David Moenning's Daily State of the Markets: 1/25

It's A Start

Heres a link to listen to an Audio Version of the report:

Traders came into Thursday looking for some follow-through buying, which has been something that has been tough to come by lately given that it has been more than a month since the market has enjoyed more than two consecutive advances. Most everyone in the business of trading stocks knows that “key reversal” days, such as what we saw on Wednesday, need to be confirmed by with an up day of 1% or more within a week of the big swing.

On the other side of the volatility coin though, everyone also knows that after a precipitous decline such as we’ve seen over that past month, prices usually retest their lows somewhere between 3 days and 3 weeks of the low being reached. Thus, the big question on everyone’s mind yesterday was which of these events would come first?

The bottom line is the bulls were able to put together a second straight up day and despite the fact that it was only the second time such an event has occurred this year, the words, “it’s a start” could be heard coming from the bull camp.

Although it was touch and go for a while, a series of positive news items helped the bulls keep hope alive. First, while it was disturbing to hear of a massive loss at Societe Generale, the good news was that the $7 billion problem had nothing to do with subprime securities as it was a sophisticated trading fraud that created the loss. This news item also helped erase some of the curiosity associated with why stocks were so weak in Europe on Monday as it now becomes clear that there was some forced selling going on.

Next up, although it's been a light week in terms of economic news, it was a positive that the report on Initial Unemployment Claims actually fell for the fourth straight week. In short, this is something that just wouldn’t happen if the economy was indeed falling off a cliff.

The bears' thesis that the global growth story is over was also dealt a fairly large blow yesterday after China reported that their fourth quarter GDP increased by 11.4%, which was the largest increase in 13 years.

And then when you toss in some decent earnings, positive market action across the pond, the government stimulus package, and the increased loan limits for Fannie and Freddie, traders finally realized that there was little reason for selling and stocks finished near the highs of the day.

Turning to this morning, positive earnings from Mr. Softie as well as word that billionaire investor Wilbur Ross is in talks to buy AMBAC Financial (ABK) has definitely helped the bulls mobilize their forces overseas and in the pre-market.

Running through the rest of the pre-game indicators; Asian markets soared while the European bourses are enjoying modestly green screens at the moment. Crude futures are advancing so far this morning with the futures currently trading up $1.16 to $90.57. Interest rates are moving up again with the 10-yr trading at a yield of 3.70% 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 ahead by about 40 points; the S&Ps are up by about 10 points, while the NASDAQ looks to be about 24 points above fair value at the moment.

Stocks "In Play" This Morning:

Yesterday's Earnings After the Bell:

Amgen (NASDAQ: AMGN) – Reported $1.00 vs. $0.97
Ameriprise (NYSE: AMP) – Reported $1.16 vs. $1.03
Broadcom (NASDAQ: BRCM) – Reported $0.16 vs. $0.11
DeVry (NYSE: DV) – Reported $0.49 vs. $0.40
E-Trade (NASDAQ: ETFC) – Reported -$3.98 vs. -$3.14
Federated Investors (NYSE: FII) – Reported $0.52 vs. $0.54
Hartford Financial (NYSE: HIG) – Reported $2.66 vs. $2.49
Sun Microsystems (NASDAQ: JAVA) – Reported $0.31 vs. $0.31
Juniper Networks (NASDAQ: JNPR) – Reported $0.27 vs. $0.24
KLA Tencor (NASDAQ: KLAC) – Reported $0.75 vs. $0.71
Microsoft (NASDAQ: MSFT) – Reported $0.50 vs. $0.46
MEMC Elec Mat (NYSE: WFR) – Reported $0.97 vs. $0.96

Today’s Earnings Before the Bell:

Caterpillar (NYSE: CAT) – Reported $1.50 vs. $1.50
Fortune Brands (NYSE: FO) – Reported $1.43 vs. $1.43
Harley Davidson (NYSE: HOG) – Reported $0.78 vs. $0.84
Honeywell (NYSE: HON) – Reported $0.91 vs. $0.91
Weatherford Intl (NYSE: WFT) – Reported $0.99 vs. $0.96

News, Upgrades/Downgrades/Brokerage Research:

Intel (INTC) – Target reduced at Bear Stearns
Analog Devices (NYSE: ADI) – Target reduced at Bear Stearns
Nvidia (NVDA) – Target reduced at Bear Stearns
Fairchild Semiconductor (NYSE: FCS) – Downgraded at Citi
Textron (NYSE: TXT) – Upgraded at Citi
Arcelor Mittal (NYSE: MT) – Downgraded at Citi
AT&T (NYSE: T) – Downgraded at Citi
MEMC Electronic Materials (NYSE: WFR) – Target increased at Deutsche Bank
Royal Dutch Shell (NYSE: RDS.A) – Downgraded at JP Morgan
Wachovia Corp (NYSE: WB) – Upgraded at Merrill
Fifth Third Bancorp (FITB) – Upgraded at Merrill
Lukoil (Nasdaq: LUKOY) – Upgraded at Merrill
Halliburton (NYSE: HAL) – Upgraded at Morgan Stanley
NYSE Euronext (NYSE: NYX) – Upgraded at Piper Jaffray
Potash (NYSE: POT) – Target increased at UBS

Mr. Moenning holds Long positions in stocks mentioned: POT

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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