Daily State of the Markets
Wednesday Morning – October 5, 2011
Good morning. With the game on the line and the clock winding down on a bruised and battered bull squad, the defensive unit was asked to get back out on the field and find some way to keep their ferocious counterparts from scoring yet again on Wednesday. To be sure, the bulls were tasked with a tough job. Their opponents appeared to have everything going for them on this day (there was Goldman’s cut in its global forecast, Dexia’s troubles, and the usual problems with Greece). The ball was in the red zone. And the seemingly better prepared bears were looking to put the game away with an arsenal of offensive weapons and a fresh set of downs.
In market parlance, the situation was simple. With what appeared to be a “breakdown” on the charts of the S&P 500, the midcaps, and the smallcaps, any further selling would have given the bears a fair amount of open field to work with until the next defensive support level could be found. And with the S&P futures pointing in a southerly direction, it looked like the outcome was a foregone conclusion.
Getting back to the play-by-play, on first down, the bears used their strength and ran the ball right up the middle. The bulls were once again beaten off the line and pushed back. By the time the whistle blew and the pile was emptied, the ball was placed on the eleven. One play and a cloud of dust later, the referee placed the pigskin on the eight and signalled that it was first down. In short, it wasn’t looking good for our heroes in horns.
But from there, it appeared that the bears lost their focus. Sure, there was some bad news on the banking front as France and Belgium had to publically say they would back depositors of Dexia. And with the Troika having cancelled their October 13th deadline to make a decision on the next batch of Greek bailout cash, it looked like the game was all about fear of default again. But a false start and a holding call on consecutive plays backed the bear team up a bit.
After a timeout to regroup, the bears came back with a vengeance. Sticking to their strength, the brutes quickly muscled their way down to the two. And from the stands, it appeared that this game was about to be over. The Dow was down more than 200 points and it looks like any possibility for a rebound was fading fast. Hoping for a miracle, the bulls’ coach called timeout to gather his troops.
With the team huddled around him and hanging on every word, the coach said, “Gentlemen, I have just gotten an important message from the boys in the booth. I have two little words for you. I want you to think about these two words and what they mean. And then I want you to go back out there and make something happen! Are you ready… Well, are you!?!”
As only a team of young men can do, they responded with a roar, “YES, WE’RE READY COACH!”
“OK boys, the two words are ‘concerted’ and ‘coordinated’… now GO!”
Needing nothing more, the bull team leapt to their feet and sprinted enthusiastically back out onto the field. Slapping each other on the back and chest-thumping all the way back to the huddle, it was clear that they were ready. With word from the FT that the Euro gang was going to apply those two words to bank recapitalization, the bulls were suddenly fired up – REALLY fired up!
With the snap of the ball on the next play, the defensive line swarmed the bear QB and stripped the ball loose. A scramble ensued and suddenly the ball scooted out of the pack toward the sideline. In full stride, the bull’s defensive corner scooped up the bouncing ball and lit out down the field. With nothing but green grass and an end zone full of screaming fans in front of him, it was the easiest score of his life.
As far as the stock market was concerned, those two little words used in an FT story, which, by the way, offered no details and no plan of action, lit quite a fire under the buyers. 40-eight minutes of intense HFT action later, the Dow closed nearly 375 points higher than it was when the story hit the wires. So suddenly and without warning, the bulls looked like they might be ready to get back in the game.
Turning to this morning… The FT article suggesting that there is some sort of “grand plan” to recapitalize Europe’s banks appears to have stuck as European markets are up nicely this morning. However, the futures in the U.S. are only modestly higher at the present moment. But as we’ve learned, this can change at the drop of a hat.
On the Economic front… ADP reported that the private sector job market expanded by 91K jobs during the month, which was above the consensus expectations for a gain of about 67K.
Earlier this morning, Challenger, grey and Christmas reports that there were 115,730 planned job cuts announced in September, which was much higher than August’s 51,114. This is the highest level seen since April 2009.
In addition, we’ll get the ISM Non-Manufacturing Index at 10:00 am eastern.
Thought for the day… Don’t forget to think positive today :-)
Here are the Pre-Market indicators we review each morning before the opening bell…
- Major Foreign Markets: Australia: +1.45% Shanghai: closed Hong Kong: closed Japan: -0.87% France: +2.75% Germany: +3.30% Italy: +2.07% Spain: +1.68% London: +2.34%
- Australia: +1.45%
- Shanghai: closed
- Hong Kong: closed
- Japan: -0.87%
- France: +2.75%
- Germany: +3.30%
- Italy: +2.07%
- Spain: +1.68%
- London: +2.34%
- Crude Oil Futures: +$2.11 to $77.78
- Gold: +$12.90 to $1628.90
- Dollar: higher against the Yen, Euro, and Pound
- 10-Year Bond Yield: Currently trading at 1.850%
- Stock Futures Ahead of Open in U.S. (relative to fair value): S&P 500: -1.05 Dow Jones Industrial Average: -22 NASDAQ Composite: -6.69
- S&P 500: -1.05
- Dow Jones Industrial Average: -22
- NASDAQ Composite: -6.69
Wall Street Research Summary
- Foot Locker (FL) – Estimates increased at Canaccord Genuity
- CBS Corp (CBS) – Citi
- Walt Disney (DIS) – Citi
- Acor Therapeutics (ACOR) – Citi
- Apollo Group (APOL) – Credit Suisse
- Nielsen Holdings (NLSN) – Goldman Sachs
- Rockwood Holdings (ROC) – JPMorgan
- Celgene (CELG) – Mentioned positively at RBC
- AT&T (T) – Mentioned positively at Wells Fargo
- Advanced Micro (AMD) – Bernstein
- Dick’s Sporting Goods (DKS) – Credit Suisse
- CarMax (KMX) – Credit Suisse
- PerkinElmer (PKI) – Deutsche Bank
- Community Health (CYH) – Deutsche Bank
- HCA Holdings (HCA) – Deutsche Bank
- Health Management (HMA) – Deutsche Bank
- Lifepoint Hospitals (LPNT) – Deutsche Bank
- Home Depot (HD) – Goldman Sachs
- PetSmart (PETM) – Goldman Sachs
- Hewlett Packard (HPC) – JPMorgan
- Google (GOOG) – Stifel Nicolaus
Long positions in stocks mentioned: none
For more of Mr. Moenning’s thoughts and research, visit StateoftheMarkets.com
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