David Moenning's Daily State of the Markets: 12/11

Not Down, Again

Perhaps the most important thing to note about yesterday’s session is that stocks did not tank. As usual, there was plenty of bad news to go around, but the bottom line is the bulls were able to avoid being overrun for the second day in a row. So don’t look now, but this appears to be a bit of a trend.

To be sure, a gain of 70 points is hardly anything to write home about and as has been the trend lately, the session was fairly choppy. But again, finishing in the green does beat the alternative as well as provide another point to the argument that we are seeing an improvement in the overall tone of the market.

On the negative side of the ledger, we got some disturbing news out of China, confirming the global nature of the economic slowdown. While I’m guessing that few of us have spent much time combing through China’s economic releases, since the “China Demand Theme” was one of the major drivers to the commodity boom over the past couple of years, the data bears watching. The problem is that China’s exports fell by 2.2% year-over-year in November, which was the first decline in seven years and a bit of a contrast to the 19.2% growth seen in October. In addition, imports plunged nearly 18% after growing by 15.6% in October. And while those that see the glass as half-full might protest that one down month does not a trend make, it clearly shows how the economies of the globe stopped on a dime in October and November.

Next up, Oppenheimer’s rock star banking analyst Meredith Whitney felt compelled to tell us again yesterday just how downbeat her outlook for the future is. This time it was consumer credit that was the focus of her disdain.

Then there is the saga over the bailout of the auto makers. Frankly, I don’t care to watch another minute of congressional hearings as they tend to make it clear how little lawmakers know about business and the markets. But, the general consensus at this point in time seems to be that having any one of the Big 3 go down would put more pressure on an already strained economy. And since there doesn’t seem to be an easy answer to this one, the hope is that we can just get the deal done sooner rather than later.

The latest news in this saga is the House passed a bill last night 237-170. However, it looks like it might be a tough go in the Senate as the political infighting continues regardless of the topic at hand. So stay tuned because the Senate may start voting as soon as this afternoon.

On a chart basis, it remains a positive that the major indices have been able to, so far at least, consolidate above the recent breakout levels. And while the 50-day moving average does seem to be a bit of a ceiling at the moment and we recognize that any piece of bad news can easily put the bears back in charge, we do like the basing action that is taking place at the moment.

Turning to this morning, a report from SpendingPulse showed that retail sales took a dive in November. On the economic front, Import Prices plunged 6.7% on the back of oil’s decline, but this isn’t exactly news. Something that is NOT rear-view mirror data is the weekly jobless claims, which jumped to 573,000 versus expectations for 525K. And then Ongoing Unemployment Claims increased to 4.42M, which was higher than expectations for 4.02M. And it has been this combination of data that has sent the futures lower.

Running through the rest of the pre-game indicators, the major overseas markets are fractionally mixed. Crude futures are higher again with the latest quote showing oil trading up $2.07 to $45.59 On the interest rate front, we’ve got the yield on the 10-yr currently trading at 2.68%, the yield on the 3-month T-Bill is at 0.01%, and overnight LIBOR is at 0.12%. And finally, with about 60 minutes before the bell, stock futures in the U.S. are now pointing to a down open. The Dow futures are currently off by about 130 points; the S&P’s are down about 12 points, while the NASDAQ looks to be about 18 points below fair value at the moment.

Stocks “In Play” This Morning:

Today’s Earnings Before the Bell:

Ciena (Nasdaq: CIEN) – Reported -$0.10 vs. $0.05
Costco Wholesale Club (Nasdaq: COST) – Reported $0.65 vs. $0.62

News, Upgrades/Downgrades/Brokerage Research:

Cummins (NYSE: CMI) – Guides full year revenue 9% vs. 12%
Ball Corp (NYSE: BLL) – Upgraded at Citi
Telefonica (NYSE: TEF) – Upgraded at Credit Suisse
Rio Tinto (NYSE: TRP) – Upgraded at Deutsche Bank
Viacom (NYSE: VIA.B) – Upgraded at Goldman
Sun Trust Banks (NYSE: STI) – Target reduced at Ladenburg Thalmann
Janus (NYSE: JNS) – Downgraded at Merrill
Ericsson (Nasdaq: ERIC) – Downgraded at Merrill
Molson Coors (NYSE: TAP) – Named top pick at UBS

Disclosure: Mr. Moenning and/or related firms hold long positions in: None

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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