The Market Gives Back . . .
The Market Gives Back . . .
By David Brown, Chief Market Strategist, Sabrient Systems
The market continued today what it started with Friday’s slide, and ended up giving back all of July’s gains and then some. The S&P 500 lost -1.8% for the day, closing at 1319. The 1310 support level held, but if we breach that, the next major support is about 1250.
The anemic jobs numbers and the jump in the unemployment rate to 9.2% caused Friday’s downturn. Today’s was driven by global economic fears, namely, the increasingly shaky condition of two more PIIGS – Italy and Spain. That sent the euro to its knees and left the pumped-up dollar (up +1.35% against the euro) beating its chest at the top of the three-month price channel in which it has been trading.
The irony is, a strong dollar sounds good—strong dollar, strong America—but it has not been so good for the stock market, as it hurts exporters across the board and assists importers to the U.S, which widens our trade deficit.
Jeff Cox, CNBC.com, has this to say about Why Strong Dollar Hurts Stocks:
The inverse correlation between [the dollar] and the equity market is the strongest we've seen since 1971. Meanwhile, the recent rally in the dollar has done very little to encourage the unwinding of record short positions.
The dollar will be boosted even further if China boosts its interest rates in response to the recent report on inflation in that country, which is at its highest level in three years.
Will Q2 earnings season save the day? The main hope for the U.S. markets is the Q2 earnings season, which kicked into high gear today with Alcoa (AA) meeting analysts’ estimates of $0.32, which almost tripled the $0.13 for the same quarter last year. That didn’t help the market today and didn’t even help Alcoa, which is down 0.69% in after-hours trading.
Other major announcements this week include Google (GOOG) and J.P. Morgan (JPM) on Thursday and Citigroup (C) on Friday. This is also a big week for economic reports, with the most important ones coming on Thursday and Friday (see table below).
Market Stats. I’m not sure there’s much point in reviewing the market stats, since the market took back all of last week’s gains, but for those who care, Small-cap Growth led the way, up +2%. Small caps and growth style bested the other caps and styles across the board. Large-cap Value was the worst performer of the week, down -0.3%, and the worst for the past 1, 3, 6, and 12 months. (What flight to safety?)
Sector performance was a mixed bag, with the Sabrient SectorCast getting only two of its top 5 projections right. It ranked Basic Industries as #2 and Technology as #4. In fact, Technology turned in the best actual performance, and Basic Industries landed in the #3 spot. Consumer Services rose to second place when it was projected to be dead last. All in all, there was no discernible pattern with flight-to-safety sectors scattered from 4th to 7th to 10th positions. See all stats here.
Below is the week’s schedule of economic releases, with the big guns coming on Thursday (PPI, retail sales, initial jobless claims, and business inventories) and Friday (CPI, industrial production, Empire Sate manufacturing survey, and consumer sentiment.)
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Upcoming Economic Reports |
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Tuesday |
International Trade FOMC Minutes |
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Wednesday |
Import/Export Prices Treasury Budget Report EIA Petroleum Status Report |
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Thursday |
Producer Price Index (PPI) Retail Sales Initial Jobless Claims Business Inventories |
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Friday |
Consumer Price Index (CPI) Industrial Production Empire State Manufacturing Survey Consumer Sentiment |
Not much we can do but wait and see how these numbers shake out, how the PIIGS fare, and whether or not Q2 earnings season can provide the muscle to lift the swooning market.
That said, here are 4 stock ideas for the brave at heart.
This week, I started with the Undervalued Large Cap Growth preset search in MyStockFinder. I also included Buys (in addition to Strong Buys), Mid Caps, and slightly upweighted Long-Term Technicals.
Complete Product Services (CPX) – Energy
Lam Research (LRCX) – Technology
Copa Holdings, S.A. (CPA) – Transportation
Robbins & Myers (RBN) – Capital Goods
Until next week,
David Brown
Chief Market Strategist
Sabrient Systems, LLC.
Leaders in Investment Research
http://www.sabrient.com
Follow us on Twitter: 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.
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The market continued today what it started with Friday’s slide, and ended up giving back all of July’s gains and then some. The S&P 500 lost -1.8% for the day, closing at 1319. The 1310 support level held, but if we breach that, the next major support is about 1250. The anemic jobs numbers and the jump in the unemployment rate to 9.2% caused Friday’s downturn. Today’s was driven by global economic fears, namely, the increasingly shaky condition of two more PIIGS – Italy and Spain. That sent the euro to its knees and left the pumped-up dollar (up +1.35% against the euro) beating its chest at the top of the three-month price channel in which it has been trading. The irony is, a strong dollar sounds good—strong dollar, strong America—but it has not been so good for the stock market, as it hurts exporters across the board and assists importers to the U.S, which widens our trade deficit. Jeff Cox, CNBC.com, has this to say about Why Strong Dollar Hurts Stocks: The inverse correlation between [the dollar] and the equity market is the strongest we've seen since 1971. Meanwhile, the recent rally in the dollar has done very little to encourage the unwinding of record short positions. The dollar will be boosted even further if China’s boosts its interest rates in response to the recent report on inflation in that country, which is at its highest level in three years. Will Q2 earnings season save the day? The main hope for the U.S. markets is the Q2 earnings season, which kicked into high gear today with Alcoa (AA) meeting analysts’ estimates of $0.32, which almost tripled the $0.13 for the same quarter last year. That didn’t help the market today and didn’t even help Alcoa, which is down 0.69% in after-hours trading. Other major announcements this week include Google (GOOG) and J.P. Morgan (JPM) on Thursday and Citigroup (C) on Friday. This is also a big week for economic reports, with the most important ones coming on Thursday and Friday (see table below). Market Stats. I’m not sure there’s much point in reviewing the market stats, since the market took back all of last week’s gains, but for those who care, Small-cap Growth led the way, up +2%. Small caps and growth style bested the other caps and styles across the board. Large-cap Value was the worst for the week, down -0.3%, and the worst for the past 1, 3, 6, and 12 months. (What flight to safety?) Sector performance was a mixed bag, with the Sabrient SectorCast getting only two of its top 5 projections right. It ranked Basic Industries as #2 and Technology as #4 – Technology turned in the best actual performance and Basic Industries was #3. Consumer Services was #2, when it was projected to be dead last. All in all, there was no discernible pattern with flight-to-safety sectors scattered from 4th to 7th to 10th positions. |
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Below is the week’s schedule of economic releases, with the big guns coming on Thursday (PPI, retail sales, initial jobless claims, and business inventories) and Friday (CPI, industrial production, Empire Sate manufacturing survey, and consumer sentiment.)