David Moenning’s Daily State of the Markets:
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David Moenning’s Daily State of the Markets:
Here’s a link to listen to an Audio Version of the report:
http://PlayAudioMessage.com/play.asp?m=524379&f=SRDOSS&ps=13&c=FFFFFF&pm=2&h=25
Lots of Negative, But…
Despite a host of negatives in the market yesterday, the bulls managed to rally the troops and push the indices nicely into the green by the time the closing bell rang. It would appear that a countertrend bounce in the oil patch led to the green screens at the close as most everything in the sector enjoyed bounces of the dead cat variety in the range of 3% to 8%.
The problems however, did not go away yesterday as there continues to be big concerns over (1) whether or not Fannie (FNM) and Freddie (FRE) will make it, (2) the quality of earnings amongst the brokers, (3) the state of the consumer, and (4) the latest geopolitical flap with Russia.
Although the major indices finished to the upside, the day had a decidedly negative bent to it. First, it appears that the government will soon be forced to either inject a large amount of capital into the GSE’s or simply take them over completely. One look at the action in FNM and FRE makes this quite clear as FNM closed at $4.40 with a loss of -26.8% on the day while FRE finished at just $3.25. And as anyone who has been around a while will tell you, these stocks are trading like they are going out of business as the losses for the past year now exceed 90%.
The problem is that the combined equity of Fannie and Freddie is in the vicinity of $7.5 billion dollars, but their paper outstanding is over $1.6 Trillion (yep, that’s trillion with a T). And it is for this reason that many intelligent folks are calling the GSE’s technically insolvent. And despite Fannie Mae’s CEO telling us yesterday that the company is well capitalized (and if this sounds familiar, it should as we’ve heard lots of CEO’s continue to tell us everything looks fine right up until it doesn’t), the bottom line is when the government does finally step in, the stockholders will be vaporized.
Speaking of problems with debt, the “deleveraging” process continues on Wall Street. The difficulty right now is it appears that selling assets and raising capital is becoming increasingly difficult as just about everybody is looking for billions of dollars. The trials and tribulations of Lehman (LEH) are not only an entertaining read, but also make this point quite clear. For example, the firm was first turned down by South Korea and another sovereign wealth fund because the price it was asking for the capital (reportedly 50% over book value) was too high. Next, there was the report that the Fed was forced to follow up on a rumor that Credit Suisse had pulled Lehman’s line of credit. And it now appears that LEH will be forced to sell off a large chunk of its asset management arm, which accounts for the majority of Lehman’s book value at the present time.
But getting back to the topic at hand, not even some more jawboning between the U.S. and Russia, and the accompanying pop in crude oil, could keep equities down yesterday. Whether this type of defiant attitude from the Bull camp can continue however, remains to be seen.
Turning to this morning, things do not look quite as rosy as oil has continued to catch a bid in electronic trading. On the economic front, weekly jobless claims came in a bit below expectations, which is a good thing and is taking a little of the pressure off of equities at the moment.
Running through the rest of the pre-game indicators, the foreign markets ignored Wall Street’s close and are down across the board. Crude futures are moving up with the latest quote showing oil trading higher by $2.63 to $118.19. Interest rates aren’t moving much this morning with the yield on the 10-yr currently trading at 3.81%. And finally, with about 60 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 51 points; the S&P’s are down by about 7 points, while the NASDAQ looks to be about 10 points below fair value at the moment.
Stocks “In Play” This Morning:
Yesterday’s Earnings After the Bell:
Salesforce.com (CRM) – Reported $0.08 vs. $0.18
JDS Uniphase (JDSU) – Reported $0.07 vs. $0.10
Longs Drug (LDG) – Reported $0.78 vs. $0.77
Limited Brands (LTD) – Reported $0.27 vs. $0.20
Today’s Earnings Before the Bell:
Burger King Holdings (BKC) – Reported $0.37 vs. $0.34
Dicks Sporting Goods (DKS) – Reported $0.39 vs. $0.36
Heinz (HNZ) – Reported $0.72 vs. $0.66
News, Upgrades/Downgrades/Brokerage Research:
Synopsys (SNPS) – Downgraded at Citi
Waste Management (WMI) – Added to Top Picks Live list at Citi
Lehman Bros (LEH) – Estimates reduced at Citi
Goldman Sachs (GS) – Estimates reduced at Citi
Morgan Stanley (MS) – Estimates reduced at Citi
Southern Copper (PCU) – Upgraded at Merrill
Salesforce.com (CRM) – Downgraded at Piper Jaffray
Foundation Coal (FCL) – Upgraded at UBS
Massey Energy (MEE) – Upgraded at UBS
Arch Coal (ACI) – Upgraded at UBS
Quest Diagnostics (DGX) – Upgraded at William Blair
Disclosure: Mr. Moenning and/or related firms hold long positions in: GS
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
Here’s a link to listen to an Audio Version of the report:
http://PlayAudioMessage.com/play.asp?m=524379&f=SRDOSS&ps=13&c=FFFFFF&pm=2&h=25
Lots of Negative, But…
Despite a host of negatives in the market yesterday, the bulls managed to rally the troops and push the indices nicely into the green by the time the closing bell rang. It would appear that a countertrend bounce in the oil patch led to the green screens at the close as most everything in the sector enjoyed bounces of the dead cat variety in the range of 3% to 8%.
The problems however, did not go away yesterday as there continues to be big concerns over (1) whether or not Fannie (FNM) and Freddie (FRE) will make it, (2) the quality of earnings amongst the brokers, (3) the state of the consumer, and (4) the latest geopolitical flap with Russia.
Although the major indices finished to the upside, the day had a decidedly negative bent to it. First, it appears that the government will soon be forced to either inject a large amount of capital into the GSE’s or simply take them over completely. One look at the action in FNM and FRE makes this quite clear as FNM closed at $4.40 with a loss of -26.8% on the day while FRE finished at just $3.25. And as anyone who has been around a while will tell you, these stocks are trading like they are going out of business as the losses for the past year now exceed 90%.
The problem is that the combined equity of Fannie and Freddie is in the vicinity of $7.5 billion dollars, but their paper outstanding is over $1.6 Trillion (yep, that’s trillion with a T). And it is for this reason that many intelligent folks are calling the GSE’s technically insolvent. And despite Fannie Mae’s CEO telling us yesterday that the company is well capitalized (and if this sounds familiar, it should as we’ve heard lots of CEO’s continue to tell us everything looks fine right up until it doesn’t), the bottom line is when the government does finally step in, the stockholders will be vaporized.
Speaking of problems with debt, the “deleveraging” process continues on Wall Street. The difficulty right now is it appears that selling assets and raising capital is becoming increasingly difficult as just about everybody is looking for billions of dollars. The trials and tribulations of Lehman (LEH) are not only an entertaining read, but also make this point quite clear. For example, the firm was first turned down by South Korea and another sovereign wealth fund because the price it was asking for the capital (reportedly 50% over book value) was too high. Next, there was the report that the Fed was forced to follow up on a rumor that Credit Suisse had pulled Lehman’s line of credit. And it now appears that LEH will be forced to sell off a large chunk of its asset management arm, which accounts for the majority of Lehman’s book value at the present time.
But getting back to the topic at hand, not even some more jawboning between the U.S. and Russia, and the accompanying pop in crude oil, could keep equities down yesterday. Whether this type of defiant attitude from the Bull camp can continue however, remains to be seen.
Turning to this morning, things do not look quite as rosy as oil has continued to catch a bid in electronic trading. On the economic front, weekly jobless claims came in a bit below expectations, which is a good thing and is taking a little of the pressure off of equities at the moment.
Running through the rest of the pre-game indicators, the foreign markets ignored Wall Street’s close and are down across the board. Crude futures are moving up with the latest quote showing oil trading higher by $2.63 to $118.19. Interest rates aren’t moving much this morning with the yield on the 10-yr currently trading at 3.81%. And finally, with about 60 minutes before the bell, stock futures in the U.S. are pointing to a lower open. The Dow futures are currently off by about 51 points; the S&P’s are down by about 7 points, while the NASDAQ looks to be about 10 points below fair value at the moment.
Stocks “In Play” This Morning:
Yesterday’s Earnings After the Bell:
Salesforce.com (CRM) – Reported $0.08 vs. $0.18
JDS Uniphase (JDSU) – Reported $0.07 vs. $0.10
Longs Drug (LDG) – Reported $0.78 vs. $0.77
Limited Brands (LTD) – Reported $0.27 vs. $0.20
Today’s Earnings Before the Bell:
Burger King Holdings (BKC) – Reported $0.37 vs. $0.34
Dicks Sporting Goods (DKS) – Reported $0.39 vs. $0.36
Heinz (HNZ) – Reported $0.72 vs. $0.66
News, Upgrades/Downgrades/Brokerage Research:
Synopsys (SNPS) – Downgraded at Citi
Waste Management (WMI) – Added to Top Picks Live list at Citi
Lehman Bros (LEH) – Estimates reduced at Citi
Goldman Sachs (GS) – Estimates reduced at Citi
Morgan Stanley (MS) – Estimates reduced at Citi
Southern Copper (PCU) – Upgraded at Merrill
Salesforce.com (CRM) – Downgraded at Piper Jaffray
Foundation Coal (FCL) – Upgraded at UBS
Massey Energy (MEE) – Upgraded at UBS
Arch Coal (ACI) – Upgraded at UBS
Quest Diagnostics (DGX) – Upgraded at William Blair
Disclosure: Mr. Moenning and/or related firms hold long positions in: GS
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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