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Daily State of the Markets Publishing Note: I am traveling early Friday and Monday and will not publish a morning report. Daily State of the Markets reports will return on Tuesday. Good Morning. Up until just recently, the bulls’ battle cry had been three simple words: “Better than expected!” In short, for the better part of the last month, the economic data for the good ol’ USofA had been coming in above consensus expectations. To anyone paying attention to such things, this steady stream of strong reports suggested that the country’s economy might actually be better than the bears had led everyone to believe. And as a result, stock prices have been adjusted to higher levels. However, the string of better than expected data came to an end over the past week as the reports from the Chicago PMI, Case-Shiller, Personal Spending, and Consumer Confidence all came in on the punk side. And as one might expect, the discounting of stock prices to the upside also ground to a halt. Although the market did not head lower in earnest, our furry friends assured us that it was only a matter of time before the dance to the downside, which had been put on hold since December 20th, would resume. But a funny thing has happened on the way to bear party – a new bull thesis appears to have developed. Instead of focusing on the idea that the economy is going to continue to beat every economic report by a country mile ad infinitum, stock market investors appear to have figured out that growth is a good thing. Thus, it appears that the new mantra amongst the glass-is-at-least-half-full gang is “slow and steady wins the race.” It is important to recognize that the recent economic reports dubbed as “disappointing” weren’t really bad reports. This data did not suggest a slowdown in economic activity or even a potential slowdown. No, the numbers were simply below analyst expectations. And while I will agree that this game is all about reality vs. expectations, at this stage of the game, growth is really the key. My thinking here is pretty straightforward. Economic expectations for calendar year 2012 are not exactly robust as just about everybody who is anybody in the economic forecasting business has knocked down their projections over the past four months. So, as long as the recent string of “better than expected” data doesn’t turn into a pumpkin at midnight, those same analysts might just have to start adjusting their expectations higher. Not by much, mind you, but higher all the same. This, of course, leads to the issue of corporate earnings. As I’ve written recently, earnings have increased a fair amount over the past year and are expected to grow at a decent pace this year. So, given that stocks are only modestly higher than where they were at the beginning of last year, there is clearly room for stock prices to rise. And then if we also see some incremental improvement in the economy, well, stocks might be able to tack on few more points along the way. However, we also have to keep in mind that stock prices don’t usually move in a straight line and that any economic hiccups or surprises from across the pond will likely lead to corrective action. But, if the U.S. economy can continue to grow – even at a slow and steady pace – the bulls may ultimately wind up winning the race. Turning to this morning… Despite falling yields at French and Spanish bonds auctions and a 2% surge in Chinese stocks, European markets have turned sluggish as concerns relating to the Greek debt swap deal continue to plague the markets. U.S. futures have followed suit and are pointing to a flat to slightly higher open. On the Economic front… Initial Claims for Unemployment Insurance for the week ending 1/28 fell by 12,000 to 367K, which was below the consensus estimate for 373K and also last week’s revised total of 379k. Continuing Claims for the week ending 1/21 came in at 3.437M vs. consensus of 3.53M and last week’s 3.567M. Next up,the government reported U.S. Nonfarm Productivity in the fourth quarter of 2011 rose by +0.7%, which was in line with the estimates for reading of +0.7% but below Q3’s +2.3%. On the wage inflation front, Unit Labor Costs rose by +1.2% versus the expectations for +0.7% and Q3’s +2.2%. Thought for the day… “Surround yourself with the best people you can find, delegate authority, and dont interfere.” – Ronald Reagan Pre-Game Indicators Here are the Pre-Market indicators we review each morning before the opening bell… !========>
Positions in stocks mentioned: None For more of Mr. Moenning’s thoughts and research, visit StateoftheMarkets.com !========> The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of StateoftheMarkets.com and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. One should always consult an investment professional before making any investment. Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided. The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed. The information contained in this report is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer. Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice. Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results. !========> |
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