Blowout earnings reports from tech giants are keeping the market at the higher end of the trading range we have seen for some time now. The market sees these bellwethers pointing to a continued growth in corporate earnings. It would seem, then, the market is still focused on corporate earnings and not yet bothered about the debt ceiling rhetoric from Washington D.C. Is it denial, or is it the belief that the politicians will do the right thing and raise the ceiling before the August 2nd deadline? Clearly, after President Obama spoke yesterday praising a potential bipartisan agreement, the market jumped up and stayed up. It appears the market has one eye on corporate earnings and the other on the clock tick, tick, ticking toward August.
American airlines placed the largest order for airplanes in aviation history today. Is it that their fleet is aging, or is it a belief that its future looks bright? Either way, the ten-year span for the orders means at least a few people will be working for a while.
Existing home sales fell a day after housing starts rose. The bad news is the combination of existing home sales falling and housing starts rising means the inventory of houses on the market rises, which further exacerbates the trouble industry.
Applications for mortgages hit a four-month high, and this is both good and bad news. Regarding the beleaguered real estate market, the bad news is refinancing is the reason for the rise in mortgage applications. This is good news for the financial sector, though, as the refinancing run means more loans, which speaks to my ongoing suggestion that you investors keep your eye on the financial sector. Soon enough it will bottom and then turn upward.
U.S. Bancorp (USB) rose 3.7% in early trading after the bank beat earnings expectations and grew loans.
The above is a small sign of the turnaround, but it is the big banks that still have a ways to go before the sector as a whole starts moving in the opposite direction. Now, my thinking about this is not revolutionary, or prescient, or, for that matter, based on some ingenious analytical skills. It is my simple understanding that all things move in cycles, and a sector as important as the financials will not be denied its turn …
According to Bob Pavlik, Chief Market Strategist at Banyan Partners, the case for owning the big money banks follows the simple logic that it’s not a question of if, but when, they will recover. “I am not smart enough to say when the beginning of the end is going to start, but I know it’s going to come,” he says.
I like this guy’s thinking. It appears this investment wizard sees the turnaround in the same simplistic way I do, which tells me that simple logic can work in a world bent on illogical, emotional, and often irrational movement.
Trade in the day – Invest in your life …
