David Moenning's Daily State of the Markets: 01/07

Striking Fear In The Hearts of Men

Here's a link to listen to an Audio Version of the report:

Just about the time that CNBC was revealing that the managers in their trillion dollar survey did not expect a recession in 2008, the Labor Department released a jobs report that put this assumption in question. With the market fresh off another disappointing session, the December Employment report was expected to be of the Goldilocks variety and provide some hope for the bulls. But in reality, it was a report that struck fear in the hearts of traders everywhere.

Analysts had been looking for a report that showed the economy creating 70,000 new jobs in December. But instead, we were treated to a report of just 17,000 and an unexpected uptick in the Unemployment Rate. And with the Fed looking like they are in denial mode, fear of recession took hold and stocks tanked once again on Friday.

It also didn’t help that a big-time tech name like Intel (INTC) was downgraded before the bell. The large-cap tech names had been the clear cut leaders into the end of the year and had been viewed as a safe haven from all the worry about recession. But, with an -8.1% drop on Friday and a total decline of -17.4% over the past six sessions, it is obvious that fear has taken hold in this arena as well.

The bears also got a hand from overseas as a report out of China suggested that the government there would take measures to slow its economy’s growth rate. This obviously puts a crimp in the global growth story and adds to the fear that the slowdown we are seeing in the U.S. might be expanding around the globe.

Finally, one look at the charts definitely creates some fear among the technically inclined. The major indices closed very near the important lows seen in August and November. The bulls argue that this level represents the low end of the current trading range and should act as a support area. However, the bears counter with the idea that if these lows are “taken out” then it is likely to be downhill from here.

Turning to this morning, it looks like the bulls are trying to spread the word that the jobs report almost ensures another rate cut from the Fed. And with cries for a 50 basis point cut growing louder, it looks like we might have a rebound attempt on our hands.

Running through the rest of the pre-game indicators; the overseas markets are mixed by region with Asian markets finishing on the downside while Europe is sporting modestly positive numbers. Crude futures are down a bit with the latest quote showing the February contract off by $0.26 to $97.65. Interest rates are up on a yield basis with the 10-yr trading at a yield of 3.89% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently up by about 70 points; the S&Ps are higher by about 9, while the NASDAQ looks to be about 8 points above fair value at the moment.

Stocks :"In Play" This Morning:

News, Upgrades/Downgrades/Brokerage Research:

Agilent Technologies (NYSE: A) – Upgraded at Bank of America
Best Buy (NYSE: BBY) – Downgraded at Bear Stearns
Rohm & Haas (NYSE: ROH) – Downgraded at Citi
Nalco Holding (NYSE: NLC) – Upgraded at Citi
Gilead Sciences (Nasdaq: GILD) – Upgraded at Credit Suisse
Deutsche Bank (NYSE: DB) – Downgraded at Credit Suisse
Goodrich (NYSE: GR) – Downgraded at Deutsche Bank
Salesforce.com (NYSE: CRM) – Downgraded at Goldman Sachs
Bed Bath & Beyond (Nasdaq: BBBY) – Upgraded at JP Morgan
Direct TV (NYSE: DTV) – Upgraded at Lehman
Lam Research (Nasdaq: LRCX) – Upgraded at Lehman
Eli Lilly (NYSE: LLY) – Upgraded at Morgan Stanley
Motorola (NYSE: MOT) – Downgraded at RBC Capital
IBM (NYSE: IBM) – Downgraded at UBS

Mr. Moenning holds Long positions in stocks mentioned: GR

Note: All earnings reports compared to Reuter’s consensus estimates

** For More of David Moenning’s Market Analysis, Stock Portfolios, and Trading Ideas, visit: www.TopGunsTrading.com

The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management and Co-Founder of TopGunsTrading.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 of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

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