Is It Time For The Stock Market To Make An Adjustment?

Daily State of the Markets 
Thursday Morning – July 21, 2011

Good morning. It is said that the stock market discounts what is likely to happen over the next three to six months. While I firmly agree with this concept, we should also note that the time-frame being discounted in the current environment is obviously much shorter than that as each headline is met with an almost instantaneous response in the markets. So, with no game-changing news to work with and an awful lot of inputs on the horizon, we’re of the mind that Wednesday’s rather blasé day was a result of traders waiting and watching for what comes next on a number of fronts.

From my perch, it looks as if Tuesday’s joyride to the upside was the market’s way of discounting the likelihood of a solution on the debt ceiling/budget debate here in the United States. Sure, there was a fair amount of scurrying for cover among the bears who were betting that the sky would actually fall. And yes, the better-than expected economic data as well as the encouraging earnings likely also played a role.

The key big-picture point is that Tuesday’s big blast represented a very quick adjustment to the market’s “view” of the future. However, with a slew of very important headlines likely to hit the tape over the next few days, it is also clear to me that traders were quick to curb their enthusiasm Tuesday and were happy to sit on their hands on Wednesday. Remember, while those wearing the rose-coloured Revo’s believe that the politicos in Washington will manage to come to an agreement which will keep the U.S.’s AAA credit rating intact and that the EU/ECB/IMF will also find a way to avoid a global market meltdown by coming up with a solution for Greece, there is also a chance that there could be a bump in the road along the way.

As my friend Curt B. wrote on Wednesday, “I call your attention to the market’s reaction to the surprise failure on September 29, 2008 for the U.S. House of Representatives to pass the initial TARP legislation. On that day the DJIA fell a then record 778 points.” Curt isn’t suggesting that he expects a replay of one of Washington’s biggest snafu’s. No, he was merely pointing out that there is still risk in the market and that failure on any front will surely be accompanied by a rather swift adjustment to the downside. And it is for this reason that the bulls weren’t able to produce a follow-through day on Wednesday.

So, with time running out on the deadline to extend the debt ceiling in the U.S., a big meeting beginning today across the pond on what to do about Greece, more jobs data due out, and an avalanche of earnings reports to sift through, it is a safe bet that traders may be ready to make an adjustment to their outlook whenever a big headline hits the tape. However, with the market still stuck in a trading range, the REAL adjustment to the outlook will be revealed when the range breaks.

So, while it is vacation season, you may to keep your mobile device handy because the next adjustment may be close at hand.

Turning to this morning… The earnings parade and the potential for resolutions to the market’s big issues have put trades in a decent mood in the early going.

On the Economic front… Initial Claims for Unemployment Insurance for the week ending 7/16 rose by 10,000 to 418K. This was slightly above the consensus estimate for 405K and last week’s total of 405K. Continuing Claims for the week ending 7/9 came in at 3.698M vs. 3.70M and last week’s 3.727M.

In addition, we’ll get a report on the Philly Fed and LEI at 10:00 am eastern.

Thought for the day… Regardless of the colours on the screens, make the decision to enjoy your day.

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell…

  • Major Foreign Markets: Australia: +0.17% Shanghai: -1.01% Hong Kong: -0.07% Japan: +0.04% France: +0.01% Germany: -0.39% London: -0.39%
  • Australia: +0.17%
  • Shanghai: -1.01%
  • Hong Kong: -0.07%
  • Japan: +0.04%
  • France: +0.01%
  • Germany: -0.39%
  • London: -0.39%
  • Crude Oil Futures: +$0.12 to $98.52
  • Gold: +$1.00 to $1597.90
  • Dollar: higher against the Yen, lower vs Euro and Pound
  • 10-Year Bond Yield: Currently trading at 2.917%
  • Stocks Futures Ahead of Open in U.S. (relative to fair value): S&P 500: +7.96 Dow Jones Industrial Average: +59 NASDAQ Composite: +8.55
  • S&P 500: +7.96
  • Dow Jones Industrial Average: +59
  • NASDAQ Composite: +8.55

Wall Street Research Summary


  • Nuvasive (NUVA) – BMO Capital
  • FirstEnergy (FE) – Deutsche Bank
  • St. Jude Medical (STJ) – Added to Focus List at JPMorgan
  • SFN Group (SFN) – JPMorgan
  • Robert Hald (RHI) – RW Baird
  • National Oilwell Varco (NOV) – Estimates increased at Wells Fargo


  • Ferrellgas Partners (FGP) – Citi
  • Toll Brothers (TOL) – Citi
  • Nalco Holding (NLC) – Citi, Janney, JPMorgan
  • Ecolab (ECL) – Credit Suisse
  • Parexel (PRXL) – Jefferies
  • Banco Santander (SAN) – JPMorgan
  • Intel (INTC) – Nomura
  • Core Labs (CLB) – RBC Capital
  • Clorox (CLX) – RBC Capital


Earnings Yesterday’s Earnings After The Bell


Alliance Data ADS   $1.63 American Express AXP $1.07 $0.97 CA Technologies CA $0.55 $0.51 Cheesecake Factory CAKE $0.42 $0.42 Covanta Holding CVA $0.14 $0.09 eBay EBAY $0.48 $0.46 E*TRADE ETFC $0.16 $0.16 East West Bancorp EWBC $0.39 $0.37 F5 Networks FFIV $0.97 $0.90 Forward Air FWRD $0.40 $0.37 Intel INTC $0.54 $0.51 Noble Corp NE $0.17 $0.25 Newfield Exploration NFX $1.02 $1.06 Plexus Corp PLXS $0.58 $0.55 Qualcomm QCOM $0.73 $0.69 Robert Half RHI $0.25 $0.22 SLM Corp SLM $0.48 $0.42 Seagate Technology STX $0.28 $0.25 Tractor Supply TSCO $1.23 $1.20 Werner Enterprises WERN $0.38 $0.34 Xilinx XLNX $0.56 $0.53 

Earnings Before The Bell


Alaska Air ALK $2.44 $2.44 Autoliv ALV $1.54 $1.28 Alexion Pharmaceuticals ALXN $0.29 $0.30 Baxter BAX $1.07 $1.02 BB&T Corp BBT $0.44 $0.44 Cooper Industries CBE $0.96 $0.95 Celanese CE $1.66 $1.43 Cash America CSH $0.84 $0.78 Cypress Semiconductor CY $0.32 $0.28 Danaher DHR $0.69 $0.67 Diamond Offshore DO $1.92 $1.92 EnCana ECA $0.22 $0.13 Entegris ENTG $0.24 $0.24 ITT Educational ESI $2.85 $2.64 Freeport-McMoRan FCX $1.43 $1.35 Fifth Third FITB $0.35 $0.27 Gentex GNTX $0.27 $0.27 Goodrich GR $1.38 $1.31 Huntington Bancshares HBAN $0.16 $0.15 Ingersoll-Rand IR $0.88 $0.93 Janus Capital JNS $0.23 $0.23 Laboratory Corp LH $1.64 $1.62 Eli Lilly LLY $1.18 $1.18 ManpowerGroup MAN $0.87 $0.77 Medco Health MHS $0.96 $0.94 Morgan Stanley MS -$0.38 ($0.62) Penn National Gaming PENN $0.55 $0.47 PepsiCo PEP $1.21 $1.21 Philip Morris PM $1.34 $1.22 PPG Industries PPG $2.12 $2.00 Sherwin-Williams SHW $1.74 $1.77 Snap-On SNA $1.14 $1.08 Sonoco Products SON $0.60 $0.63 Swift Transportation SWFT $0.18 $0.19 AT&T T $0.60 $0.60 Thomas & Betts TNB $0.80 $0.79 The travellers Co TRV -$0.91 ($0.64) Travelzoo TZOO $0.30 $0.39 United Continental UAL $1.49 $1.46 Union Pacific UNP $1.59 $1.57 VF Corp VFC $1.19 $1.03 Whirlpool WHR $2.76 $2.73 

* Report includes items that make comparisons to the consensus estimate questionable

Long positions in stocks mentioned: PM, TSCO

For more of Mr. Moenning’s thoughts and research, visit


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