Thursday, April 5, 2012 9:08 a.m. ET
DJIA: 13,074.75 S&P 500: 1398.96
The bulls have been taking their cuts with aggressive buying since early March, but sellers appeared in Mid-March to feed stock out and put a lid on the DJIA around 13,330 (S&P 500: 1420).
Last year I warned that the BIG money may be using “good” earnings in April/May to sell, because they saw other problems surfacing, namely the European sovereign debt problems and risk of a global meltdown, as well as brinkmanship in Congress over extending the debt ceiling risking default on some obligations.
The DJIA peaked in early May prior to an 18% plunge.
This year, I suspect the BIG money is selling prior to the earnings reports because a number will disappoint, or just not “excite.”
If the BIG money saw a particularly bad report, this market would be headed south in a hurry.
Coming out of a deep recession, year ago (depressed) earnings are easy to beat by a big margin. Earnings increase along with the economy, but become more difficult to beat by big numbers. I think that is what we will be seeing going forward.
That is the reason for hesitancy now. The Street is reassessing valuations. What are stocks worth in today’s market and next year’s market.
As always, there are some balls up in the air that could come down to hammer stocks. Energy prices are currently threatening to impact the economy, but Europe’s problems could resurface with the risk of default by Spain and Portugal. The rhetoric accompanying the November elections will be anything but upbeat for our nation’s outlook.
Nevertheless, there will be companies that will prosper regardless and there is a lot of money earmarked for stocks that is not earning a decent return in “safe” havens.
TODAY: Long weekend coming up. Hot money will be out of the corner office early and off for the weekend so trading may be light.
Odds favor a mixed open, an unenthused rally and a brief drop to DJIA 12,914 (S&P 500: 1381) with a bounce at the close. Nimble trader’s buy if it gets down that much.
Very big week for economic reports. They must confirm that the U.S. economy continues to gain traction. No room for doubts here.
ISM Manufacturing Index (10 a.m.) a survey of 300 manufacturers covering employment, production, new orders, supplier deliveries, and inventories, expanded faster than projections rising to 53.4 in March from 52.4 a month ago. Forecasters were looking for it to rise to 53. This report was reassuring since it had slipped in February to 52.4 from 54.1. Autos, corporate purchase of equipment and inventory also contributed.
Construction Spending (10 a.m.) includes residential, non-residential and public projects. Dropped 1.1% in February after a 0.8% drop in January, after a 1.4% increase in December and 1.9% in November.
Motor Vehicle Sales (7:45) includes domestic and foreign sales. Jumped 6.5% in February to an annual rate of 15.1 million
ICSC Goldman Store Sales (7:45) sales at 10% of major retail stores – a sampling but useful comparing one period to another. For the week ended March 31, ICSC Store Sales rose 3.8% vs a week ago, 4.2% year over year.
Factory Orders (10 a.m.) February orders were up 1.3% after a revised January decline of 1.1% but strong December and November months. February’s gain was less than a projected gain of 1.5% which may account for the market’s softness yesterday. Bloomberg’s survey of 60 economists ranged between a gain of 0.5% to 2.6% so prescience is kind of iffy.
ADP Employment (8:15 a.m.) increased 209,000 in March after a 215,000 increase in February. It is looked to as an early indication of Friday’s “Employment Situation” report.
ISM Non-Manufacturing (10 a.m.)a survey of 375 companies including agriculture, mining, construction, transportation, communications, wholesale, and retail trade. March’s ISM index slipped to 56 from a one-year high of 57.3 in February. Bloomberg’s median forecast of 69 economists called for a drop to 56.8 – forecasts ranged from 54 to 62.
Jobless Claims (8:30) For the week ended March 31, dropped 6,000 to 357,000, lowest since April 2008. The 4-week moving average is now down 4,250 to 361,750. This compares with the prior week’s drop of 5,000
Employment Situation (8:30) Payroll employment increased 227,000 in February after a 284,000 jump in January and 223,00 jump in December.
Consumer Credit (3 p.m.) Gained $17.8 billion in January vs. a revised gain of 16.3 billion in December.
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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