Market Takes a Breather after Last Week’s Sprint
Market Takes a Breather after Last Week’s Sprint
By David Brown, Chief Market Strategist, Sabrient Systems
After the biggest weekly gains in two years, the Dow and the S&P 500 stopped to catch their breath today, both down about -0.1%, while the Nasdaq managed to stay in positive territory (+0.35%). Even the strength we saw in today’s factory orders report (+0.8% for May versus
–0.9% for April but less than expected +1.0%) wasn’t enough to keep the Dow and the S&P out of the red.
Last week, though, was something else. The S&P 500 and the Dow each gained more than +5%, and the Nasdaq topped out with a +6% gain.
Part of impetus was second quarter “window dressing,” when fund managers attempt to improve their portfolio performance by dumping their weakest stocks and purchasing strong stocks that will look good to their clients or shareholders. No doubt short covering also played a major role in last week’s surge.
Granted, the Greece debt problem has been resolved (at least, temporarily), but last week’s economic news was mixed. There were signs of growing strength in the housing industry and manufacturing sectors, but personal income was down and personal spending was flat. Initial jobless claims were down slightly from the previous week, but still over 400,000 (at 428K), and consumers still lack confidence in the recovery, based on the Conference Board’s consumer sentiment index.
Market Stats. Growth, and in particular Large-cap Growth, led the cap/styles last week (+6%), while Small-cap Value lagged, but still showed a healthy gain of +4.7%.
All the sectors were positive, with Energy leading the pack (+6.7%), and with Capital Goods, Basic Industries, Technology and Finance each gaining more than 6%. The worst performance—but still very good —came from the traditional safe havens of Public Utilities (+3.6%), Consumer Non-Durables (+3.8%), and Health Care (4.3%). The rising tide truly lifted all boats.
Our forward looking SectorCast had it right on four of the top 5 sectors last week, but got it wrong on Finance, which it placed at the very bottom. Finance actually ended up as No. 5. Stubbornly, the SectorCast kept Finance near the bottom of this week’s projections (No. 10), with Consumer Services in the very last slot. Energy, Basic Industries, and Technology remained in the top half of the projected rankings. (Energy turned in the best performance today—July 5—while Finance was near the bottom).
Click here to see market stats.
Upcoming Economic Reports. Coming up this shortened holiday week are the Institute for Supply Management (ISM) service index on Wednesday; June’s ADP employment report and weekly jobless claims on Thursday; and the Employment Situation report on Friday, with its monthly look at our official unemployment rate, which currently sits at 9.1%. That is not expected to change.
Second quarter earnings season started this week, but it will shift into high gear on Monday with the announcement from bellwether Alcoa, Inc. (AA).
4 Stock Ideas for this Market
This week, I started with the High Growth preset search in MyStockFinder (http://MyStockFinder.com). I then included Buys (in addition to Strong Buys) and slightly up-weighted Long-Term Technicals. Here are four stock ideas worth considering:
HollyFrontier Corp (HFC) – Energy
Momenta Pharmaceuticals (MNTA) – Healthcare
EasyLink Services (ESIC) – Technology
Lindsay Corp. (LNN) – Capital Goods
Until next week,
David Brown
Chief Market Strategist
Sabrient Systems, LLC.
Leaders in Investment Research
http://www.sabrient.com
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Full disclosure: The author does not hold any of the stocks mentioned in this week’s “Stock Ideas.”
Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.