"Just what makes that little old ant
Think he'll move that rubber tree plant
Anyone knows, an ant, can't
Move a rubber tree plant
But he's got high hopes, he's got high hopes
He's got high apple pie, in the sky hopes"
-Frank Sinatra

The market's high hopes appear to be fading. It's not that there is a huge crowd at the exits rather it's just that the air is seeping out of the hope balloon. It is abundantly clear now that it's going to take more than anecdotal observations by economists and stock market bulls. With that in mind, I'm not sure what's going to turn the market around except that it gets to a point where some of that sideline money goes to work. Don't get me wrong, there are many investors that missed the rally whom are eagerly waiting to plow in. However, most still need signs, something that screams: "Hey, you're missing the train, again!" Of course, something could come out of left field, too. The thing is for now bulls have to shift from green shoots rationalization to a pullback is healthy mindset.

I can tell you right now just a little more pressure and some weaker investors are going to bail. I use the word "investors" with regret because the fact of the matter is real investors are looking to buy quality companies on weakness. Be that as it may, we aren't far from some investors bailing, and I think that would be great because these same people would be buyers much higher and in the meantime the level on the downside the market needs to reach will just get there faster. But there is the threat that the selling will take on the snowball effect. Thus far, volume on the downside has been very light, reflecting a reluctance to sell. I think that one of the reasons there hasn't been more dumping of stocks is the widespread belief/hope this action is the result of the market failing at the 200-day moving average and key resistance point just under 960.0 If that's the cause then the worst case scenario sees the S&P 500 touching 880.0. That is where buyers would materialize even if momentarily. That is where the buy on dips crowd would make a move, but also above 960.0.

Today, the president drops the much awaited gauntlet on Wall Street. Even though my office is around the corner from the New York Stocks Exchange I rarely go outside. I had a meeting yesterday and was blown away at how sparse the Street was. Where the hell were all the people? It was like the movie High Plains Drifter. I saw there was a new Tiffany's (TIF) and my man that has the newsstand on the corner of the exchange got a new shelter...it looks good. But, it felt like a new sheriff rolled into town as sagebrush was stuck on those ugly barriers that litter the street (for safety). Today, that sheriff will step to the podium and put the nail in Wall Street...or should I say tombstone? Listen, there is no doubt that Wall Street will survive, but depending on how intense the new rules are it's going to sting.

Speaking of "sting" what happened yesterday? The White House turned down the auto supplier industry. Say what? I was stunned when I heard the news. I think that those guys already started spending the money. Of course, the White House will monitor the situation so maybe the industry will get its mitts on an extra $10.0 billion. But, they had to sweat a little even if it was with a wink and a nod. That being said, "sting" could be more appropriate for taxpayers that thought they were in the clear. President Obama is now not ruling out the possibility of taxing the majority of Americans if the economy doesn't improve enough to put a dent in the deficit. Moreover, there is a very good chance that employer provided health benefits will be taxed, too. We'll see what happens but I will not be surprised as I have always believed the plans are too ambitious and expensive to only be funded by 5.0% of the population.

On the topic of taxes, Texas Governor Rick Perry stepped up to the plate. The governor signed a bill to give tax breaks to small businesses. Exemptions on taxes for businesses making up to $1.0 million in annual sales will go into effect January 1, 2010. Previously, the exemptions were for revenues up to $300,000. This is how businesses keep people employed or find a way to pay for healthcare benefits.

Economic Data

Consumer Price Index (CPI)

Two benign readings on the inflation front this week, first with the PPI and now with the CPI. While it's probable that inflation will creep back into the numbers as 2009 plays out, as we sit here right now it seems a ways off before we receive a level of inflation that justifies an interest rate increase. May CPI at the core advanced 0.1% (consensus: +0.3%). The headline CPI also rose 0.1% (consensus: +0.1%). Energy prices stood out, while transportation costs led the way with a 0.8% increcase, but so did declines in areas such as food, housing, and apparel.



Morning Notes from WSS Research Desk

Brian Sozzi

* Scotts Miracle Grow (SMG) raised its full year earnings guidance today. With outdoor items selling strongly at home centers as consumers focus on small home improvement upgrades, the guidance raise doesn't surprise me. Longer-term thesis: all those dead lawns on foreclosed homes will need some form of nutrients to reignite germination says our resident green thumb (yours truly).
* The Big O said that Fed Chairman Ben Bernanke has done an "extraordinary job under extraordinary circumstances." If you pick it apart (suggests under normal circumstances prior to the crisis Ben didn't get the job done), I don't think the statement is an expression of full support, and ultimately it calls into question the reappointment of the grey beard leader of the secret reserve.
* When it comes to investing, question everything. Back when Circuit City went into the toilet following the holiday season all I heard from analysts was that Best Buy (BBY) would be a prime beneficiary. While the exit of a major competitive threat is a positive for the long-term, the fact is that Circuit City closed because of a poorly situated store base (meaning, locations in economic areas not conducive to purchases of high-end electronics). I note this as Best Buy only reiterated its full year guidance yesterday, and it appeared that only a modest Circuit City benefit was realized in the latest quarter.

David Silver

* FedEx (FDX) posted results that beat the Street's expectations by a hefty margin ($0.64 compared to $0.51), but management added fuel to the lack of green shoots theory guiding for earnings in its first quarter to be far less than the Street's expectations. FedEx is thought to be an economic bellwether so it will be interesting to see how some economists try to spin the quarter (and guidance) into a positive.