Aha! Big PowWow in DC about solutions to the nation’s mounting deficits going forward and nearer term, raising the debt ceiling. The U.S. stock-index futures are ahead sharply confirming what I have suspected that this issue is more important psychologically than the economy, which may only be in a temporary slump.
President Obama is now well aware that more has to be done about jobs and simplifying business regulations and clearing other uncertainties discouraging business decisions. His meeting in North Carolina with 24 business leaders to map out measures designed to achieve just that has to be a positive.
I don’t see this rally carrying more than DJIA: 12,090 (S&P 500: 1286) if the confab is adjourned without meaningful progress. This is a critical issue, where a resolution could be taken to the August 2 deadline, with untold damage done to investor confidence, so the pressure is on to find common ground.
Stock prices will rally a lot more if we get some tangible results from this meeting, like DJIA: 12,370 (S&P 500: 1315).
A rally failure today would renew the downtrend.
Brooksie’s Daily Stock Market blog: An edge before the market opens.
Tuesday, June 14, 2011 9:23 am EDT
DJIA: 11952.97
S&P 500: 1271.83
Nasdaq Comp.: 2369.69
Russell 2000: 777.24
In Friday’s blog, “Will Congress the Raise Debt Ceiling Before August 2?,” I said I have noted that, “Key people in Washington have begun to back peddle, soften their rhetoric and MMA tough talk,” because I suspect some very, very powerful people are pressuring Congress to put politics aside and hammer out solutions.
Other positives:
An early June survey by Bloomberg of 67 economists concluded the GDP will grow 3.2 percent July to December as a result of stable fuel prices, record levels of cash, easier lending rules and rising exports.
Companies in the S&P 500 are flush with some $2.6 trillion in cash,* about 18% of the total market cap of the index. A recent survey by ISI Group of 99 companies revealed executives are more optimistic about capital spending than at any time in the last eight years and more optimistic about hiring in the last five.
The corporate sector is in much better shape today than it was in past cycles, Joseph Carson , director of global economic research, AllianceBernstein told Bloomberg News, adding, “Liquidity is the lifeblood of all cycles,” the U.S. has “the foundation for a strong recovery.”
Economist, Robert Mellman, JP Morgan Chase sees earnings benefitting from surging foreign sales, an improving demand in the U.S., and the Fed’s low interest rate policy. He sees earnings advancing at a 10% rate through 2013.
John Carey, money manager for Pioneer Investments sees the possibility of the S&P 500 posting a 10% gain for the year, which works out to about 1398.
George Brooks
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*Bloomberg
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