Stock-index futures are trading lower before the open reflecting concerns that China’s economy may be stalling as factory output weakened last month.
Commodities fell to a 9-month low, copper, an economic bell weather, is at an 8-month low, and oil is below $90 a barrel. Gold and silver are in a tailspin.
Economic indicators in the United States are mixed. This morning, April business conditions in the New York region improved slightly as the Empire State Manufacturing Survey for April came in positive, though new orders were off.
So far, Q1 earnings are coming in above expectations. Of the 30 S&P 500 companies reporting to date, 70% have beat earnings estimates, 57% beat revenues. Beating estimates has become SOP in the investment business; where the practice is generally to low-ball them. The time to worry is when corporations can’t “beat” low-balled estimates. Bloomberg’s survey of analysts projects a Q1 drop of 1.4% vs. a year ago, the first year-over-year decline since 2009.
TODAY:
So far, analysts warning about a correction in stock prices have been wrong on their timing, but that is not good reason for investors to throw caution to the winds.
A 3% – 5% correction will occur. Most likely, it will start innocently as a blip that goes a bit further than expected, then plunges in face of unexpected news, triggering hurried profit-taking, causing buyers to back off awaiting better prices. As prices weaken, selling increases until the correction has run its course. A 3% correction would lop 445 points off the DJIA, a 5% correction, would cost it 740 points.
Minor support is DJIA 14,736 (S&P 500: 1,570).
Investor’s first read – an edge before the open
DJIA: 15,865.06
S&P 500: 1,588.85
Nasdaq Comp.: 3,294.94
Russell 2000: 942.85
Monday, April 15, 2013 (9:14 a. m.)
SEQUESTER: I’m keeping this posted so you don’t forget the market may begin to worry about its impact.
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: $429.80)
AAPL failed to follow through on Wednesday’s and Thursday’s strength and dropped to support at $429 Friday after a breakout on the upside Friday where it has to hold to maintain a positive status. While $426 offers some support, the critical level is the $422 – $419 area. This area held on March 4 and April 5. Once again, sellers just keep showing up every time AAPL tries to stabilize.
I am not long or short AAPL.
FACEBOOK (FB – $27.40)
FB got stopped cold at resistance at $28, dropping a little below support at $27.80, which now is $27.20. Sellers appeared just in time to stifle what looked like an opportunity to move into the low 30s. Today’s trading will be critical.
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:
This will be a light week for economic reports.
But the Street is heartened by favorable economic data on employment, personal income, consumer sentiment, auto sales construction spending, durable goods manufacturing, and housing.
I am going to list the economic reports below but will not include the numbers from the last report, since those numbers are often revised significantly and therefore are potentially misleading.
I strongly urge you to access the website: www.mam.econoday.com for detailed reports on this week’s calendar and an excellent recap (plus graphs) of last
week’s reports. The site does a great job graphically illustrating key indicators.
MONDAY:
Empire State Mfg. Svy. (8:30:
Housing Mkt. Ix.(10:00):
TUESDAY:
Consumer Price Ix.(8:30):
Housing Starts (8:30):
Industrial Production(9:15):
WEDNESDAY:
Beige Book(2:00)
THURSDAY:
Jobless Claims (8:30):
Bloomberg Consumer Comfort Ix>(9:45):
Philadelphia Fed. Svy(10:00)
Leading Indicators (10:00):
RECENT POSTS: 2013
Mar 28 DJIA 14,526 “Stocks – The Only Option For Institutions”
Apr 1 DJIA14,583 “Breakouts Need More Buying”
Apr 2 DJIA 14,572 “ Bulls Need to Reverse Technical Deterioration”
Apr 3 DJIA 14,662 “Q1 Earnings and Sequester Uncertainty Deserve More Respect”
Apr 4 DJIA 14,550 “Deterioration in Technicals Resumed”
Apr 5 DJIA 14,606 “Weak Technicals Forecasts Drop”
Apr 8 DJIA 14,565 “Buyers Require Good Reason to Back Off
Apr 9 DJIA 14,613 “Believers Still Outnumber Non-Believers”
Apr 10 DJIA 14,673 “Bull Market – a Perpetual Machine “
Apr 11 DJIA 14,803 “Don’t Panic – Current Leaders Will Correct, New Leaders Will Surface”
Apr 12 DJIA 14,865 “What Will It Take to Prompt a Correction ?”
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.
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