Daily State of the Markets
Tuesday Morning – May 10, 2011
Good morning. As someone who spends a fair amount of time behind the keyboard, I often get a kick out of some of the explanations offered up by the “experts” on days like Monday. When asked about the action, some folks feel they have to create a lavish explanation. For example, instead of simply telling the reporter, “Not much to report, Bob… The dollar reversed lower, so, as has been the case lately, traders pushed stocks higher,” there are those that like to make it complicated.
As a case in point, let’s review what LPL’s Jeff Kleintop told Reuters on Monday afternoon. But first, we should preface the comments with the fact that commodities of all shapes, sizes, and colours moved up smartly on Monday as a result of, yep, you guessed it; a decline in the dollar. But instead of talking about whether or not the move is over or what moved commodities up on Monday, Kleintop opined, “Commodities pulling back is both good and bad. It’s certainly good in that oil prices have pulled back a little bit as that’s one of the risks facing consumers and the economy overall, but at the same time a lot of S&P corporate profits are tied to commodities and… maybe the outlook for some sectors might be negatively impacted.”
I’m guessing the question that begs to be asked after reading that statement is if the recent pullback in commodities (which may or may not be over) is a good thing or a bad thing? After rereading Kleintop’s statement, it sound to me like his answer is, “yes.” Helpful, eh?
To be fair, it is sometimes tough to give a reporter the sound bite they are looking for to fill their page. And on a day like Monday, where there was a lot of “noise” but not a lot of important stuff happening, it can indeed be tough to come up with something meaningful to say.
However, instead of an “On the one hand… and yet on the other hand” type of response, we believe it is more productive to stick to the task of identifying the driving forces each day. And from where I sit, the bottom line – boring as it may be – it that it’s still a trader’s market that remains all about the buck.
For example, we had rumours galore out of the Eurozone in relation to the trials and tribulations of Greece. With the Greeks talking about bailing on the EU and/or needing to restructure their debt, the Euro fell and the dollar rose – well, for a while. But then, just before lunch, the dollar started dropping and the buy programs kicked in; taking the stock market up to the highs of the day in short order.
There were other stories as well yesterday. However, the bottom line is that stocks (a) appear to remain tethered to the movements in the greenback and (b) are continuing to consolidate the recent gains. Yes, I’ve mentioned this a time or two before. And frankly, this assessment isn’t likely to get me quoted in the media. But it does appear to be what IS happening at the present time.
Turning to this morning… Stocks are firmer in the early going on the back of improving overseas markets and a big M&A deal between Microsoft and Skype.
On the Economic front… The government reported that Import Prices for the month of April rose by +2.2%, which was above the consensus for an increase of +1.7%. The March reading was revised lower to 2.6% from 2.7% Export prices rose by +1.1%, below last month’s revised level of +1.5%.
Thought for the day… Remember that there is more to life than increasing its pace…
Here are the Pre-Market indicators we review each morning before the opening bell…
- Major Foreign Markets: Australia: +0.32% Shanghai: +0.32% Hong Kong: +0.76% Japan: -0.66% France: -1.33% Germany: -1.11% London: -0.64%
- Australia: +0.32%
- Shanghai: +0.32%
- Hong Kong: +0.76%
- Japan: -0.66%
- France: -1.33%
- Germany: -1.11%
- London: -0.64%
- Crude Oil Futures: +$2.17 to $99.35
- Gold: $+8.20 to $1499.80
- Dollar: higher against the Yen, Euro and Pound
- 10-Year Bond Yield: Currently trading at 3.179%
- Stocks Futures Ahead of Open in U.S. (relative to fair value): S&P 500: +1.40 Dow Jones Industrial Average: +15 NASDAQ Composite: +3.50
- S&P 500: +1.40
- Dow Jones Industrial Average: +15
- NASDAQ Composite: +3.50
Wall Street Research Summary
Viacom (VIA.B) – Argus GAMCO Investors (GBL) – BAC/ML Saks (SKS) – Goldman Sachs Boston Beer (SAM) – HSBC Mindray Medical (MR) – Oppenheimer Louisiana-Pacific (LPX) – TD Newcrest Creditcorp (BAP) – UBS FirstEnergy (FE) – Wells Fargo Downgrades: Archer-Daniesl (ADM) – BAC/ML Smithfield Foods (SFD) – BAC/ML Tyson Foods (TSN) – BAC/ML Jones Group (JNY) – Goldman Sachs American Eagle (AEO) – Janney Ralcorp Holdings (RAH) – William Blair 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.