2010 S&P poised for record low

U.S. stocks tumbled Tuesday, with the S&P 500 Index poised for its lowest finish this year, as U.S. consumer confidence fell more than anticipated in June, adding to worries about a global slowdown. This is all part of the global economy we’re worried about, there just isn’t enough growth around to generate steady job growth and after falling nearly 300 points, the Dow Jones was down 248.04 points, or 2.4%, to 9,890.48, with all 30 of its components in the red.

The Dow last fell below 10,000 on June 10, and closed below the psychologically important level the prior day. Current US stock prices and market watch. 

Industrial companies and natural-resource firms were among the hardest hit after the Conference Board revised downward its leading economic index for China. China stock picks that should be on your watchlist. 

The Conference Board, a private research group based in New York, said Tuesday that its Consumer Confidence Index dropped almost 10 points to 52.9, down from the revised 62.7 in May. Economists surveyed by Thomson Reuters had been expecting the reading to dip slightly to 62.8.

June’s reading marked the biggest drop since February, when the index fell 10 points. The index had risen for three straight months since then.

Both components of the index — one that measures how consumers feel now about the economy, the other that assesses their outlook over the next six months — dropped. The Present Situation Index decreased to 25.5 in June from 29.8 in May. The Expectations Index declined to 71.2 from 84.6.

A key issue is jobs. The Labor Department is expected to report on Friday that employers eliminated 110,000 jobs in June, and the jobless rate is expected to tick up slightly to 9.8 percent, from 9.7 percent in May, according to economists surveyed by Thomson Reuters. That follows a bleak report in May, which showed employers added 431,000 jobs but the vast majority were temporary census positions.

Retailers had a surprisingly solid start to the year as consumers felt better as their stock portfolios rose, but since April, business has slowed. Hastings believes the sluggishness continued into June. He believes sweltering heat in this past month wilted sales of summer’s trendy fashions as consumers stuck to buying the basics like shorts and tank tops to keep cool.

Value Stock Picks

Value stocks can pay off if you pick carefully.  For the average investor hunting for low-priced value stocks can require exhaustive research and countless hours of investigative work. And buyer beware: You could wind up in some dimly lit trading room staring down at a stock that’s deader than last call at a southern baptist ministry convention. Just to define our terms, a low-priced stock is one that sells for $10 or less. We’re not talking about penny stocks, which sell for $1 or less and can be deadlier than the kool-aid at Jonestown.

One attraction of low-priced stocks, of course, is that they are inexpensive. You can pick up 100 shares of a $5 stock for just $500. If you wanted to buy 100 shares of Google, you’d need about $50,000.

But the main allure of low-priced stocks is that they usually aren’t followed by the average Wall Street mope, which means you can sometimes pick up overlooked bargains. Many big institutional investors, for example, won’t touch a stock that sells for less than $10, on the assumption that it’s on its way to zero. And stocks that sell below $5 aren’t marginable, which means you can’t borrow to buy them — and that rule eliminates some investors as well.

Your first job is to get some protection. A stock that sells for $3 can go to zero faster than a drummer can get to a pawnshop. One way to get some muscle: Look for stocks of companies with low or no debt and plenty of cash. High debt is one of the biggest killers of small companies: If rates go up or business goes down, the bank will own your company, and your stock will become toilet paper.

Value investors follow a different path. They believe that the broader stock market always overreacts to news about a company. The Stocknod neural network uses a proprietary software scan that seeks out value stock picks of formerly hot stocks that have stumbled and whose share prices are at bargain levels. Value stock picks with eye popping fundamentals and low price to book ratios.

Value investing has proven to be a successful investment strategy for faithful investors: Buying low PE ratio stocks, low price-to-cash-flow ratio stocks, or low price-to-book ratio stocks that insure positive gains regardless of what the rest of the market is doing. Stocknod’s value stock picks scan consistently uncovers the value stocks poised to outperform. Value stock’s have a conservative risk profile with low portfolio turnover and steady sure fire gains.

If you are looking for value stocks that pay dividends then try the StockNnod neural network scanned stock picks ned st that pinpoints value stocks poised to outperform.

US Stock Market on Shaky Ground

With no quick fix in sight to the sovereign debt issues plaguing Greece and other parts of Europe, the U.S. stock market’s roller coaster ride is unlikely to end in the weeks ahead. Watching Europe is important. They import a lot, and they export a lot, so they have a lot of influence over what’s going on around the world.

On Friday, the major U.S. stock indexes fell sharply for a second consecutive session, yet still managed to halt a weekly losing streak before it hit a third week, as investors tracked the euro’s decline on worries about Europe’s debt crisis, with Wall Street detouring around reports illustrating slow but steady improvement in the U.S. economy.

Making a triple-digit move for an 11th session out of the last 14, the Dow Jones Industrial Average fell 162.79 points, or 1.5%, to finish at 10,620.16, leaving it up 2.3% for the week after a two-week slide.

It’s the global growth story and concerns this is going to dampen the global recovery and increase credit risk. There’s a big question mark around how much damage is this going to do to an economy that is just starting to chug along.

And, while the current earnings season is mostly over, the coming days will bring results from a collection of big names, including results slated for Tuesday from three Dow components — Wal-Mart Stores Inc., Home Depot Inc. and Hewlett-Packard Co.

Twenty-three S&P 500 companies are expected to report earnings in the days ahead, including home-improvement retailer Lowe’s Companies Inc. on Monday, and tax preparation software firm Intuit Inc. on Thursday.

The S&P 500 Index on Friday declined 21.76 points, or 1.9%, to 1,135.68, up 2.2% from the week-ago close.

Results are also on tap from the technology sector, including Agilent Technologies Inc. [A] on Monday and Analog Devices Inc. [ADI] the next day. Computer Sciences Corp. [CSC] reports on Thursday, as does tax preparation software firm Intuit Inc. [INTU] .

Thursday also brings results from video game publisher Gamestop Corp. [GME] , shares of which were hit at the end of the last week after data pointed to a sharp April drop in sales of video games. .

The coming week also features results from retailers, including Abercrombie & Fitch [ANF] on Tuesday and office-supplies retailer Staples Inc. [SPLS] on Thursday.

Muted outlooks from retailers that reported in the past week left some questioning recent signs of strength in consumer spending, even as J.C. Penney Co. [JCP] reported robust gains in sales and profits, a theme echoed by the likes of Macy’s Inc. [M] and Kohl’s Corp. [KSS] .

Blended share-weighted earnings for the S&P 500 for the first quarter stood at $183.3 as of Friday, above the prior week’s $182.4 billion, according to research compiled by Thomson Reuters.

The Nasdaq Composite Index [COMP] on Friday shed 47.51 points, or 2%, to 2,346.85, leaving it 3.6% higher from last Friday’s finish.

Treasury’s Biggest Weekly Loss

Treasury prices posted gains on Friday, but remained headed for a weekly loss as yields on 10-year notes touched the highest levels since June amid heightened concerns about the government’s ability to finance its deficits and as investors turn to seeking out higher yields in other asset classes.

Still, U.S. debt yields, which move inversely to prices, were deemed attractive by some.

Yields on 10-year notes (UST10Y 3.86, -0.02, -0.46%)  fell 2 basis points, or 0.02%, to 3.86%. Last June, they peaked at 3.94%, which was the highest since October 2008, when the credit crisis really took off and sent yields to all-time lows.

Yields on 2-year notes (UST2YR 1.06, -0.02, -1.77%)  declined 2 basis points to 1.06%, after closing at the highest rate this year.

The week’s losses came as the successive Treasury auctions received poor demand from investors, coming at higher-than anticipated yields and with smaller proportions of the auctions being bought by a group of investors that includes foreign central banks. See previous column on auctions.

Providing some support for bonds, analysts pointed to a lack of note or bond auctions next week and the potential for month-end buying.

Benchmark bond indexes, at the end of every month, add to the index any debt that was sold during the period, which usually extended the duration of the index. Duration is a measure of price sensitivity to a change in interest rates, and is partly determined by maturity. Fund managers who try to match their holdings to benchmark indexes therefore buy recently-issued debt at month end.

That followed a government report which said the U.S. economy grew at a revised 5.6% pace in the fourth quarter, slower than reported earlier.

Benchmark 10-year securities are still on pace for the biggest weekly jump in yields since December.

Ring of Fire

U.S. stock investors don’t know where to take cover with the constant market swings. Reeling from four straight weekly losses, are entering the coming week’s market torn between confidence in the global economic recovery and fear that foreign governments’ actions will bring the rebound to a sudden halt.

Investors have looked at the two sides and bet on safety, ultimately selling stocks to buy U.S. dollars, Gold and Treasury’s.

There is also the dark cloud looming that China will start to slow growth in its economy, and indirectly, other economies that have benefited from its appetite for energy and basic materials.

And at the same time, investors have grown concerned that high government debt levels in Greece, Spain and Portugal will lead to the type of spiraling financial crisis that froze credit markets two years ago.

The struggle between these opposing viewpoints has contributed to some heart-stopping swings in the last week.

The Dow made triple-digit moves in three of the last five trading sessions, tacking on 230 points by Tuesday’s close. The blue-chip average then gave back the entire advance, and then some, ending 0.6% lower for the week.

Along the way, the measure staged a late, sharp reversal Friday that brought the Dow from a 167-point loss to a 10-point gain by the finish, and a return above the key 10,000 level.

The S&P 500ended the week 0.7% lower at 1,066, with its weekly loss similarly moderated by solid gains early in the week.

Commodities tumbled last week, with their value as an alternative asset to paper currencies eroded by the dollar’s gains. Oil futures ended the week more than 1% lower, while gold futures lost nearly 2%.

Still, the index’s track record is looking tattered over a slightly longer period: It hadn’t posted four straight weekly declines since March 2009.

Investors face plenty of economic and corporate data in next few weeks that could sway sentiment either way.

As the week starts, investors may respond to press statements from the weekend’s G7 meeting of finance ministers in Canada.

Any deterioration in the financial situation in southern European nations also could overshadow U.S. events.

Stocks ZigZag to Start New Year

Stocks zigzagged early Monday as investors awaited on earnings from Alcoa latest stock price,for more signs that the global economy is healing.

Alcoa’s stock news will give investors one of the first looks at how companies fared in the final quarter of 2009.

Investors also looked to a report that Chinese exports jumped by nearly 18 percent in December. The bigger-than-expected increase follows 13 straight months of declines. The increase in exports has added confidence to investors who believe a global economic rebound is well under way.

Outside of unemployment rates and sub-par fundamentals, most indications are that the global enonomy is healing and 2010 should be a pivot year for the international markets.

Alcoa kicks off the flood of reports that will provide insight into how fast the economy is recovering. Economists polled by Thomson Reuters predict Alcoa earned 6 cents per share in the fourth quarter.

In midmorning trading, the Dow Jones industrial average fell 2.72, or less than 0.1 percent, to 10,615.47. The Standard & Poor’s 500 index rose 1.05, or 0.1 percent, to 1,146.03, while the Nasdaq composite index fell 2.41, or 0.1 percent, to 2,314.76.

The upbeat report from China has also bolstered commodity prices. A rise in production would push demand for resources higher.

Gold and oil are both sharply higher. Oil & Gas rose 43 cents to $83.18 a barrel, while gold is up $16.80 to $1,155.70 an ounce.

The dollar has also declined, adding to the strength of commodities.

Wall Street’s rise during the first week of the year is a promising sign for things to come. The S&P 500 has posted full-year gains 31 of the last 36 times the index rose during the first week of the year, according to the Stock Trader’s Almanac.

Meanwhile, bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.80 percent from 3.84 percent late Friday. The dollar fell against other major currencies.

2010 Stock Market Analysis

As we speed through the last few trading days of 2009, it’s time for all of us to turn our attention to what is sure to be an interesting and eventful 2010.

So, let’s take a look at what investors should be keeping in mind – and on their radars – as we enter a bright new year and evaluate the next phase of the economic recovery.

The unemployment rate remains the ultimate barometer of how well the recovery is doing. The initial $787 billion stimulus package was supposed to create or save millions of jobs, but so far success can only be measured in terms of “what could have been”. It’s a safe bet that the stock market can’t get on a sustainable uptrend until new jobs are being created, and the unemployment rate begins to tick down.

As long as unemployment is rising, bears will have strong ammo to retain their stance in market discussions. Investors should remain cautious of companies and industries that rely on consumer spending until we see concrete evidence of higher employment.

Home tax credit extended and the mortgage industry is another key metric to follow in 2010. The $8,000 new buyer credit now runs through April 2010, and an additional credit offers $6,500 to homeowners that have lived in their home for at least five years and are looking to relocate their primary residence. This should help to improve the home market and fringe retailers like Home Depot and Lowe’s, and other home appliance and home improvement stocks.

Housing led us into this mess, and at some point it will need to help lead us out. Housing data follows employment data as the most important economic indicators heading into 2010.

The banking pulse will continue to dominate headlines. We might see the vast majority of TARP funds repaid to the U.S. Government by the end of 2010. On December 2, Bank of America got approval from the Treasury Department to repay its $45 billion in remaining TARP loans. Bank of America subsequently sold nearly $20 billion in stock to raise cash, and its move could be followed by similar actions at Citigroup and Wells Fargo.

The combination of a falling U.S. dollar and higher commodity prices has been the most consistently profitable investing theme of 2009. Most signs point to the dollar remaining low in 2010, but if we see any signs of inflation in economic indicators like the CPI and PPI, expect the dollar to start recovering as short-term interest rates will head higher.

Investors should have some stock exposure to commodities as well as stocks with a high percentage of exports, but don’t bet the farm on them. This area has had an extremely good 2009 and could be due for a drop, or at least a slowdown.

There’s cash in them thar hills! We continue to see investors holding cash, trillions in fact. This means that as more people have faith that we are indeed recovering, there is a lot of kegged gunpowder that can fire into stock markets next year.

Dubai Credit Rattles the Stock Markets

The world stock markets fell on Thursday as Dubai attempted to delay debt payments for six months.   The US stock market was closed for the Thanksgiving holiday, but the S&P futures are down considerably.  Commodities, especially oil prices, are weakening while the U.S. Dollar and Treasury bonds are starting to rise.

Emerging markets are suffering significant losses and money appears to be moving into consumer staples.  Investors remain very cautious as we wait to learn more about Dubai’s credit situation.   Keep in mind that money managers are eager to lock in profits for the 2009, so an event such as this may be a catalyst for year end selling.  Couple this with the fact that the US dollar and Treasuries are at historic lows, and we may see some selling pressure ahead.

Stocks start week off with a bang

Securities investors kept the stock market’s upward momentum going Monday, sending shares sharply higher after retail sales rebounded more than expected in October and the dollar extended its slide.

Major stock indexes rose more than 1 percent to new 13-month highs, including the Dow Jones industrial average, which jumped 136 points. The Standard & Poor’s 500 index closed above the 1,100 mark for the first time in more than a year.

The weaker dollar lifted gold to a new record and pumped up prices of other commodities, including oil. That, in turn, helped shares of energy and materials companies.

Stocks got another boost after Federal Reserve Chairman Ben Bernanke reaffirmed in a midday speech that the central bank would hold interest rates at record-low levels for an “extended period,” and that he didn’t see signs that the money being pumped into the economy by the government was creating speculative bubbles. Bond prices rose after Bernanke said inflation appeared contained.

Some analysts have cautioned that the surge in stocks, which has been hastened by the falling dollar, might not be justified by the still-struggling economy. In fact, they say some investors might misread the big advance in stocks as a sign that the economy is stronger than it actually is.

The market’s own dynamics fed some of the day’s gains.

The S&P is breaking through the 1,100 mark, which is psychologically significant, and the market is seeing a little pop from this. Stocks began rising from the start after the Commerce Department said retail sales rose 1.4 percent in October, nearly double the increase forecast by economists polled by Thomson Reuters. It was a sharp rebound following the 2.3 percent drop in September. Excluding the gain from autos, however, sales rose just 0.2 percent, half of what economists predicted.

The broader S&P 500 index rose 15.82, or 1.5 percent, to 1,109.30. It has hovered around the 1,100 mark for a month but hadn’t closed above it since October last year. The index first finished above 1,100 more than a decade ago, in March 1998.

Sluggish Economy: Economists guardedly optimistic about timeline

The beginning of an economic recovery appears to be just a few months away but unemployment is predicted to rise past 10% into next year by most surveyed economists. The jobless rate will peak at 10.2%, according to the median estimate of the 49 economists surveyed July 16-22 per USAToday. That’s up nearly a half-percentage point from the previous survey in April. The nation’s unemployment rate hit 9.5% in June, a 26-year high.

“About half of those surveyed said unemployment will peak in the first half of next year, while 16% said jobless rolls will swell into the latter part of 2010. The Federal Reserve forecasts unemployment peaking late this year at 9.8% to 10.1%.

The economy is expected to grow again during the second half of this year, and slightly more robustly than the April survey projected. Yet, the median growth-rate estimate of 2% for the fourth quarter is weak by historical standards.”

“I think (the recovery) is going to be anemic,” says Allen Sinai, chief economist at Decision Economics. He cites debt-laden consumers as the main obstacle.

“Households have to save a lot to fix their balance sheets before they can spend more,” he adds. “I don’t think consumers have the wherewithal to buy a lot of cars and a lot of houses.”

Another factor slowing the turnaround is still-tight credit markets that will limit business expansion, UBS chief economist Maury Harris says.

Overall, 63% of the economists say the recovery will be slow and gradual. Those surveyed expect businesses to continue to cut spending until early next year. As a result, Sinai says, unemployment will continue to rise.

There are some bright spots.

Two-thirds of economists say existing-home sales have hit bottom. Consumer spending has stabilized. And CEO confidence shot up in the second quarter, the Conference Board said recently. Such signals are prompting 37% of economists to predict a moderate or fast recovery.

Bill Cheney, chief economist at MFC Global Investment, says the housing and automobile markets plunged so sharply that “both have the potential to generate some quite large percentage increases.” Consumers could be moved to open their wallets because of rising values on the stock market, he says.

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubushi, is also fairly bullish, expecting unemployment to top out at 9.7% this year.

“I think the key to a turnaround is that job losses stop quicker than people are expecting,” he says.

Next Page »