WHAT THE MARKET WANTS: Business Expansion Driving Market
It worked . . . last week the market reversed Monday Mania, starting the week with a down day and ending in a bullish mood.
Business, rather than the consumer, seems to be driving the economy forward, as evidenced by the performance of the sectors that are the backbone of the business side of the economy: Energy, Materials, Financials, and Information Technology. (Consumer Discretionary, Consumer Staples, Healthcare, and Utilities represent to a greater degree the consumer side of the economy.)
It is the resurgence in business and industry to which the market seems to be responding.
Although initial jobless claims have finally shown some improvement (dropping 43,000 last week alone) and unemployment has dipped back below 10%, the overall government deficit and employment situation paint a much dimmer picture than the business side of the economy, which seems to have bottomed and now is resuming an expansionary focus . . . perhaps in anticipation of a recovery in consumer spending over the next several months.
As for quarterly earnings data, the announcements continue to be mixed and, frankly, somewhat of a disappointment to me. On the other hand, this quarter has been much better than most of the quarters over the past year.
So despite employment and housing woes and the shocking budget deficit, I am somewhat positive and believe that the market is more likely to move above the recent highs rather than return to the lows of the past several weeks.
Important Week Ahead. The picture will be much clearer by Friday, as this week is packed with economic data. On Wednesday we have the Goldman Store Sales report, as well as Housing Starts, Import and Export Prices, Industrial Production, and another "thrilling" look at the minutes of the Federal Open Market Committee (FMOC). Thursday offers the Producer Price Index (PPI), Initial Jobless Claims, Leading Indicators report (LEI), and the Philly Fed Survey, and on Friday we get an update on the Consumer Price Index (CPI).
Nevertheless, today's market strength hints at a fairly positive week -- let's hope we haven’t returned to Monday Mania -- and for now business seems to be the driving force. That said, investors should remain cautious. Look for growth opportunities but insist on strong valuation, and hedge where practical.
Click here to see the Market Stats.
4 Stocks Ideas for this Market
This week, I started with the Small Wonders preset search on MyStockFinder (http://MyStockFinder.com). However, I also added Small Caps with the Micro Caps, and up-weighted Technicals a bit. Here are 4 intriguing stock ideas from SectorCast’s 4 highest ranked sectors:
Breitburn Energy Partners L.P. (Nasdaq: BBEP) – Energy (10% yield!)
Micrus Endovascular (Nasdaq: MEND) – Healthcare
BofI Holding (Nasdaq: BOFI) – Financials
LaserCard Corp. (Nasdaq: LCRD) – Information Technology
Until next week,
David Brown
Chief Market Strategist
Sabrient Systems, LLC
Leaders in Investment Research
http://www.sabrient.com
and http://Twitter.com/ScottMartindale
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.