David Moenning's Daily State of the Markets: 3/11

More Than a Bounce?

Stocks melted up yesterday in response to some good news from the poster children for problems in the banking sector and a couple of politicians actually making sense for a change. The Dow enjoyed one of its best days in months and finished with a gain of 379 points or +5.8%. But the good news is that the Dow was the laggard on the session as the S&P popped +6.4% and the NASDAQ sprang higher to the tune of +7.07%.

The cynics among us are likely to point out that while the day’s fireworks were most certainly a breath of fresh air, the blast, impressive as it was, only returned the major indices to where they were last Wednesday morning. And then I’m guessing that if you listened to any of the analysis about yesterday’s excitement, you undoubtedly heard someone utter the old Wall Street saw, “one day does not a trend make.”

However, brace yourself dear readers because what I’m about to pose could be considered unabashedly positive. So, if you find yourself in the gloom-and-doom camp these days, you may want to skip ahead.

The question of the day is this: When is a bounce, especially one of the dead-cat variety, more than just a bounce? Before we get to the answer, let’s not forget that we have seen close to 20 of these things since the bears started clawing up equity values. As such, shouldn’t we simply put yesterday’s short-covering induced pyrotechnics in the “just a bounce” category and keep the helmet and the canned goods close at hand?

Three months ago, I’m guessing I might have simply categorized yesterday as a classic “stand aside” day for the bears as our furry friends may have recognized that they had pushed things just a little too far. But, but, but… the answer is a bounce is more than a bounce when it has a fundamental trigger associated with it.

Yep, you heard me right. I’m saying that something good actually happened yesterday and that while the move may have gotten a little ahead of itself, there just might be more of where that came from ahead.

Before you confuse me with one of those pie in the sky dreamers that only sees puppies, ice cream cones, and happy times ahead, let me say that I do NOT believe that we embarked on a new bull market yesterday. However, the fact is that not one, but two banks – yes, those very banks that everyone and their grandmother (well, everyone except Timothy Geithner, anyway) has been talking about nationalizing – came out and said that they were… wait for it… MAKING MONEY so far this year!

To which I can only say, holy fundamental trigger Batman – if banks are actually making money, then the grand plan that the Mr. Bauer (aka the Fed Chairman Bernanke) has been diligently applying to the economy and the banking system just might be working.

Now toss in Barney Frank (btw, has anyone ever seen Rep. Frank and Fred Flintstone in the same room at the same time?) talking uptick rule during the day and you’ve got a reason for the shorts to run for cover.

Okay, I’ll admit that all of the above could be considered a little on the optimistic side. But after the beating investors have taken lately, perhaps a little optimism – say to something on the order of Dow 8000 – is warranted about now.

Turning to this morning, we don’t have any economic news to review before the bell. And don’t look now, but the early indications are that the bulls just might try and produce a follow-through day.

Running through the rest of the pre-game indicators, with the exception of the UK, the overseas markets are higher across the board. Crude futures are lower with the latest quote showing oil trading down by $0.61 to $45.10. On the interest rate front, we’ve got the yield on the 10-yr currently at 2.99%, while 3-month LIBOR is at 1.33% and the yield on the 3-month T-Bill is trading at 0.23%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently ahead by about 35 points; the S&P’s are up by about 7 points, while the NASDAQ looks to be about 9 points above fair value at the moment.

Stocks “In Play” This Morning:

Today’s Earnings Before the Bell:

American Eagle Outfitters (NYSE: AEO) – Reported $0.19 vs. $0.19

Korn/Ferry (NYSE: KFY) – Reported $0.08 vs. $0.10
LDK Solar (NYSE: LDK) – Reported -$1.25 vs. -$1.24
National Semiconductor (NYSE: NSM) – Reported $0.9 vs. -$0.04
Staples (Nasdaq: SPLS) – Reported $0.40 vs. $0.42


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

CNA Financial (NYSE: CNA) – Downgraded at BAC/MER
Jet Blue (Nasdaq: JBLU) – Upgraded at BAC/MER
Transocean (NYSE: RIG) – Added to Top Picks Live list at Citi
Lukoil (NYSE: LUK) – Downgraded at Citi
American Express (NYSE: AXP) – Downgraded at Goldman
US Bancorp (NYSE: USB) – Upgraded at Goldman
Morgan Stanley (NYSE: MS) – Upgraded at Goldman
Avon Products (NYSE: AVP) – Downgraded at Goldman
Nucor (NYSE: NUE) – Upgraded at Goldman
Olympic Steel (Nasdaq: ZEUS) – Upgraded at Goldman
AK Steel (NYSE: AKS) – Downgraded at Goldman
Reliance Steel (NYSE: RS) – Downgraded at Goldman
Cheesecake Factory (Nasdaq: CAKE) – Upgraded at Goldman
Wendy’s Arby’s Group (NYSE: WEN) – Upgraded at Goldman
Sonic Corp (NYSE: SON) – Upgraded at Goldman
Darden Restaurants (NYSE: DRI) – Downgraded at Goldman
Tyson Foods (NYSE: TSN) – Upgraded at JP Morgan
Big Lots (NYSE: BIG) – Upgraded at JP Morgan
Masco Corp (NYSE: MAS) – Upgraded at Morgan Stanley
Comerica (NYSE: CMA) – Upgraded at Morgan Stanley
Cullen Frost Bankers (NYSE: CFR) – Downgraded at Morgan Stanley
Intl Flavors & Fragrances (NYSE: IFF) – Downgraded at Morgan Stanley
Motorola (NYSE: MOT) – Upgraded at Oppenheimer
Dicks Sporting Goods (NYSE: DKS) – Downgraded at Piper Jaffray
Boeing (NYSE: BA) – Target reduced at UBS
Hewlett Packard (NYSE: HPQ) – Upgraded 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.TopStockPortfolios.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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