Daily State of the Markets
Wednesday Morning – May 11, 2011
Good morning. Tuesday’s stock market session was easy to like. In short, the fact that the indices advanced smartly across the board without any “high-profile directional drivers,” the strong breadth numbers (2400 advancing issues vs. just 614 declines), and an increase in volume from the prior session all add up to what traders like to call “good action.”
However, before you reach for the champagne, the noisemakers, and the party hats, I’d like to add that although the action was good, it wasn’t great. Yes, it was indeed positive that China’s trade surplus provided an upside surprise. Yes, it is hard to argue against a big M&A deal (Microsoft’s purchase of Skype for the not-so tidy sum of $8.5 billion) being anything but a positive input. And yes, the fact that Greece’s auction of 6-month T-Bills (at a rate of over 4.8%) certainly helped counter the idea that the sky is falling in Europe. Oh, and yes, the dollar finishing with a red number and near the low of the day didn’t hurt either.
Now toss in a 76-point gain for the Dow (and even bigger percentage moves in the broader indices) and again, it is easy to call it a good day. But unfortunately for those wearing the rose-coloured Revo’s the bottom line is stocks didn’t break out. And because of this, Tuesday simply can’t be considered a great day.
The bulls will certainly argue that this good day, which seemed to appear out of the blue, is a very good thing and definitely bodes well for the future. And while those across the aisle dressed in fur could be heard muttering aloud about the overhead resistance after the close yesterday, there didn’t seem to be much vigor behind the complaint.
From a macro perspective, traders also may have been exhaling a bit on Tuesday in response to the situation in Europe. The key here is that the markets have been concerned that the mess in Greece might wind up producing an actual default of sovereign debt. And no matter how you try to spin it, a default by any country would mean a resumption of the “who’s next” game. But with the EU talking openly about providing additional assistance over the next two years (Greece is said to need €28 billion in 2012 and another €32 billion in 2013), the thinking on Tuesday was that there may not be any additional big surprises out of the PIGI’S.
If you are a reader of tea leaves and/or spend your day watching the tape action in the market, you are likely to agree that this market “feels” like it wants to go higher. But, until and unless the bulls can find a way to bust through the 12,800 level on the Dow, the 1363 level on the S&P 500, the 2875 level on the NASDAQ, the 1015 level on the Midcaps, and the 860 level on the Russell 2000, we’re stuck calling the market “good, but not great.”
Turning to this morning… An abundance of economic data out of China has traders squabbling over what the Chinese Central Bank will do next. Germany says there will be a discussion of what to do about Greece next week. And the foreign markets were mixed overnight. The combination has the U.S. futures trading slightly below fair value at the moment.
On the Economic front… The U.S. Trade Deficit rose in March to $ 48.18 billion, which was worse than the consensus estimate for a deficit of $46.9 billion. The February reading was revised lower to $45.44 billion from $45.76 billion.
Thought for the day… Why not send positive thoughts to someone who is hurting or in need…
Here are the Pre-Market indicators we review each morning before the opening bell…
- Major Foreign Markets: Australia: +1.14% Shanghai: -0.23% Hong Kong: -0.19% Japan: +0.46% France: +0.36% Germany: +0.49% London: -0.04%
- Australia: +1.14%
- Shanghai: -0.23%
- Hong Kong: -0.19%
- Japan: +0.46%
- France: +0.36%
- Germany: +0.49%
- London: -0.04%
- Crude Oil Futures: -$1.49 to $102.39
- Gold: -$3.40 to $1513.50
- Dollar: lower against the Yen and Pound, higher vs Euro
- 10-Year Bond Yield: Currently trading at 3.223%
- Stocks Futures Ahead of Open in U.S. (relative to fair value): S&P 500: -0.26 Dow Jones Industrial Average: -11 NASDAQ Composite: -1.55
- S&P 500: -0.26
- Dow Jones Industrial Average: -11
- NASDAQ Composite: -1.55
Wall Street Research Summary
Genpact (G) – BAC/ML Thomas & Betts (TNB) – BAC/ML Acuity Brands (AYI) – Canaccord Genuity Reynolds American (RAI) – Target increased at Citi JA Solar (JASO) – Credit Suisse Becton Dickinson (BDX) – Goldman Sachs Stryker (SYK) – Goldman Sachs Dick’s Sporting Goods (DKS) – Goldman Sachs Johnson & Johnson (JNJ) – Goldman Sachs Harmony Gold (HMY) – HSBC Eaton (ETN) – Mentioned positively at Oppenheimer TJX Cos (TJX) – Target increased at RBC NetApp (NTAP) – RBC American Campus (ACC) – UBS Education Realty Trust (EDR) – UBS Oceaneering Intl (OII) – Wells Fargo Downgrades: Hospira (HSP) – Goldman Sachs Bristol-Myers (BMY) – Goldman Sachs IdaCorp (IDA) – KeyBanc Kimco Realty (KIM) – UBS Long positions in stocks mentioned: AYI 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.