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Difficult Summer Ahead for Stocks

Investor’s first read   - Brooksie’s edge before the openThursday, July 5, 2012        9:09 a.m. ETDJIA:  12,943.82S&P 500: 1374.02Nasdaq  Comp.: 2976.08Russell 2000: 818.49If

Investor’s first read   – Brooksie’s edge before the open

Thursday, July 5, 2012        9:09 a.m. ET

DJIA:  12,943.82

S&P 500: 1374.02

Nasdaq  Comp.: 2976.08

Russell 2000: 818.49

If the angst over a euro-meltdown has receded meaningfully after the European summit concord, it won’t be evident in today’s economic reports.  It will take several months for businesses to ramp up plans that were on hold and for consumers to step up buying.

Any good numbers released between now and October will be a bonus.

The capitulation by Germany at the summit ensures a solid effort to preserve the euro.

While that is no guarantee the euro will survive, odds  now favor that it will.

This puts the ball in the U.S. court.

How well can our economy do in face of a slowdown/recession in Europe and in Asia ?

What does this do for corporate earnings, which stand to have difficulty beating year-ago numbers, ergo negative growth ?

What would a stall/decline in earnings growth do to the valuation of stocks ?

Assuming efforts abroad to preserve and strengthen the European Union  and stimulate economic growth there and in Asia, how long will it take the savviest BIG money investors to look beyond this mess-in-transition and see better times ?

With nowhere else to invest for a potential return, they will be buyers…..and years after that, the public will return to ice the cake and let the BIG money sell out at the top.

The ADP Employment report showed a June increase of 176,000 vs. 133,000 in May, Jobless Claims for the week ending June 30 were down 14,000 to 374,000 vs. a decline of 6,000 for the prior week. The 4-week average dropped 1,500 to 385,750.

The stock-index futures were little affected by the reports.

The ISM Non-Manufacturing Index report is due at 10 o’clock, it rose slightly to 53.7 in May from 53.5. The Index covers 375 firms engaged in agriculture, mining, construction, transportation, communications, wholesale and retail trade.

At 8:30 tomorrow, we get the Employment Situation Report, generally considered more important than the ADP report which does not include government payrolls.

The latter is currently a drag on the report.


European central banks  will announce their decision today regarding the lowering of its benchmark interest rate below 1% for the first time and reduce its deposit rate to zero. The Bank of England is expected to increase its purchase of bonds.

TODAY: Mixed open.  Continued buying can be expected by institutions investing Q3 funds. Minor support is DJIA 12,690 (S&P 500: 1342). Tuesday, I said there was a good chance of s spike across DJIA13,050 (S&P 500: 1384). While the market posted a nice move, it fell short of those targets  – perhaps today.

   Facebook (FB): We have had some spikes in recent days, it may be short covering. Like I have been saying, this stock needs a major league friend or it is i going to drift below 30.  It has plenty of doubters, which suggests it needs to bump along between $28.50 and $32 until all the disappointed buyers on the overpriced IPO and at higher level than present are gone. I don’t own, nor have I ever owned FB, I was bearish when it traded at $34 shortly after the IPO, thought it was a risk down to $24 – $26 and thought readers would benefit from my technical input.



ISM Manufacturing (10:00)The Index plunged to 49.7 in June from 53.5 in April.

Construction Spending (10:00) – Gained 0.9% in April following a revised gain of 0.6% in March.


Factory Orders (10:00) – May Factory Orders rose 0.7%  to $469 billion, 43.5% higher than the recession lows in March 2009.



ADP Employment Report – June private payroll employment increased  176,000 vs 133,000 in May.

Jobless Claims – Claims dropped 14,000 to 374,000 vs a drop 6,000 for the June 23d week to 386,000, bringing the 4-week average to 386,750.

ISM Non-Manufacturing Index – Rose to 53.7 in May from  53.5 in April, however, New Orders rose 2 points to 55.5


Employment Situation – Rose a disappointing 69,000 in May after a rise of 77,000 in April.

George  Brooks


The writer of  Investor’s first read, George Brooks,  is not registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.