David Moenning's Daily State of the Markets: 1/09

As the First 5 Days of January Go...

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

The Stock Traders Almanac says "As January goes, so goes the year." And then more recently, there has been an addendum made to the predictive nature of the early trading action which reads, “As the first five days go, so goes January.” And as I’m sure you know by now, if this is true, we’ve got a problem on our hands.

While there were many predictions that the first half of ’08 would be "bumpy," no one called for a waterfall decline right off the bat nor the worst first five days in history. During the first five days of 2008, the DJIA has plunged 675 points or 5.09%. The S&P 500 hasn’t fared any better and has dropped -5.3%, the NASDAQ has fallen by -7.98%, and the Russell 2000 is already off -8% on the year.

Yesterday, the market spent the majority of the day in positive territory, which gave the impression that the bulls were attempting to make a stand. Things definitely started off in the right direction on Tuesday with an initial rally of almost 80 points. But then rumors of bankruptcy at Countrywide Financial started to make the rounds and suddenly the gains started to evaporate. But, with 90 minutes left in the trading session it looked like the showdown between the bulls and bears would continue.

However, at about 2:45 pm, AT&T's (NYSE: T) chairman Randall Stephenson, while updating the company's outlook at Citi's EMT Conference, said "we are seeing some impact on the consumer." And to a market that is on recession watch, this was exactly the wrong headline for the bullishly inclined.

Never mind the fact that Stephenson also said that the impact on their wireless business has been minimal so far or that he felt this will be the last place that a consumer will look to cut costs. The bottom line is that the bears had their headline in hand and proceeded to sell anything and everything relating to the consumer and the economy.

The result was yet another pasting for the indices and a breakdown of the recent trading range. And while there is still the March '07 lows to contend with, the charts suddenly have a very ugly look to them and there is a lot of talk about a bear market.

Turning to this morning, once again, we don’t have any economic data to review before the bell. The big news so far is that Goldman Sachs has announced it does see a recession in 2008 and expects the Fed to cut the Fed Funds rates all the way back to 2.75% by the end of summer.

While the focus continues to be on the macro situation, as a reminder, the attention should turn to the micro picture pretty quickly as the earnings parade officially kicks off today after the bell with the report from Alcoa (NYSE: AA).

Running through the rest of the pre-game indicators; surprisingly, the Asian markets closed higher overnight while the European bourses are all lower at the moment. Crude futures are down a smidge with the latest quote showing the February contract lower by $0.26 to $96.58. Interest rates are down on a yield basis with the 10-yr trading at a yield of 3.81% at the moment. And finally, with about an hour before the bell, stock futures in the U.S. are attempting to stay positive at the moment. The Dow futures are currently up by about 15 points; the S&Ps are higher by about 3, while the NASDAQ looks to be about 4 points above fair value at the moment.

Stocks "In Play" This Morning:

Yesterday’s Earnings After the Bell:

Apollo Group (Nasdaq: APOL) – Reported $0.83 vs. $0.73

Today's Earnings Before the Bell:

Mosaic (NYSE: MOS) – Reported $0.89 vs. $0.73

News, Upgrades/Downgrades/Brokerage Research:

Delta Air Lines (NYSE: DAL) – Upgraded at Bear Stearns, Morgan Stanley
Forward Air (Nasdaq: FWRD) – Upgraded at Bear Stearns
Tesoro (NYSE: TSO) – Downgraded at Bear Stearns
Family Dollar Stores (NYSE: FDO) – Downgraded at Bear Stearns
Tenaris (NYSE: TS) – Upgraded at Citi
Alliant Techsystems (NYSE: ATK) – Downgraded at Friedman Billings
Mosaic (NYSE: MOS) – Upgraded at Goldman Sachs
Federated Investors (NYSE: FII) – Upgraded at JP Morgan
Citigroup (NYSE: C) – Estimates reduced at Morgan Stanley
Hertz Global (NYSE: HTZ) – Upgraded at Morgan Stanley
Avis Budget Group (NYSE: CAR) – Upgraded at Morgan Stanley
Repsol (NYSE: REP) – Upgraded at Morgan Stanley
Starbucks (Nasdaq: SBUX) – Target reduced at UBS
Express Scripts (Nasdaq: ESRX) – Downgraded at Wachovia

Mr. Moenning holds Long positions in stocks mentioned: ESRX, APOL


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.

You May Also Be Interested In

• Alliance Laundry principal stockholder prices 22.55M share offering
• After-Hours Movers: CSCO, COHR, HLIT, CBRS, STUB, ENS
• After-Hours Movers: CRWV, NBIS, SMCI, LITE, CAVA, HRB