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Good News – It Needs to Continue

October 14, 2009 – 9:31 am

So far the earnings for this reporting season have not only met expectations but exceeded them. Intel and J.P. Morgan blew out their numbers whereas Johnson and Johnson disappointed. In Monday’s market commentary I stressed the need for earnings to take over from momentum to push stock prices higher. It appears, at least so far, that sales and earnings are rebounding.

Helping somewhat this morning is the retail sales report for September that came in at a drop of 1.5%. However, you have to look deeper as the Cash for Clunkers program impacted the numbers. Removing auto sales, retail sales actually rose .5%. That is the second month in a row of increases. This is not a strong number in and of itself but when put in context with the high unemployment rate and a consumer that has rediscovered savings, with our savings rate currently at about 5%, then the spending rate is fairly strong.

Corporate earnings are the key. The stock market has anticipated those earnings, and sales and earnings must continue to roll in if the market is going to continue to rise. As always it is in the guidance of future sales and earnings that will be important.

I think we are going to get higher guidance. Buy this market on pullbacks. I can’t stress it any more than I have over the last several months. Buy quality sales and earnings growth companies.

Good Trading
Steve Peasley

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