrill LSI Corp (LSI) – BofA/Merrill Microchip Technology (MCHP) – BofA/Merrill Marvel Technology (MRVL) – BofA/Merrill Maxim Integrated Products (MXIM) – BofA/Merrill Texas Instruments (TXN) – BofA/Merrill Hot Topic (HOTT) – Citi, Piper Jaffray Essex Property (ESS) – RBC Capital
Long positions in stocks mentioned: GS, GOOG, INTC, MSFT
* Report includes items that make comparisons to the consensus estimate questionable
Regardless of the color on the screen, make every effort to enjoy the 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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