CommStock Israel Investor
Insights Newsletter
Monday, June 29th, 2009
The following report has been prepared as a courtesy
to clients of CommStock Trading Ltd. for general informational
purposes only and is not intended to, and should not, be construed
as any recommendation or advice for any specific investment decisions.
1) Here comes the second half
The second quarter and first half of the
year are set to end with a bang as investors brace for the
latest on housing, manufacturing and the labor market.
Investors barrel into the second half of the year in
a holiday-shortened trading week that's loaded with key economic
news.
Reports on housing, manufacturing and the labor market
dominate in a week that will also feel the influence of quarter-end
portfolio rejiggering.
Typically, the quarter's end can push stocks higher
as market pros look to "window dress," and spruce up their portfolios.
But stocks have been flat to lower for the last two
weeks as investors step back after a big spring rally. That hesitation
is likely to continue into next week.
Between the trading lows on March 9 and the trading
highs of June 11, the S&P 500 (SPX)
gained 43%. And that's probably it for the bulls until later in
the fall, said Donald Selkin, chief market strategist at National
Securities.
"Since the end of World War 2, the average short term
bull market within a longer term bear market has been 42%," Selkin
said. "We've done that already so a rest was inevitable."
That rest has amounted to a decline of about 4% on the
S&P 500 over the last two weeks and that could stretch on a
bit more. Selkin said stocks will likely chop around in a range
through the summer, sell off more in the fall and then stage another
big rally toward the end of the year when some of the economic
and corporate news starts to improve.
A full week's worth of economic news will be stuffed
into four sessions, as Wall Street takes a three-day weekend that
includes the 4th of July holiday.
The June pending home sales index Wednesday and the
June employment reports Wednesday and Thursday will likely draw
the most attention. In May, employers cut far fewer jobs from their
payrolls than economists had forecast and investors will be looking
to see if that trend continues.
On the docket
Monday: Bernard Madoff faces sentencing in
the morning. The Ponzi schemer has already pled guilty to 11 counts
of fraud, money laundering, theft and perjury. He is expected to
be sentenced to life in prison, with a statutory maximum of 150
years on the table.
Tuesday: The June Consumer Confidence index from the
Conference Board is expected to have risen to 55.1 from 54.9, according
to a consensus of economists surveyed by Briefing.com.
The S&P/Case Shiller 20-city home price index is
expected to have fallen 18.75% in April from a year ago, after
posting a year-over-year decline of 18.7% in March.
The Chicago PMI, a regional read on manufacturing, is
expected to have risen to 38.5 in June from 34.9 in May.
Wednesday: The June reading on private-sector employment
from payroll services firm ADP is due before the start of trading.
Employers are expected to have cut 363,000 jobs from their payrolls
in June after cutting 532,000 in May.
The Pending Home Sales index from the National Association
of Realtors is expected to have risen 1.1% in May after rising
6.7% in April.
The Institute for Supply Management's June manufacturing
index is expected to have risen to 44 from 42.8 in May, according
to forecasts.
May construction spending is expected to have fallen
0.5% after posting a surprise rise of 0.8% in April. The Commerce
Department report is due out after the start of trading.
The weekly crude oil inventories report from the Energy
Information Administration is due shortly after the start of trading.
June auto and truck sales are due throughout the day.
Thursday: The week's biggest economic news is the June
employment report from the Labor Department, due before the start
of trading. Employers are expected to have cut 370,000 jobs from
their payrolls after cutting a much smaller-than-expected 345,000
in the previous month.
The unemployment rate, generated by a separate survey,
is expected to have risen to 9.6% from a 26-year high of 9.4% in
May.
In light of the monthly payrolls report release, the
weekly release from the Labor Department, also due, will have little
impact.
After the start of trading, the Commerce Department
will release the May factory orders report. Orders are expected
to have risen 0.2% after rising 0.7% in April.
Friday: All financial markets are closed for the 4th
of July holiday weekend.
2) Commentary by David Zwebner,
CEO of CommStock Trading
U.S. Economy
The U.S. Commerce Department said that personal incomes were up
1.4% in May, more than expected, while spending was up .3%. The
December 2010 eurodollars closed up .085 at 97.805.
The University of Michigan said that its consumer sentiment
index increased from 68.7 to 70.8 in June, better than expected.
The People's Bank of China said again today that it
would like to see a new international currency and more involvement
from the International Monetary Fund. The September U.S. dollar
index closed down .585 at 80.105.
KB Home said that its orders for new homes increased
59% in the second quarter of this year, but they were still down
31% from a year ago. September lumber closed up $6.40 at $227.70.
Grains and Cotton
Dow Jones Newswires reported that Russia's winter wheat crop may
total roughly 38.5 million tons this year, down from 42.7 million
tons a year ago due to frost earlier this year. December wheat
was up a penny at $5.872.
December corn ended up 2.75 cents at $4.042 with the
USDA's acreage report due out on Tuesday morning.
Coffee
Brazil's coffee harvest continues and so far, the weather is said
to be favorable. September coffee finished down 1.05 cents at
$1.1920 in spite of today's weaker U.S. dollar.
Energies
Militants in Nigeria said that they blew up an oil wellhead in
southern Nigeria that belonged to Royal Dutch Shell. The violence
in Nigeria has increased the past week and shows no sign of letting
up. September crude oil closed down $1.06 at $70.02 in spite
of today's news from Nigeria.
Currencies
It looks like deflation is still a problem in Japan. The Statistics
Bureau said that consumer prices were down 1.1% in May from a
year ago, the biggest annual decline since records began in 1971.
The September yen finished up .0077 at 1.0515.
Real GDP in New Zealand was down 1% in the first quarter
of 2009 and down 2.7% from a year ago. It was the fifth consecutive
quarter of decline.
David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
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