Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Nobody Home?

Daily State of the Markets 
Thursday Morning - February 3, 2011

Good morning. After three days of excitement, things appeared to calm down a bit at the corner of Broad and Wall yesterday. And while there was some intraday volatility and it is a safe bet that there were some programs run (this time in both directions), the bottom line is there didn't appear to be anybody home in the bear camp on Wednesday.

Long-time readers know that the purpose of this meandering missive is to start each day by identifying the current drivers of the market's action. The problem is that there just didn't appear to be much of anything in the way of drivers to Wednesday's tight range. Sure, there was some economic data, some geopolitical developments, lots of earnings, and the usual batch of rumors. However, with some big stuff on the horizon the bulls didn't seem to have a reason to continue to push their agenda while the bears, well, other than a scary Friday, they don't even appear to be trying anymore.

One might have thought that the upbeat data from ADP Employment report might have allowed the bulls to pick up where they had left off on Tuesday. But with the Big Kahuna of economic reports due out on Friday, buyers may have become reluctant. And don't forget about the ECB meeting, another batch of PMI data, and the same-store retail sales numbers; all of which may have caused some trepidation.

While on the subject of trepidation, the little standoff in Egypt doesn't seem to be going away. Reports of skirmishes between Mubarak supporters and protesters turned ugly again yesterday and the death toll of the more than weeklong ordeal is getting hard to ignore. So, while it would be easy to wave-off this situation as unimportant to the earnings of U.S. companies, an escalation in the violence would likely send stock market buyers to the sidelines again.

From a chart perspective, we still have a tale of two tapes to deal with. While the Dow and S&P appeared to simply take a break from the upside fun yesterday (especially when one looks at a weekly chart), the charts of the NASDAQ, Russell 2000 and Midcap indices look to be trapped in a trading range. Thus, the question that begs to be asked is which picture is more accurate?

As long as we're pondering, we may want to ask if the small- and mid-caps will simply play a game of catch up during the next romp higher? Or will the Dow and S&P mess around long enough to drop back into the range? If asked, I would say that this is the key thing to watch from a technical perspective over the next week or so.

From my perch, a situation where traders appear to be waiting on the next batch of inputs would seem to favor our furry friends in the bear camp - at least in the very near-term. But if there is nobody home to answer the bell...

Turning to this morning... With European markets currently trading lower and the violence in Egypt ongoing, it appears that buyers have decided to sit on their hands in the early going.

On the Economic front... The government reported U.S. Nonfarm Productivity in the fourth quarter rose by +2.6%, which was above the consensus expectations for a reading of +2.1% and Q3’s revised level of +2.4%. On the inflation front, Unit Labor Costs were reported to have fallen -0.6% versus the expectations for +0.1%. Q3’s reading was unrevised at -0.1%.

Next up, the Labor Department reported that initial claims for unemployment insurance for the week ending January 29 fell by 42,000 to 415K. The week’s total was below the consensus for a reading of 420K. Continuing Claims for unemployment for the week ending January 22 were in line with consensus at 3.928M vs. expectations for 3.828M.

Thought for the day: Don't forget to check the happiness box today...

Pre-Game Indicators

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

 

  • Major Foreign Markets:
    • Australia: +0.44%
       
    • Shanghai: closed
       
    • Hong Kong: closed
       
    • Japan: -0.25%
       
    • France: -1.14%
       
    • Germany: -0.31%
       
    • London: -0.55%

     

  • Crude Oil Futures: +$0.62 to $91.48
     
  • Gold: +$4.200 to $1336.00
     
  • Dollar: lower against the Yen and Pound, higer vs Euro
     
  • 10-Year Bond Yield: Currently trading at 3.509%

     

  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: -3.43
       
    • Dow Jones Industrial Average: -24
       
    • NASDAQ Composite: -6.98

 

Wall Street Research Summary

Upgrades:

  • Arch Coal (ACI) - Argus
     
  • InterActiveCorp (IACI) - BofA/Merrill
     
  • Hershey (NYSE:HSY) - Credit Suisse, JPMorgan
     
  • Time Warner (NYSE:TWX) - Estimates increased at Deutsche Bank
     
  • KB Home (NYSE:KBH) - Goldman Sachs
     
  • Bemis (NYSE:BMS) - KeyBanc
     
  • Shutterfly (NASDAQ:SFLY) - Morgan Keegan
     
  • Exxon Mobil (NYSE:XOM) - Target increased at Oppenheimer
     
  • Cisco Systems (NASDAQ:CSCO) - Target increased at Oppenheimer
     
  • FedEx (NYSE:FDX) - RW Baird
     
  • CBS (NYSE:CBS) - Estimates increased at UBS

 

Downgrades:

  • Southwest Air (NYSE:LUV) - Argus
     
  • First Solar (NASDAQ:FSLR) - Auriga
     
  • MDC Holdings (NYSE:MDC) - BofA/Merrill
     
  • Pulte Group (NYSE:PHM) - BofA/Merrill
     
  • Statoil (NYSE:STO) - BofA/Merrill
     
  • Anadarko Petroleum (NYSE:APC) - Barclays
     
  • Boston Scientific (NYSE:BSX) - BMO Capital
     
  • Cymer (NASDAQ:CYMI) - Credit Suisse
     
  • DR Horton (NYSE:DHI) - Goldman Sachs
     
  • Ryland Group (NYSE:RYL) - Goldman Sachs
     
  • Rackspace (NYSE:RAX) - Kaufman Bros
     
  • Intersil (NASDAQ:ISIL) - Morgan Keegan

 

Long positions in stocks mentioned: BMC, HOT, CI

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. (NASDAQ: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.