How much sequester will impact the economy will be better known in Q2 and Q3.
Has this impact been factored in stock prices ?
Normally it would be if it were quantifiable, but it may take weeks before the Street can get a handle on it.
That spells uncertainty, which can trigger a correction or just a slowdown in the bull’s advance.
Money managers really have no alternative to common stocks. T-bonds are risky, T-bills, money markets, CD’s yield next to nothing.
However, if money managers think they can buy stocks at a lower price, they will back off, creating lower prices by their action.
Recent economic reports are mixed, which is okay except for the fact stock market indexes are near all-time highs.
Nevertheless, a good showing this week by key economic indicators would be an early indication that the economy’s strength has the capability to override any adverse impact by sequester.
The bulls are still running the show.
Check the schedule below for economic reports
TODAY:
A breakout today by the DJIA above 14,760 (S&P 500: 1,598) calls for a move to DJIA 14,835 (S&P 500: 1,605). That breakout must hold its gain throughout the day – no room for rally failures now.
Some profit-taking is justified and cash reserves to protect capital and prepare for a buying opportunity in coming months.
Institutions have no choice but to BUY stocke, they have no alternative, and I believe this bull can run a lot further, a lot, lot further, but not in a straight line.
Investor’s first read – an edge before the open
DJIA: 14,712.58
S&P 500: 1,582.24
Nasdaq Comp.: 3,279.26
Russell 2000: 935.25
Monday, April 29, 2013 (9:12 a.m.)
SEQUESTER: Stay tuned, it is starting to hit.
At some point, the question will be raised about the sequester’s impact on the economy, notwithstanding the uncertainty it brings to persons at risk, directly and indirectly.
It is too early to expect anything to show up in the indicators, and it may never be a major issue if our economic recovery gains traction.
It is one of those potential negatives one has to consider along with other ingredients that lead to a decision to buy or sell.
Employers (government or private) may opt to furlough employees without pay, cut back on hours rather than release them to unemployment at the expense of the government. Even so, several weeks without pay has an impact on the economy.
This is one of those uncertainties that, along with a few others, can trigger a consolidation or pullback in the stock market.
Apple (AAPL: $417.20) Street likes it, question is – how much ?
Friday’s action confirms the Street likes what they hear from management as AAPL broke above $414 to reduce the risk of another leg down.
A break above $421 improves the pattern and a break above $430 even more, but that will take a big buyer.
It’s not that its 43% plunge hasn’t discounted the sharp slippage in its growth rate and new product introduction. It is a value here. The problem is, does it represent enough upside to attract serious buying.
I am not long or short AAPL.
FACEBOOK (FB – $26.85)
FB broke out Friday above resistance at $25.40 edged above $27 before settling back. Next stop $27.75.
Between Aug. and Dec. last year, a trading range between$18 and $24 developed. That should provide support for FB and a buying opportunity. That’s where a three month tug of war took place between the believers and non-believers.
I am not long or short Facebook.
ECONOMY:
Very big week for economic reports.
Investors will be looking for assurance this week that the economy is not weakening. Evidence is beginning to surface that sequester is impacting the economy.
MONDAY: Note the following reports are accompanied by a “forecast”
Personal Income/Outlays (8:30): Forecast: +0.4%
Pending Home Sales Ix. (10:00): +0.7%
Dallas Fed Mfg. Ix. (10:30): +5%
TUESDAY:
Employment Cost Ix.(8:30): +0.5%
S&P Case-Shiller Home Price Ix,(9:00): +0.3%
Chicago PMI ((9:45): 52.4
Consumer Confidence(10:00): 62.0
European Central Bank (ECB): Meets (time ?)
WEDNESDAY:
ADP Employment (8:15): 155,000
PMI Mfg.Ix.(8:58): 52.0
ISM Mfg.Ix.: 51.0
Construction Spending (10:00): +0.6%
FOMC Announcement (2:00 p.m.)
THURSDAY:
Jobless Claims (8:30): 345,000
International Trade (8:30): -$42.4 billion
Productivity and Costs (8:30): +1.3%
FRIDAY:
Employment Situation (8:30): 153,000
Factory Orders (10:00): -2.8%
ISM Non-Mfg Ix. (10:00): 54.0
George Brooks
“Investor’s first read – an edge before the open”
[email protected]
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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.
