HIGHLIGHTS TODAY: Big investment picture, fiscal cliff, stock market correction, presidential election, Unemployment rate, leading indicators, housing, jobs, euro-discord, economy, recession, corporate earnings, Google, Facebook
All trading in equity markets has been canceled today in anticipation of Hurricane/nor’easter Sandy. Stock-index futures indicate a down market if trading was not suspended.
Depending on how much damage is done in lower Manhattan, the market may be closed for more than one day. Electronics and transportation systems are vulnerable.
This week features a host of key economic reports, so trading stands to be crammed into fewer days.
Looks like my “Raise Cash” post Friday was a bit heavy for some readers, but I would much rather bare my instincts fully and if I going to miss a call, I’d rather err on the side of caution rather than see an ugly plunge in stock prices catch readers unaware.
Investor’s first read – an edge before the market opens
S&P 500: 1411.91
Nasdaq Comp.: 2987.95
Russell 2000: 813.25
(Monday, October 29, 2012 (9:14 a.m.)
Basically, our Congress is divided along partisan political lines with a huge gap in the middle. That’s not an environment for getting any job done. That is why we are faced with the fiscal cliff, that is why a resolution before December 31 is unlikely, though not impossible since negotiations have been going on behind the scene to reach a compromise. Then too, the gridlock must be frosting some heavy hitters enough that they are bringing pressure on Congress to find common ground.
CONCLUSION: Combine the divisiveness in Congress along with uncertainty about corporate earnings and you have a nasty cloud overhanging the market. That could keep institutional investors on the sidelines, even trigger some selling, resulting in lower prices.
Of the 273 companies in the S&P 500, 72% (196) “beat” earnings estimates. Estimates for sales were not as accurate as 59% (161) “beat” projections. While Q3 earnings were expected to be down, it appears at this date, the results are disappointing. That can only mean revision of future earnings, which undermines the justification for the current level of stock prices.
A compromise on the fiscal cliff, tax cuts leading to reform changes the picture dramatically to positive.
This week will produce a lot of economic reports that will shed some light on the economy, not the least of which are the ADP Employment report at 8:15 Thursday and Employment Situation report Friday at 8:30. The latter includes the Unemployment Rate which last month came in at 7.8%. It had political significance and critics of its viability will be watching closely.
Personal Income 8:30) – Rose 0.1% in August after a like gain in July
Dallas Fed Manufacturing Svy (10:30) – Rose in September to a minus 0.9 from minus 1.6 in August.
S&P Case-Shiller Home Price Ix (9:00) –rose 0.4% in July. Year-on-year gain was 1.1% from 0.5%.
Consumer Confidence (10:00) – jumped 9 points to 70.3
Chicago PMI (9:45) – Dropped 3.3 points in September to 49.7. New orders dropped 7.4 points to 47.4.
ADP Employment (8:15) – ADP Private payrolls increased 162,000.
Jobless Claims (8:30) – Dropped 23,000 in the October 20 week after a revised increase of 46,000 the prior week after a drop of 27,000 the week before.
Productivity/Costs 8:30) – Revised up in Q2 to a 2.2% annual rate vs. a 0.5% drop in Q1.
ISM Manufacturing Ix (10:00)- Rebounded in September to 51.5 from 49.5 in August, New orders also increased to 52.3 from47.1.
Construction Spending (10:00) – Dropped 0.6% in August after a 0.4% drop in July
Employment Situation (8:30) – Nonfarm payrolls increased 114,000 in September after a 142,000 rise in August. Workweek was up to 34.5 hours from 34.4. Unemployment rate dropped to 7.8%
Factory Orders (10:00) – Dropped 5.2% in August due to a temporary drop in aircraft orders.
FACEBOOK (FB – $21.94): FB spent the last 3 days consolidating Wednesday’s 5-point spurt in response to better than expected earnings. Stock should get some buying around 21.60. This correction is orderly suggesting buyers are allowing sellers to exit but at slightly lower prices throughout each day.
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 on May 21, I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. I warned of a drop to $24-26, 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 of $16.88. On September 4, it hit $17.55, its low since its IPO at $38.
*Stock Trader’s Almanac: This is a “must own” publication, loaded with daily, weekly, monthly savvy. It is “the source” for strategies, seasonalities, recurring events, useful stats. Published annually, I have used it every year since 1968. Nothing compares !
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.