David Moenning's Daily State of the Markets: 2/3

Better Late Than Never

Although there were most certainly other stories worthy of mention yesterday, from where I sit at least, the game is still all about what’s going on in Washington. First, there’s the political fun and games over the not-so stimulative stimulus bill as Congress seems to be getting back into the swing of the game of partisan politics. And then there’s the main event – the “we’ll talk about it next week” solution to the credit crisis that may or may not, but probably will, include a “bad bank” solution.

To be sure, we got some interesting economic data yesterday, with some of it actually winding up on the positive side of the ledger. And as always, the earnings parade was fun to watch. Then, the fact that tech stocks simply went the other way during the Dow’s early morning dive is definitely worth noting. But, make no mistake about it; this game is still all about what the new kids on the block have up their sleeves in terms of a plan.

In order to clear up some of the confusion about what the administration meant in relation to the term “next week” last week, new Treasury Secretary Timothy Geithner made sure to let the appropriate news channels know yesterday that he would be giving a speech next week to outline the Obama administration’s full blown financial rescue plan. And while we are pretty sure, they said that last week, we guess the phrase ‘better late than never’ would be appropriate here.

According to the Wall Street Journal, the Obama plan is likely to include provisions to help homeowners avoid foreclosure and some additional measures to help the financial sector such as injecting banks with capital and buying bad assets. All of which is likely to require another bundle of borrowed cash as just about everyone recognizes that the mere $350 billion still left in the TARP just isn’t going to cut it. However, other than the fact that Mr. Geithner has put a team together to “explore alternatives,” the details of said “plans” are a little thin right now.

Stocks initially tanked on the reality that the “bad bank” wasn’t coming this week. However, given that the powers-that-be will likely shed more light on the subject in just a few days, some confidence appeared to return by mid-morning. It also probably didn’t hurt that the ISM Composite actually rose last month, which is an indication that the decline in manufacturing activity may be slowing, which at this stage of the game is indeed a good thing.

Looking at the charts, it wound up being another close call yesterday at least for the DJIA, anyway. The venerable index initially broke below the near-term support level, which is in the 7940 area, but then recovered a bit into the close. Most technicians believe that if these support levels give way, then we are likely to see a full-fledged retest of the November lows. But, the good news is none of the other major indices followed suit and remain above their all-important lines in the sand.

Turning to this morning, we don’t have any economic news before the bell but we will get a report on Pending Home Sales at 10:00 am.

Running through the rest of the pre-game indicators, the major foreign markets are mixed. Crude futures are up with the latest quote showing oil trading higher by $0.13 to $40.21. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.77%, while overnight LIBOR is at 0.31%, and the yield on the 3-month T-Bill is trading at 0.26%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a relatively tame open. The Dow futures are currently ahead by about 6 points; the S&P’s are down by about a point, while the NASDAQ looks to be about 5 points below fair value at the moment.

Stocks “In Play” This Morning:

Yesterday’s Earnings After the Bell:

AFLAC (NYSE: AFL) – Reported $0.98 vs. $1.00
Anadarko Petroleum (NYSE: APC) – Reported $0.15 vs. $0.18
Crown Holdings (NYSE: CCK) – Reported $0.22 vs. $0.17
First Marblehead (NYSE: FMD) – Reported -$0.94 vs. -$0.23
Plum Creek (NYSE: PCL) – Reported $0.52 vs. $0.43
PartnerRe (NYSE: PRE) – Reported $0.95 vs. $1.83
Rent-A-Center (Nasdaq: RCII) – Reported $0.47 vs. $0.44
SanDisk (Nasdaq: SNDK) – Reported -$1.65 vs. -$0.60

Today’s Earnings Before the Bell:

Archer Daniels Midland (NYSE: ADM) – Reported $0.91 vs. $0.68
Automatic Data (NYSE: ADP) – Reported $0.59 vs. $0.56
Avon Products (NYSE: AVP) – Reported $0.55 vs. $0.60
BP (NYSE: BP) – Reported -$0.18 vs. $1.14
Cameron Intl (NYSE: CAM) – Reported $0.75 vs. $0.74
CME Group (NYSE: CME) – Reported $3.58 vs. $3.46
Cummins (NYSE: CMI) – Reported $0.45 vs. $0.41
Rockwell Collins (NYSE: COL) – Reported $0.95 vs. $0.94
DR Horton (NYSE: DHI) – Reported -$0.20 vs. -$0.56
Dow Chemical (NYSE: DOW) – Reported -$0.62 vs. $0.00
Emerson (NYSE: EMR) – Reported $0.60 vs. $0.57
Interactive Corp (Nasdaq: IACI) – Reported $1.69 vs. $0.20
Motorola (NYSE: MOT) – Reported -$0.01 vs. -$0.02
Merck (NYSE: MRK) – Reported $0.87 vs. $0.74
Marathon Oil (NYSE: MRO) – Reported $0.87 vs. $0.89
Myriad Genetics (MYGN) – Reported $0.43 vs. $0.32
PNC Bank (NYSE: PNC) – Reported $0.32 vs. $0.78
Schering Plough (NYSE: SGP) – Reported $0.39 vs. $0.30
Scotts Miracle-Gro (NYSE: SMG) – Reported -$0.81 vs. -$0.91
Tyco (NYSE: TYC) – Reported $0.61 vs. $0.48
UPS (NYSE: UPS) – Reported $0.83 vs. $0.85

Today’s Corporate News, Upgrades/Downgrades/Brokerage Research:

Brinker Intl (NYSE: EAT) – Upgraded at Argus Research
Viacom (NYSE: VIA.B) – Upgraded at Barclays
ONEOK (NYSE: OKE) – Removed from Conviction Buy list at Goldman
Qualcomm (Nasdaq: QCOM) – Downgraded at Goldman
Netgear (Nasdaq: NTGR) – Downgraded at Goldman
SanDisk (Nasdaq: SNDK) – Downgraded at Goldman
Royal Bank Scotland (NYSE: RBS) – Upgraded at HSBC
Illinois Tool Works (NYSE: ITW) – Upgraded at JP Morgan
First Horizon National (NYSE: FHN) – Upgraded at Morgan Stanley
Mattel (NYSE: MAT) – Downgraded at Piper Jaffray
BJ’s Wholesale Club (NYSE: BJ) – Upgraded at UBS

Disclosure: Mr. Moenning and/or related firms hold long positions in: ADM, SMG

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

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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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