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Deal Or No Deal?

|Includes: Microsoft Corporation (MSFT)

Daily State of the Markets 
Friday Morning - July 22, 2011

Good morning. Although those of us in the money management game tend to review a myriad of indicators, read everything in sight, and spend an inordinate amount of time pouring over charts and economic statistics in order to help us keep our finger on the pulse of the market, there are times when things can be just plain simple. For example, the stock market currently seems to be fully engaged in a game of "deal or no deal?"

In the Broad & Wall version of the game, traders up their bids for stock prices on days when they think a deal on either continent is close at hand and hit the sell button early and often if it looks like it's going to be a "no deal" kind of day. Believe it or not; it appears that it has come down to this.

So, here's the way things work in the current game. You can forget about earnings, M&A deals, economic statistics, the yield curve, or what the Fed may or may not do next. Nope, these days the only thing you need to know is whether or not the powers-that-be in Washington and the Eurozone have a deal. If you're of the mind that the "No New Taxes" gang can find a way to agree with the "Blame it on the Rich" crowd, then your battle cry should be "Buy 'em!" And if you've come to the conclusion that the Germans and the French can get along long enough to save the day across the pond, feel free to load up on those leveraged long ETF's.

However, if you take a more cynical view of the dueling dilemmas facing the markets these days, you may prefer to do a some selling each and every time the crowd gets a little too excited about the potential deals that everyone is yammering on about. Or, if the next headline no longer supports the spirit of compromise amongst the world's leaders, you might consider checking into the ticker symbol SPXU.

Okay, I guess I could be accused of being a bit too simplistic this fine Friday morning. I guess I should be looking at the fact that the market is quickly approaching the top end of the trading range that has been with us for about five months now. I guess I should be analyzing whether or not the current growth rates of the economy and the EPS of the S&P justify a new high for the current bull market cycle. And I guess I should be looking at the overbought condition, the Fibonacci numbers, and/or some computer-generated trendlines.

But for now at least, I'm guessing that none of the above is really necessary as the guys and gals pulling the trigger on the big trades or programming the computers to do their dirty work for them are not worried about the beat/miss ratio of the earnings parade or wondering what the impact of the apparent slowdown in PC growth will do to the economy. No, I'll bet that the trades right now are based on one thing and one thing only: Do we have deal or not?

Turning to this morning... News of a "deal" in Europe has been greeted with cheers in the overnight markets. However, disappointing results from Caterpillar and talk of "no deal" here in the U.S. has taken some of the enthusiasm out of the pre-market advance here in the U.S., with futures now about flat on the session.

On the Economic front... There is no economic data scheduled for release before the bell today.

Thought for the day... Best of luck on this Friday and be sure to enjoy the weekend!

Pre-Game Indicators

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

 

  • Major Foreign Markets:
    • Australia: +1.04%
       
    • Shanghai: +0.18%
       
    • Hong Kong: +2.08%
       
    • Japan: +1.22%
       
    • France: +0.55%
       
    • Germany: +0.39%
       
    • London: +0.71%

     
  • Crude Oil Futures: -$0.23 to $98.90
     
  • Gold: +$16.30 to $1603.30
     
  • Dollar: higher against the Yen, Euro and Pound
     
  • 10-Year Bond Yield: Currently trading at 2.980%
     
  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: +1.70
       
    • Dow Jones Industrial Average: -4
       
    • NASDAQ Composite: -1.50

 

Wall Street Research Summary

Upgrades:

  • Dean Foods (NYSE:DF) - BofA/Merrill
     
  • Kroger (NYSE:KR) - BMO Capital
     
  • Advanced Micro (NASDAQ:AMD) - Canaccord Genuity, Wells Fargo
     
  • Blackstone Group (NYSE:BX) - Citi raises estimates and target
     
  • Pinnacle Entertainment (NYSE:PNK) - Target raised to $20 at Credit Suisse
     
  • Autodesk (NASDAQ:ADSK) - Jefferies
     
  • Kulicke & Soffa (NASDAQ:KLIC) - Jefferies
     
  • Murphy Oil (NYSE:MUR) - Mentioned positively at Oppenheimer

     

    Downgrades:

  • C.R. Bard (NYSE:BCR) - BofA/Merrill
     
  • Ruby Tuesday (NYSE:RT) - BofA/Merrill
     
  • AstraZeneca (NYSE:AZN) - BofA/Merrill
     
  • New York Community Bancorp (NYB) - BMO Capital
     
  • Medco Health (NYSE:MHS) - BMO Capital
     
  • Coach (COH) - Cowen
     
  • TCF Financial (TCB) - FBR Capital
     
  • Huntington Bancshares (NASDAQ:HBAN) - FBR Capital
     
  • StanCorp Financial (NYSE:SFG) - FBR Capital
     
  • Chubb (NYSE:CB) - Goldman Sachs
     
  • Avid Technology (NASDAQ:AVID) - JPMorgan
     
  • Swift Transportation (SWFT) - RW Baird
     
  • Western Digital (NYSE:WDC) - ThinkEquity
     
  • Microsoft (NASDAQ:MSFT) - William Blair

     

     

    Earnings Yesterday's Earnings After The Bell

    Company

    Symbol

    EPS
    Reuters
    Estimate
    Albemarle ALB $1.23 $1.12
    Advanced Micro AMD $0.09 $0.08
    C.R. Bard BCR $1.57 $1.57
    Chubb CB $1.27 $1.01
    Chicago Bridge CBI $0.62 $0.59
    Compuware CPWR $0.08 $0.07
    Cymer CYMI $0.89 $0.71
    Edwards Lifesciences EW $0.49 $0.50
    Flextronics FLEX $0.21 $0.22
    Gardner Denver GDI $1.27 $1.21
    Kansas City Southern KSU $0.71 $0.70
    Lattice Semiconductor LSCC $0.12 $0.12
    Microsoft MSFT $0.69 $0.58
    NCR Corp NCR $0.46 $0.39
    Olin Corp OLN $0.52 $0.50
    PMC-Sierra PMCS $0.17 $0.15
    Ruby Tuesday RT $0.25 $0.31
    StanCorp Financial SFG $0.61 $1.05
    SanDisk SNDK $1.14 $0.98
    Skyworks SWKS $0.49 $0.46
    Western Digital WDC $0.67 $0.66

    Earnings Before The Bell

    Company

    Symbol

    EPS
    Reuters
    Estimate
    Air Products APD $1.46 $1.47
    Caterpillar CAT $1.72 $1.74
    Rockwell Collins COL $1.01 $1.04
    Dover Corp DOV $1.19 $1.15
    General Electric GE $0.34 $0.32
    Honeywell HON $1.02 $0.98
    IDEXX Labs IDXX $0.83 $0.72
    McDonald's MCD $1.35 $1.28
    Precision Drilling PDS $0.06 $0.06
    Reynolds American RAI $0.67 $0.71
    Schlumberger SLB $0.87 $0.85
    SunTrust Banks STI $0.33 $0.31
    Verizon VZ $0.57 $0.55
    Xerox XRX $0.27 $0.25

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

    Long positions in stocks mentioned: none

    For more of Mr. Moenning's thoughts and research, visit TopStockPortfolios.com

     


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