Daily State of the Markets
Friday Morning – October 21, 2011
Good morning and welcome back to the guessing game. In case you’re a new contestant, this is a game in which investors of all shapes and sizes, professionals of varying experience levels, and a host of folks playing at home will place their bets and attempt to guess which way the markets will move in the next three minutes. Are we ready to play? Alrightythen… let’s get started!
Before we take a crack at our first headline, let’s go over the ground rules. Long-time players probably don’t need to review the way the game is played, but for those new folks, let’s do a quick once-over. First, players, as always, there is absolutely no peeking at the economic data before you make your guess. Next, the use of earnings reports is strictly forbidden. And finally, you will need to turn off all of your electronic devices such as cell phones, iPads, iPods, laptop computers, or, as they say on the aeroplanes, anything with an on/off switch. Remember, this is… everybody now… The Guessing Game!
Now let’s get started. Today, players, our game is going to focus on Europe. After all, Europe IS where the action is these days. Remember, we’ll give you the headline and then you have 0.005 seconds to (1) decide which way the market is going to go and then (2) place your bets. Oh, and in case you’ve forgotten the way our scoring works, you will earn double points if you decide to guess with the 2X leveraged ETF’s, you’ll earn triple points every time you bet correctly using the 3X funds, and you’ll get, well, let’s just call it a boatload of bonus points if you decide to roll the dice with the futures using minimum margin.
Is everybody ready to play? Ok, with the opening bell just moments away, let’s begin. We’re going to start with an easy one, so be ready to make your guess! My first card says… The Philly Fed Index comes in at +8.7 in October, which was well ahead of the consensus expectations for a reading of -8.6 and was an impressive rebound from the last two months’ readings of -17.5 and -30.7. Ready or not…. Let’s Guess. Now Go, Go, Go!!
Ok, times up. Hmmm… In looking at my screen, it appears that most of our contestants decided to go with the bulls on this one. Oh, and what’s this, it looks like every single one of our players went for double or triple points – looks like we’ve got some players today! I guess I can’t really blame you. After all, I did say it was an easy one! But fans, I am sorry to say that each and every one of your guesses is WRRRRRRONG!
Players, normally a better than expected number out of the Philly Fed would indeed be a good thing for the directional flow of the stock market, especially since it is a current (meaning October) number as opposed to those rear-view mirror reports from August and September we’ve been seeing lately. And yes players, this number would indeed seem to put a nail in the coffin of the recession theory.
But… (You knew that was coming, right?)… Players, remember, as I mentioned at the top of the show, today we’re playing the EUROPEAN edition!!! So, instead of focusing on the U.S. economy, you needed to have your eyes glued to anything and everything coming from across the pond. I know, I know, the game is tougher if you can’t read German. But it turns out that around the time the Philly Fed report came out, a German newspaper ran the following headline: “The German Government has not ruled out postponing the EU summit scheduled for this weekend.”
With just 0.005 seconds to react, what you should have focused on were the words “postponing,” “EU summit,” and “this weekend.” You see players, THIS is what moves markets! So, I’m so sorry to say that you all lose double and triple points on that round.
Alrighty, players, let’s go again. Here’s the headline: “Libyan leader Mommar Gadhafi captured and killed.” Are you ready? Ok, let’s guess! Go, Go, Go!!
And… stop the clock. Hmmm… Ok… Some players were thinking creatively with the oil trades, but it once again looks like most of our contestants went with the long stocks guess. And lo and behold, I see an awful lot of double and triple point plays in there…
But folks, it looks like you got fooled again as one Angela Merkel just cancelled a scheduled statement on the EU summit… And we all know that can’t be good!
Ok… Let’s try one more. Since it’s getting late in the game, this one is going to be a little tougher. So put your thinking caps on and use your 0.005 seconds wisely! Ready? Ok… This one is from the now-famous Guardian: “EU May Ban Rating Agencies from Downgrading Debt of Countries in Bailout.” Ok, let’s guess… Go, Go, Go!
Three, two, one… Ok, let’s see how you did this time. Hey, good news players, a lot of you got this one right. But… I’m sorry to say that you were all tripped up because… wait for it… This was also our double-headline round! And before you could get the guess right, Team Merkozy said that there was going to be another summit – a “Bonus” summit, if you will – on Wednesday. And… wait for it… They “promise” to have a deal done by then. So, unfortunately what was bad is now good and everybody is happy! Oops, except all of you, of course.
Hey, there’s the bell fans. That means we’re out of time. So, thanks for playing… The Guessing Game!! See you all next time!
Turning to this morning… With more clarity coming out of the European situation about the reasons for the dual summits and Fitch saying they are not looking at a downgrade of France, stocks are higher across the pond and futures point to a higher open in the U.S.
On the Economic front… There are no reports scheduled before the bell today.
Thought for the day… Best of luck on this Friday and be sure to enjoy the weekend!
Here are the Pre-Market indicators we review each morning before the opening bell…
- Major Foreign Markets: Australia: -0.08% Shanghai: -0.60% Hong Kong: +0.24% Japan: -0.04% France: +1.81% Germany: +2.31% Italy: +2.49% Spain: +2.36% London: +1.26%
- Australia: -0.08%
- Shanghai: -0.60%
- Hong Kong: +0.24%
- Japan: -0.04%
- France: +1.81%
- Germany: +2.31%
- Italy: +2.49%
- Spain: +2.36%
- London: +1.26%
- Crude Oil Futures: +$1.19 to $87.26
- Gold: +$28.50 to $1641.40
- Dollar: higher lower the Yen, lower vs Euro and Pound
- 10-Year Bond Yield: Currently trading at 2.196%
- Stock Futures Ahead of Open in U.S. (relative to fair value): S&P 500: +10.76 Dow Jones Industrial Average: +89 NASDAQ Composite: +20.00
- S&P 500: +10.76
- Dow Jones Industrial Average: +89
- NASDAQ Composite: +20.00
Wall Street Research Summary
- Wynn Resorts (WYNN) – BMO
- Eldorado Gold (EGO) – Canaccord Genuity
- Altera (ALTR) – CLSA
- Accretive Health (AH) – Goldman Sachs
- Domino’s Pizza (DPZ) – Target increased at Oppenheimer
- TCF Financia (TCB) – Oppenheimer
- Seagate Technology (STX) – RW Baird
- Barry Petroleum (BRY) – Susquehanna
- Forest Oil (FST) – Susquehanna
- Newfield Exploration (NFX) – Bank of America Merrill Lynch
- Cimarex (XEC) – BMO
- Freescale Semiconductor (FSL) – BMO
- Sterling Bancorp (STL) – Janney Capital
- Alpha Natural (ANR) – Target cut at Morgan Stanley
- Arch Coal (ACI) – Target cut at Morgan Stanley
- Huntington Bancshares (HBAN) – Oppenheimer
- International flavours (IFF) – Stifel Nicolaus
- Chesapeake Energy (CHK) – Susquehanna
- Occidental Petroleum (OXY) – Susquehanna
- PetSmart (PETM) – Wells Fargo
Earnings Yesterday’s Earnings After The Bell
Estimate Altera ALTR $0.57 $0.59 Chubb CB $0.88 $0.80 Chipotle Mexican Grill CMG $1.90 $1.85 Capital One COF $1.77 $1.68 Compuware CPWR $0.10 $0.10 Flextronics FLEX $0.22 $0.22 Freescale Semiconductor FSL $0.29 $0.24 Gardner Denver GDI $1.48 $1.37 Lattice Semiconductor LSCC $0.12 $0.11 Microsoft MSFT $0.68 $0.68 Maxim Integrated MXIM $0.46 $0.42 People’s United Financial PBCT $0.15 * $0.17 Rambus RMBS $0.12 ($0.01) SanDisk SNDK $1.20 $1.07 Seagate Technology STX $0.34 $0.31
Today’s Earnings Before The Bell
Estimate Air Products APD $1.51 $1.52 Dover Corp DOV $1.20 $1.13 General Electric GE $0.31 $0.31 GNC Holdings GNC $0.46 $0.36 Harman International HAR $0.69 $0.51 Honeywell HON $1.10 $0.99 IDEXX Labs IDXX $0.66 $0.65 Kinetic Concepts KCI $1.35 $1.29 Kansas City Southern KSU $0.78 $0.74 ManpowerGroup MAN $0.97 * $0.95 McDonald’s MCD $1.45 $1.43 MGIC Investment MTG -$0.82 ($0.74) Precision Drilling PDS $0.29 $0.23 Schlumberger SLB $0.98 $1.01 SunTrust Banks STI $0.39 $0.35 Verizon VZ $0.56 $0.55* Report includes items that make comparisons to the consensus estimate questionable
Long positions in stocks mentioned: MCD, CMG
For more of Mr. Moenning’s thoughts and research, visit StateoftheMarkets.com
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