HIGHLIGHTS TODAY: wealth effect, housing recovery, monster bull market, presidential debates, fiscal cliff.
BIG PICTURE: POSITIVE
At some point, the snapback in housing has got to affect homeowners’ “wealth effect.” It was the 10% – 30% plunge in h
ome values between 2007 and 2011 and the 55% bear market in stocks between 2007 and early 2009 that decimated peoples’ net worth, causing them to slash spending, thus contributing to the severity of the Great Recession.
Investor’s first read – an edge before the market opens
S&P 500: 1460.26
Nasdaq Comp.: 3175.96
Russell 2000: 851.51
(Friday, September 21, 2012 8:40 a.m.)
Well, the stock market has recouped much of its bear market loss and home values are now on the rise. Not only can consumers be expected to loosen up the purse strings, but corporations can be expected to begin investing the $1.7 trillion of cash it has accumulated in recent years.
Unfortunately, other obstacles to a faster recovery arose after the recession and bear market ended. The European sovereign debt crises cast the euro and European Union at risk of collapse with unknown consequences. Here at home, ideological differences prevented the nation from addressing key issues such as a sharp rise in our national debt and tax policies, giving birth to the fiscal cliff.
While the euro-problem is on the mend, Congress has yet to demonstrate it can find common ground on several pressing issues. It will adjourn this week until after the November 6 election without dealing with the fiscal cliff (spending and taxes).
The uncertainties surrounding this issue will slow, but not halt, the recovery in the economy and investment markets.
While world economies are on the brink of another recession, the major economic powers have launched efforts to stimulate their economies.
The positives outnumber the negatives, with the U.S. Congress the major obstacle in the road to recovery. Maybe that changes in November, if not now, then in the mid-term election in 2014.
Individual investors and a good number of institutions are still shell-shocked by a host of negatives. Stepping back to look at the big picture, big steps have been taken to address these negatives.
Granted, there will be days when it looks like the economy is sinking into another recession, doubts about the euro will crop on occasion, global hostilities hit the headlines and Congress will remind us how dysfunctional it can be.
TODAY: Yesterday’s early correction found support a bit above my target, closing at the highs for the day, a good sign. Support now rises to DJIA 13,525 (S&P 500: 1454).
But progress is being made, and the scorekeeper for that is the stock market.
FACEBOOK (FB – $22.59):
Today: I think I have achieved the goal that I set in May, that is to offer daily guidance for followers of FB starting at $34 on May 21 with my warning about a drop to the $24 – $26 area, which it did shortly thereafter. Following a rally back into the 30s FB dropped into the low-20s where on August 2, I forecast a low for the stock at $16.88.
On September 4, it hit $17.55.
I am now cutting back on coverage, commenting on occasion when I think it would be helpful.
I don’t own, nor have I ever owned FB. Generally, I don’t recommend or comment on individual stocks. I started covering FB technically after its IPO because I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. At some point, I will drop coverage. I would like to see readers through the full cycle, from the $34 where I picked it up as “going lower” down to a bottom.
ECONOMIC REPORTS: I will post the following list of reports on Monday only, then follow up with an update of a report where appropriate. I suggest you visit “mam.econoday.com” if you are interested in economic reports – an excellent website which posts on Sunday along with national and international summaries..
Empire State Mfg Svy (8:30) – Dropped to a minus 10.41 in September after a 13-point drop in August to minus 5.85. in August, New Orders also dropped to 14.03 from minus 5.50.
Housing Market Ix (10:00) – Rose for the 5th straight month in September to 40.0, ahead of forecasts for 38.0.
Housing Starts (8:30) – Rose 2.3% in August to an annual rate of 750,000 from a revised 733,000 units. Forecast was for a gain of 765,000 units. Permits slipped 1.0% to 803,000 units after a July surge.
Existing Home Sales (10:00) – Rebounded 2.3% in July to a 4.47 million annual rate reversing a 5.4% drop in June.
Jobless Claims (8:30) – Declined 3,000to 382,000 for the week ended Sept. 15, The 4-week average is now 375,000.
Markit PMI Mfg flash In. (9:00) – Unchanged at 51.5..
Philadelphis Fed Svy (10:00) –Improved to minus 7.1 in Aug. from minus 12.9 in July
Leading Economic Indicators (10:00) – declined 0.1% in August in line with projections.
Note: Economic data above is subject to revision, so what you see as the latest reading may change in the next report.
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.