CommStock Israel Investor
Insights Newsletter
Monday, March 9, 2009
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1) Wall Street: Ripe for a rally?
With little on the economic docket and
the Dow and S&P 500 at 12-year lows, stocks may be gearing
up to surge but it may not last.
By Alexandra Twin, CNNMoney.com senior writer
Last Updated: March 8, 2009: 12:15 AM ET
NEW YORK (CNNMoney.com) -- With little in the way of
earnings or market-moving economic news on tap this week, stocks
will continue to take a cue from the financial sector as investors
try to see if the latest levels can hold.
There's been such a tremendous sell-off in the financial
sector and in some of the retailers, that at some point even traders
who are betting on a weak market are going to want to get in, said
Fred Dickson, chief market strategist at D.A. Davidson & Co.
And the mild reaction to a dismal jobs report last Friday
could suggest that the time is nearing.
"How much lower can Citigroup go when it's down around
a buck?," asked Dickson, adding, "We're starting to get to the
point where the risk of a big upside in the market is greater than
the risk of a bigger downside."
With the Dow and S&P 500 both down more than 50%
off their October 2007 highs, a decent bounce is not hard to imagine,
said Gary Hager, president of Integrated Wealth Management.
He said that the pent-up demand is equivalent to shoppers
pressing against the door of a store that is about to open for
a sale, but the shoppers wont' budge until the first few jump in.
Once they start moving, the rest will follow.
Ripe for a bear market rally. In both
October and November of 2008, the stock market stabilized at levels
that many market pros were betting could be the bottom, before
ultimately declining further. That could be the case now as well,
Dickson said. But he also said that some of what he has been seeing
lately is reminiscent of the way Wall Street ultimately stabilized
during the last bear market, bottoming between October 2002 and
March 2003.
Dickson noted that the number of New York Stock Exchange
stocks making new lows has dropped dramatically with each so-called "bottom," in
October, November and now. As such, that could indicate stabilization.
Also, from a contrarian perspective, stocks are ripe
for a bounce. The American Association of Individual Investors
(AAII) said 70.3% of investors surveyed were bearish, as of Wednesday.
That's the highest level since the index was created in 1987.
The bearish sentiment index has been hovering between
39 and 55 over the past two months, but then last week suddenly
jumped to 70.3, said Cara Scatizzi, associate financial analyst
at AAII.
In tune with the bearish tone, investors pulled billions
out of equity mutual funds last week. According to the latest report
from Trim Tabs, investors pulled $29.9 billion out of stocks in
the week ended March 4, versus an outflow of $18 billion in the
previous week.
The question is what might help soothe the market and
even trigger a bear-market rally. So far, most of the government
initiatives announced have failed to provide the spark, including
the $787 billion stimulus plan, Treasury's "stress tests" for banks
and President Obama's $3.6 trillion 2010 budget.
Dickson said that indications over the next month that
Congress is going to chip away at some of the spending in the budget
could help, while Hager said the suspension of the mark-to-market
accounting rule would help.
On the docket
Tuesday: The January wholesale inventories
report is due shortly after the market opens. Inventories are expected
to have fallen 1% after dropping 1.4% in December.
In Washington, the Senate Energy Committee holds a hearing
on offshore drilling. On Thursday, the same committee discusses
transmission lines.
Wednesday: The government's weekly
crude inventories report is due out at 10:30 a.m. ET, as well as
the February Treasury budget at 2 p.m. ET.
In Washington, the congressional oversight panel is
due to release a report on the oversight of the Troubled Asset
Relief Program (TARP), a.k.a. the bank bailout plan.
Thursday: February retail sales are
due before the start of trade from the Commerce Dept. Sales are
expected to have fallen 0.4% after rising 1% in the previous month.
Sales excluding volatile autos are expected to have fallen 0.2%
after rising 0.9% in January.
The government's weekly jobless claims report is also
due in the morning. 640,000 Americans are expected to have filed
new claims for unemployment versus 639,000 in the previous week.
Weekly claims hit a 26-year high of 667,000 in February. The number
of Americans continuing to stay on unemployment is expected to
remain near record levels of 5,112,000.
The January business inventories report is due for release
after the start of trading. Inventories are expected to have fallen
1.1% after dropping 1.3% in the previous month.
In Washington, a House Financial Services sub-committee
debates mark-to-market (MTM) accounting, a rule that critics say
has exacerbated the credit crisis. MTM requires banks to report
the value of their investments if they sold them now, even though
some of those assets - like mortgage-backed securities - have tumbled
dramatically.
Friday: The January trade balance,
due before the start of trading, is expected to have widened to
$38.2 billion from $39.9 billion in December.
Also due are reports on February import and export prices
and the initial March consumer sentiment index from the University
of Michigan.
2) Commentary by David Zwebner, CEO of CommStock
Trading The Economy
Due to recent budget cuts, as well as
current market conditions and the continued decline of the economy, "The
Light at the End of the Tunnel" has been switched off.
We apologize for any inconvenience caused.
U.S. Economy
The U.S. Labor Department said that the unemployment rate increased
from 7.6% to 8.1% in February with a net loss of 651,000 jobs.
It was the highest unemployment rate in 25 years. The March 2010
Eurodollar ended down .055 at 98.355.
The past two months of revisions were worse than expected.
Non-farm payrolls were revised from -598,000 to -655,000 in January
and from -577,000 to -681,000 in December. The June U.S. dollar
index closed down .69 at 89.09.
The Federal Reserve said this afternoon that consumer
credit increased $1.8 billion in January to $2.5644 trillion.
Grains and Cotton
Grains were steady to higher, helped by today's weaker dollar.
May wheat closed up 12 cents at $5.27 with ongoing concerns about
the dry U.S. winter wheat crop.
Lumber
May lumber tried to trade higher early, but ended up just $1.70
at $161.70 with no enthusiasm for future housing demand.
After the close, the USDA estimated this week's beef
production at 475 million pounds, down 5% from a year ago. Pork
production was estimated at 454.5 million pounds, up .2% from a
year ago. June hogs were up .55 at 73.72.
Coffee
According to Dow Jones Newswires, the weather conditions have remained "generally
favorable" for Brazil's upcoming coffee crop. May coffee fell 1.50
cents to $1.0720.
Metals
April gold finished up $14.90 at $942.70 with support from today's
weak jobs numbers.
London inventories of copper were down 3,175 tons to
522,025 tons today, the seventh consecutive day lower. May copper
closed up 3.55 cents at $1.6890.
Currencies
The U.K.'s Office for National Statistics said that producer prices
were up 3.1% in February from a year ago, down from a 3.5% annual
gain in January.
David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
www.ecommstock.com
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