Archive for the ‘stock market’ Category
Friday, February 26th, 2010
This morning the government reported their final revision of last year’s 4th quarter GDP number. There is always an initial report of GDP and then two revisions. This one showed an increase to 5.9% from a previous report of 5.7%. Most of the revision was for inventory adjustments. Do not expect that kind of growth this year. Most likely GDP growth for 2010 will be in the 1 to 2.5% range.
Also this morning was the Chicago PMI report which was up to 62.6 in February from 61.5 in January. Then a few minutes later February’s University of Michigan Consumer Sentiment Report was released which was down to 73.6 from 74.4 in January.
None of these numbers really affected the market when they came out.
By 7:00 this morning the existing housing sales number came out. Earlier in the week we had the new home sales report which was very weak (down 11%) and that put downward pressure on stock prices. This morning’s report when it came out pushed prices down a little but not by much and the market recovered it all. Existing home sales fell 7.2%, more than expected, and inventory increased to 7.8 months in January from 7.2 months in December.
This week was full of statistics and none of them changed the picture of our economy. It is growing but sputtering and it is not producing any jobs. This has heightened fear in the stock market and that is not a bad thing as it means stock prices are not overheating, but neither is there much reason for the market to rise. It is going to be a stock picker’s environment.
Good Trading
Steve Peasley
Posted in Current News, Financial Outlook, GDP, Important, Industry Analysis, Uncategorized, housing, stock market | No Comments »
Friday, February 12th, 2010
This has been a week of volatility for stock prices, though long term a 1% to 2% move on a daily basis is normal. With the DOW at 10,000 that means 100 to 200 points per day. We are still in the correction phase of the bull market which started last March. So far the correction has been about 7%.
The concern this morning seems to be over China and its announcement that they are going to tighten money supply again in an attempt to slow down their growth and thus inflation. Their most recent growth was said to be 10.1% for the final quarter of 2009.
In the U.S. retail sales for January were up a higher than expected .5% and November and December’s numbers were revised up. This is good news but we have to remember that this increase is from a low base. In real dollars that are being spent it is not that strong. Of course with a 10% unemployment rate you can’t expect retail sales to take off.
It appears the market is conflicted this week. We have had some good sized up days and down days and the DOW is trying to hold the 10,000 mark. There is no change on the economic outlook as we slowly dig our way out of the recession. Earnings for corporations are surging. These factors tell me this is a correction and not a return to the Bear market.
Good Trading
Steve Peasley
Posted in Current News, stock market | No Comments »
Tuesday, February 9th, 2010
As tensions over sovereign debt flare, foreign currency risks are rearing their ugly head. For most of the past decade a weak dollar has created a tailwind for the prices of foreign assets. As risk aversion increases however, the dollar tends to rally as it is perceived to be the reserve currency of the world. This has pushed the value of assets overseas down further than even our markets have retraced.
In a world where there will be increasing scrutiny on government debt loads, currency volatility will surely increase. This is important when investing in companies that have customers located in other countries and accept payments in other currencies. In today’s increasingly globalized business world it is hard to find many public companies that do not do some sort of business overseas. Therefore, when looking at potential stocks to buy you must determine what countries in which their foreign revenue are derived. Then determine if those countries currencies could possibly be at risk of major market disruption.
Over the long term the dollar will most likely weaken unless our historically imprudent government suddenly becomes frugal and we fix our large trade imbalance. Both of those events seem unlikely. This makes it likely that over time foreign stocks will continue to have the wind at their backs. However, until the markets hash out which countries have been irreparably damaged by the financial crisis there will be greater foreign currency market volatility. You will notice greater price movements in your stocks as a result.
One final note is that China’s currency is tied to the U.S. dollar so there is no fluctuation between the two at this time.
Posted in Current News, Financial Outlook, Industry Analysis, Uncategorized, stock market | No Comments »
Monday, February 8th, 2010
The market is still in the midst of its pullback as investors and traders decide their next move. They are confident that this is a correction but are undecided on its depth. For long term investors it’s an opportunity and for short term investors, the ones pushing prices around, they’re deciding if the fall in prices is deep enough for them to step back in.
Either way this correction restores health to our market. Stock prices do no go in one direction without pause either up or down.
The odds are good that we will see another leg up once the correction has shaken out the weak hands.
The earnings reports and more importantly the economic data is clearly showing an improving economy. With outsized government spending taking place, this year the economy should gain strength and that will mean strong corporate earnings for most of this year. The market will recognize that at some point.
At the moment, investors and traders are focused on debt. However, one way to trump debt is by a growing economy which will produce more tax dollars. Cutting spending is the only other way to control debt, but that will have to wait. It’s not possible in this political environment, and maybe we shouldn’t cut debt as the economy is very fragile.
Good Trading
Steve Peasley
Posted in Current News, Industry Analysis, Uncategorized, stock market | No Comments »
Friday, February 5th, 2010
 The economy is gaining strength but that has not and is not translating into astronger stock market at this point. Yesterday we had a stronger than expected retail sales report, up 3.3% when it was expected to be up 2.5% and factoryorders were up 1%. That too was better than expected. However, it was the big productivity report that was truly surprising. It was up 6% and the work week increased.
Jobs are the focus this morning.
The stock market pressure seems to be coming from a stronger dollar because of the weakness in the Euro. This is a very interesting scenario. Our economy is now looking better than Europe’s and because of that the dollar is gaining strength. The dollar bottomed at the beginning of December and much of that month the stock market continued higher though the pace was very slow. Then in January the market began to correct starting in the middle of the month as the dollar kept gaining strength.
Why this is so interesting is that history has taught us that a strong U.S. dollar means a strong stock market. That relationship has been turned around.
At some point the strong dollar will be viewed as a benefit by investors and traders. It makes sense because the dollar gains strength against other currencies because our economy is looking better than theirs. Of course today it is a world economy and that might be why it’s different this time. However, whenever you think it’s different this time it reverts back to the norm.
This is a correction, one that was expected. It’s a matter of degree.
Good Trading
Steve Peasley |
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Posted in Current News, Financial Outlook, Important, Industry Analysis, Uncategorized, jobs, stock market | No Comments »
