David Moenning's Daily State of the Markets: 7/28

Still on Track

In all honesty, had our research report citing the bullish implications of long strings of consecutive up days not hit my desk on Friday, I might have been seen pulling my hair out yesterday. Imagine the frustration of the bearishly inclined after yet another opportunity to knock this market off its high horse was squandered. Instead of stocks succumbing to an overbought condition and some crummy earnings news, the bulls managed to put up yet another “W.”

But for those that make our morning missive a part of their daily routine, yesterday’s lack of a pullback was an indication that the bull train is still on the track. Sure, it wobbled there for a while but while I’ll apologize for mixing my metaphors, as any coach in almost any sport is fond of saying, “a win is a win.”

The bulls were treated to another piece of surprisingly good news yesterday at 10:00 am eastern when it was reported that sales of new homes in the month of June came in much higher than anticipated. The increase of 11% in June, to a 384K annualized rate marked the third straight monthly increase and the largest monthly gain in eight years. In addition, the supply of new homes for sale fell to 8.8 months in June from 10.2 in May. And although the median sales price was down 12% year-over-year, the rest of the report overshadowed this bit of downbeat data.

The bears were heartened, albeit briefly, by the fact that the market quickly gave back the gains from the housing report. Thus, at about 10:30 am eastern time, it looked like the overbought condition might be coming home to roost and/or that traders had grown tired of the economic recovery theme.

But, in keeping with the historical trend (well, so far at least) the dip was bought and after some waffling during the afternoon, the screens were modestly green by the time the closing bell rang. To be sure, a gain of 15 points isn’t exactly something to write home about. But, I do have to admit it is rather impressive that the bulls were once again able to stand their ground.

However, lest anyone think that this game is going to be one-sided from here, let’s remember that the good ‘ol USofA is auctioning off the not-so modest sum of $115 billion in new debt this week. So, while the bulls can take solace in the fact that history is on their side right now, any hiccup in those auctions could cause traders to toss the playbook out the window in a big hurry.

Turning to this morning, once again we don’t have any economic news to report at this point in the day. However, we will get the Case Shiller Home Price index at 9:00 am and then July Consumer Confidence and the Richmond Fed Index at 10:00 am eastern. And in looking at the pre-market activity, it appears the bulls will once again be tested today.

Running through the rest of the pre-game indicators, with the exception of Hong Kong, the major overseas markets are mostly lower but only modestly so. Crude futures are moving down with the latest quote showing oil trading off by $0.79 to $67.79. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.68%, while the yield on the 3-month T-Bill is trading at 0.18%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 45 points; the S&P’s are down by about 6 points, while the NASDAQ looks to be about 4 points below fair value at the moment.

Yesterday’s Earnings After the Bell:

Amgen (AMGN) – Reported $1.21 vs. $1.17
CF Industries (CF) – Reported $4.33 vs. $2.73
Curtiss-Wright (CW) – Reported $0.54 vs. $0.52
Fidelity National Financial (FNF) – Reported $0.40 vs. $0.40
Health Management (HMA) – Reported $0.13 vs. $0.10
Masco (MAS) – Reported $0.15 vs. -$0.03
Manitowoc (MTW) – Reported $0.19 vs. $0.13
Plum Creek (PCL) – Reported $0.05 vs. $0.00
PartnerRe (PRE) – Reported $3.12 vs. $2.31
Rent-A-Center (RCII) – Reported $0.61 vs. $0.53
SL Green Realty (SLG) – Reported $1.20 vs. $1.20
Torchmark (TMK) – Reported $1.53 vs. $1.50

Today’s Earnings Before the Bell:
AGCO (AGCO) – Reported $0.64 vs. $0.53
BE Aerospace (BEAV) – Reported $0.39 vs. $0.35
BP (BP) – Reported $0.23 vs. $0.92
Check Point Software (CHKP) – Reported $0.48 vs. $0.45
Coach (COH) – Reported $0.43 vs. $0.43
Coventry Health Care (CVH) – Reported $0.48 vs. $0.40
Energizer (ENR) – Reported $1.12 vs. $1.03

Fresh Del Monte (FDP) – Reported $1.11 vs. $0.70

FPL Group (FPL) – Reported $0.99 vs. $0.96
Interpublic (IPG) – Reported $0.04 vs. $0.10
Jacobs Engineering (JEC) – Reported $0.76 vs. $0.75
McGraw-Hill (MHP) – Reported $0.58 vs. $0.56
National Oilwell Varco (NOV) – Reported $0.90 vs. $0.88
Office Depot (ODP) – Reported -$0.22 vs. -$0.12
PepsiAmericas (PAS) – Reported $0.74 vs. $0.68
PACCAR (PCAR) – Reported $0.07 vs. $0.04
Potlatch (PCH) – Reported $0.09 vs. $0.01
Rockwell Automation (ROK) – Reported $0.23 vs. $0.19
Roper Industries (ROP) – Reported $0.64 vs. $0.63
Sonic Automotive (SAH) – Reported $0.19 vs. $0.16
Smith Intl (SII) – Reported $0.15 vs. $0.24
Teva Pharmaceutical (TEVA) – Reported $0.83 vs. $0.81
Textron (TXT) – Reported $0.08 vs. $0.00
Under Armour (UA) – Reported $0.03 vs. -$0.02
Unisys (UIS) – Reported $0.10 vs. -$0.01
Viacom (VIA.B) – Reported $0.49 vs. $0.49
Valero Energy (VLO) – Reported -$0.48 vs. -$0.49
Waters (WAT) – Reported $0.78 vs. $0.79
US Steel (X) – Reported $3.28 vs. -$3.45

Upgrades/Downgrades/Brokerage Research:

MetLife (MET) – Downgraded at BofA/Merrill
Varian Inc (VARI) – Upgraded at Barclays
Lennar (LEN) – Downgraded at Citi
Perrigo (PRGO) – Downgraded at Credit Suisse
Plum Creek (PCL) – Downgraded at Credit Suisse
Posco (PKX) – Upgraded at Goldman
Aetna (AET) – Removed from Sell list at Goldman
US Steel (X) – Upgraded at Goldman
Air Products (APD) – Upgraded at JP Morgan
AMR Corp (AMR) – Mentioned positively at Morgan Stanley
Delta Airlines (DAL) – Mentioned positively at Morgan Stanley
Philip Morris (PM) – Downgraded at UBS
CDC Corp (CHINA) – Downgraded at Wedbush Morgan
Ingersoll-Rand (IR) – Upgraded at Wells Fargo

Long positions in stocks mentioned: 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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