Investor’s first read – Brooksie’s edge before the open
Thursday, April 26, 2012 9:10 a.m. ET
DJIA: 13,090.19
S&P 500: 1390.72
Nasdaq Comp.: 3029.63
Russell 2000:811.72
The market chipped away at a bearish “topping” pattern yesterday. Prompted by the morale booster of a 50-point pop in Apple’s (AAPL) stock and upbeat comments by Fed chief Bernanke, the market managed a nifty gain, which it held throughout the day.
Volatility rules driven by uncertainty out of Europe and the direction of the U.S. economy. Politics will get downright ugly between now and November, but how much uglier can it get?
Treasury Secretary Timothy F. Geithner noted yesterday that the U.S. faces a “fiscal cliff,” with the simultaneous expiration of tax and spending cuts that only bipartisan cooperation in Congress can solve.
Confidence in Europe’s economy is declining more than expected according to the index of executive and consumer sentiment for the 17-nation euro area which dropped to 92.8 in April from 94.5 in March.* Economists expected 94.2.
As expected, austerity measures by euro-area countries attempting to slash indebtedness, are adversely impacting economies which desperately need “growth” to pull them out of their mess.
None of this comes as a surprise to the Street, it was expected, but the reality is beginning to set in and that is unnerving.
So far, it hasn’t seriously impacted U.S. stock prices. Perhaps the Street believes European leaders can head off a meltdown abroad earlier and with more certainty this time around. I would think so.
TODAY: Jobless Claims at minus 1,000 for the week ended April 21 didn’t help the bulls before the open this morning. Existing Home Sales come at 10 o’clock.
Short-term downside risk is DJIA 12,965 (S&P 500: 1375). The overall pattern is neutral with a slight negative bias. The market needs a rise above DJIA 13,250 (S&P 500: 1,410) to erase the “topping” pattern in effect now. A drop below DJIA12,810 (S&P 500: 1357) would be ominous.
ECONOMIC REPORTS
Again, the flow of economic reports will be important this week because the Street is concerned that the economy is slowing.
TUESDAY
Case Shiller Home Price Ix (9:00) – a 20-city house price index indicated prices dropped at a slower rate in February, suggesting the market was stabilizing. Home prices declined 3.5% vs. a year ago.
New Home Sales (10 a.m.) At an annual rate of 328,000, March sales of new homes exceeded projections but declined 7.1% from a February’s upward revision of 353,000. A Bloomberg survey of 78 economists forecast an annual rate of 319,000.
Consumer Confidence (10 a.m.) – was unchanged in April
following a drop to 70.2 in March from 71.6 in February.
FHFA House Price Ix (10 a.m.) – unchanged in January after a 0.1% increase in December.
WEDNESDAY
Durable Goods (8:30) – March orders were down 4.1% . The numbers were adversely impacted by declines in the aircraft industry, which somewhat masked gains in other sectors of the economy. FOMC Meeting Announcement (12:30) – is expected to leave policy rates unchanged, but the Street will be focused on comments by Fed officials after the meeting for any clues about a change in policy going forward.
THURSDAY
Jobless Claims (8:30) – declined 1,000 for the week ended April 21 vs, a drop of 2,000 in the prior week. The four-week average is now 381,750.
Pending Home Sales (10 a.m.) – dropped 0.5% in February after a 2.0% rise in January.
FRIDAY
GDP (8:30) – Q4’s GDP’s last estimate was a plus 3%. Q3 was 1.8%.
Employment Cost Ix (8:30) – a measure of the total employee compensation costs, including wages, salaries and benefits. It rose 0.4% in Q4 vs, a rise of 0.3% in Q3.
Consumer Sentiment (9:55) – The index slid to 75.7 in mid-April from 76.2 in March
George Brooks
*Bloomberg News
**Stock Trader’s Almanac. You should not be without this statistical gem and reservoir of investing savvy. Got my first issue in 1968 and every one since.
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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.
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