Daily State of the Markets
Monday Morning – March 21, 2011
Good morning. For nine days, all eyes were focused on Japan as traders and investors alike worried about the potential for a nuclear disaster. For more days than I care to count, the world has worried about what social unrest and armed uprisings in the Middle East/North Africa will mean to the price of oil, and, in turn, to the U.S. consumer. And for the past four weeks, the stock market has reflected the state of angst by correcting lower.
But now that the situation in Japan appears to have turned the corner with power being restored to Daiichi reactors No. 1 & 2 and radiation levels falling, and allied forces likely to make quick work of K-Daffy’s not-so formidable forces, the stock market may indeed be ready to make a meaningful rebound.
We got an early glimpse of what to expect next from this news-driven market at the end of last week. But at that time, there was still plenty of worry to go around – enough in fact to keep fast-money types from holding long positions over the weekend. So, despite the improvement in the Japan situation on Friday and the declaration of a no-fly zone over Libya, traders decided to avoid the potential headline risk and went back to risk-off mode into the close.
But since this has been largely a news-driven environment and the news this fine Monday morning doesn’t look to be too bad at all, the rebound appears to be on. Speaking of news, I actually had a tough time finding an update on the Japanese nuclear situation on Sunday afternoon and none of the major news sites I frequent had even a bullet-point headline on the status of Daiichi reactors No. 3 and 4 this morning. Thus, it would appear that no news is indeed good news on this subject.
What about Libya, you ask? What about the bloodshed and potential for a coup in Yemen? And what about crude resuming its rude rise? In short, nobody cares. The thinking here is simple. We’ve seen the movie currently being played out in Libya (a moronic dictator finally crosses the line and is pounded from the air and sea) at least a couple times before and the bottom line is after a few days of concerted allied attacks, it is likely that Gadhafi will be out sooner rather later. And although it is disconcerting to hear that the Arab league is pulling the old bait-and-switch routine, the bottom line is the potential for a “scorched earth” response from Libya – something that could impact oil prices in a meaningful way – seems less likely at this time.
So, with the Fed telling us Friday that U.S. banks are now in good enough shape to start paying dividends again, news of some hefty M&A activity this morning, and Warren Buffett talking about making another decent-sized acquisition, the key question to ask yourself is: Are you ready for the rebound phase?
But before everyone breaks into a rousing chorus of “Happy days are here again,” we should keep in mind that there is now resistance overhead. And until proven otherwise, this remains a news-driven market. Therefore, we’ll be watching to see how the bulls handle the next bad headline and also the 1295-1305 resistance zone on the S&P 500.
Turning to this morning… As we’ve discussed, the early indications are for stocks to open strong. Despite Japan being closed for a holiday, the rest of the major foreign markets are higher and the futures are pointing higher.
On the Economic front… We do not have any economic data to review before the bell this morning.
Thought for the day: Learn to trust in an idea whose time has come…
Here are the Pre-Market indicators we review each morning before the opening bell…
Major Foreign Markets:
- Australia: +0.39%
- Shanghai: +0.10%
- Hong Kong: +1.73%
- Japan: closed
- France: +1.85%
- Germany: +2.04%
- London: +1.25%
Crude Oil Futures: +$1.90 (May contract) to $103.75 Gold: +$14.70 to $1433.80 Dollar: lower against the Yen and Pound, higher vs. Euro 10-Year Bond Yield: Currently trading at 3.268% Stocks Futures Ahead of Open in U.S. (relative to fair value): S&P 500: +16.30 Dow Jones Industrial Average: +120 NASDAQ Composite: +26.62
Wall Street Research Summary
Target (TGT) – BMO Capital Leap Wireless (LEAP) – Citi AT&T (T) – Citi, HSBC New York Times (NYT) – Citi Denbury Resources (DNR) – Target increased at Credit Suisse Bed Bath & Beyond (BBBY) – FBR Capital Potash (POT) – Goldman Sachs Intrepid Potash (IPI) – Goldman Sachs Sanderson Farms (SAFM) – Goldman Sachs Deutsche Telekom (DT) – HSBC, UBS Autodesk (ADSK) – RW Baird Qualcomm (QCOM) – Sterne, Agee Textron (TXT) – Stifel Nicolaus Time Warner (TWX) – Estimates increased at UBS PACCAR (PCAR) – UBS
Agrium (AGU) – Goldman Sachs CF Industries (CF) – Goldman Sachs Smithfield Foods (SFD) – Goldman Sachs Kraft (KFT) – JPMorgan Entergy (ETR) – Target reduced at Soleil Securities
Long positions in stocks mentioned: None
For more “top stock” portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed herein are those of Mr. David Moenning 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. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in this report is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.