What the Market Wants: Concerned Outlook

Last Monday was a banner day for most indices with S&P 500 hitting at new 46-month high of 1422.  Alas, a week later, today, it closed at 1382, down nearly -3%.  The NASDAQ and DJIA exhibited similar behavior.

Frankly, it wasn’t a great week for economic data.  So, should we worry?  Worry, yes.  Panic no. After last Monday’s strong ISM manufacturing report, we got tepid reports from the FOMC minutes, factory orders, ISM services, ADP private payrolls and initial jobless claims. None were terrible, but most were a tad below expectations.

On Friday, the Unemployment Report was a bit worse than the earlier reports with only half as many new jobs as expected (but still new jobs).  To be more precise, new jobs were down about 120K from last month’s 233K new jobs and well below the expected 215K jobs.  Last month’s new jobs were, however, revised upward, and unemployment rate ticked down to 8.2%.

Doesn’t sound that bad you say?  True, but then a look around the globe put things in perspective.  Spain’s sovereign debt rose more than expected along with other European sovereign debt that ticked up in general; geopolitical concerns rose with a lack of progress in Syria; more sabre rattling in Iran; unrest in Afghanistan and Pakistan; missile launch preparations in North Korea.

So, we head into the beginnings of earnings season tomorrow with the traditional AA report tomorrow evening.  Google, JPM, WFC, and others will announce later in the week.

Until we breakdown more than 5%, or even 10%, from the recent high, which has happened several times since the market rally that began on October, I would rather stay the course of buying undervalued equities along with hedging the European ETFs, VGK, IEV or EWP, as recommended by our European analyst, Daniel Sckolnik, in last week and this week’s edition of ETF Periscope.  Of course, I would suggest shorting any of those ETFs; however, choose the latter if you feel Spain is the chief risk.

Here are the market stats.

4 Stock Ideas for this Market

This week, I used the GARP preset search in MyStockFinder and threw in a couple more I thought looked intriguing:

Bofl Holding, Inc. (BOFI)–Financials
Ford Motor Co.  (F)—Cyclical Consumer
Western Refining, Inc.  (WNR)—Energy
Freeport-McMoRan Copper and Gold, Inc. (FCX)–Basic Materials

Until next week,

David Brown
Chief Market Strategist
Sabrient Systems, LLC.
Leaders in Investment Research
Follow us on Twitter: http://Twitter.com/ScottMartindale

Full disclosure:  The author does not hold positions in any of the stocks mentioned in this article.

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.

david / Tag: BOFI, EWP, F, FCX, IEV, VGK, WNR /