Investor’s first read – Brooksie’s edge before the open
Tuesday, February 14, 2012 9: 14 a.m.
DJIA: 12,874.04 S&P 500: 1351.77
CONCLUSION: I expect a slow “churn” in stock prices for a few days, even weeks, as investors lock in profits and jump on stocks they expect to be new leaders (also referred to as a rotation in strength).
Put another way, expect internal strength that may not be reflected in the overall major market averages.
Since Moody’s downgrade yesterday of debt ratings for six European countries (including Italy, Spain and Portugal) was expected, the impact was minimal on pre-trading in the market today and didn’t even affect the cost of an auction of Italy debt yesterday, I am not overly concerned today.
This European ‘thing” will be with us for a long time. As long as it doesn’t deteriorate significantly, the risk to the U.S. economy is not great.
What is needed globally, is economic GROWTH, which we are seeing here and in Germany.
Let’s not forget what we have been through, let’s not forget (as if we could) that we narrowly dodged a killer of a bullet that could have thrown the world into a depression. That take’s time to recover from.
Even if we stall here, and slip into an irregular correction, there will be pockets of strength.
There are HUGE reservoirs of capital out there that must be deployed. Investors and money managers, hedge funds, etc. are pressed to make money and you don’t do that sitting on treasuries. Granted, cash is unbeatable when stocks aren’t running, but when they are, it’s time to work it.
As basic as this all seems, it is what drives markets.
TODAY: Slower than expected January retail sales stand to cost the market in early trading with a drop in the DJIA to 12,800 (S&P 500: 1344).
This will be a busy week for economic reports, what’s important is that there is no serious evidence of slippage in the U.S. economic recovery which is one of the key reasons for the stock market’s recent strength.
- Retail Sales (8:30 a.m.): Up 0.1 pct in Dec, 0.4 pct in November and 0.7 pct in October, however latest strength came from autos, up 1.5 pct.
- Export/Import Prices (8:30 a.m.): Trending down in last 5 mos.
- Business Inventories (10 a.m.): Inventory/sales ratio unchanged last 5 mos.
- MBA Purchase Applications (7 a.m.): Measures mortgage applications at lenders
- Empire State Manufacturing Survey (8:30 a.m.): Rose sharply in December and January.
- Industrial Production (9:15 a.m.):
- Housing Starts (8:30 a.m.): Dropped 4.1 in December after a 9.1 pct rise in November.
- Jobless Claims (8:30 a.m.): Dropped another 15,000 for week ended February 4, bringing the 4-week average down to366,250.
- Producer Price Index (8:30 a.m.): Dropped slightly in December after November bounce.
- Philly Fed Survey (10 a.m.): Notched higher in January, though new orders were off
- Consumer Price Index (8:30 a.m.): Unchanged in December for second month in a row reflecting lower energy costs.
- Leading Indicators (10 a.m.): positive
Jan 23 DJIA: 12,720 “Europeans Seeking Long-Term Economic Cure“
Jan 25 DJIA: 12,675 “Consolidation, Correction Likely though US Stocks Hold Strong Against EU Turmoil“
Jan. 26 DJIA: 12,756 “Fed Would Raise Interest Rates If Inflation Picks Up“
Jan. 27 DJIA: 12,734 “Warning! Tradable Market Action Lies in Waiting“
Jan. 30 DJIA: 12,660 ““HUGE” Week for Economic Indicators“
Jan. 31 DJIA: 12,653 “All That Is Needed Is a Spark“
Feb. 1 DJIA: 12,632 “Week’s Economic Reports Could Be The Springboard“
Feb. 3 DJIA: 12,862 “Investors Beating the Bullish Tune“
Feb. 6 DJIA: 12,845 “Follow the Money as It Exits Safe Havens“
Feb. 7 DJIA: 12,878 “Market Held Up By Sneaky Buying“
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.