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Monday May 5, 2008
Last Week
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Closing prices week ending (5/2/08) vs
week ending (4/25/08)
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The SPREAD failed to set another new all-time high for week 41
The markets closed mostly higher because of another rate cut !!!
The markets
closed higher because the Feds decided to knock the dollar lower and help the banks and lenders more, by cutting
the Fed funds rate another 1/4 point. Showing little concern for growing inflation, Ben and his buddies felt digging
us deeper would help more. Maybe they think finding the bottom of the economy, as fast as possible, is the best
road to travel, no matter the cost. Anything for Wall street!
LAST WEEK
Last week
we heard that the cost of fueling up ole Jenny owned the top of the list of economic woes facing U.S. families,
and we also heard that ExxonMobil profits climbed 17 percent in the first quarter and the 2nd biggest quarterly
profit for a U.S. Corporation ever. Something seems to be wrong with this picture.
With
a little help from a few companies announcing decent earnings for the first quarter, the DOW 30 shot over the 13,000
level for the first time since January 3, 2008, 80 trading days ago. It mattered little that the gross domestic
product (GDP) in the 1st Q is growing at just a 0.6 percent pace, equal to the 4th Q, as housing and credit problems
forced people and businesses alike to close their wallets and tighten the purse strings.
Builders
slashed spending on housing projects by a whopping 26.7 percent, on an annualized basis, the most in 27 years.
That was one of the biggest drags on the economy, while consumer spending rose at just a 1 percent pace. That was
down from a 2.3 percent growth rate and the slowest since the second quarter of 2001, when the United States was
suffering through its last recession.
We
heard that workers' compensation -- including wages and benefits -- grew 0.7 percent in the first quarter, the
slowest pace in two years, while businesses cut back spending on equipment and software at a 0.7 percent pace,
the most since the final quarter of 2006. And, they trimmed spending on commercial construction at a 6.2 percent
pace, the most since the third quarter of 2005.
We
heard initial claims for unemployment benefits rose by 35,000 and the number of workers remaining on jobless benefits
climbed to a four-year high. Initial claims for jobless benefits increased to a seasonally adjusted 380,000 in
the week ended April 26, from a revised 345,000 the previous week. Analysts polled by Reuters had expected claims
to rise to 360,000 from an initially reported 342,000.
The
overall personal consumption expenditures price index, which measures the price pressures faced by consumers, rose
0.3 percent in March from a 0.1 percent increase the month before.
Removing
volatile food and energy prices, the core PCE price index, which is the Federal Reserve's preferred measure of
inflation, was up 0.2 percent versus forecast for a 0.1 percent rise. That followed a 0.1 percent gain in February.
We
sure are seeing mixed signals from Wall Street. There is hope that the Feds will be able to ward off a recession
by continuing to make money less expensive to borrow, but on the other hand, it is exactly this reason the dollar
is falling a value.
As
far as avoiding a recession. no way! I believe the USA is in a recession and getting deeper. Wall Street looks
at the line at the bank, not the one at the out-of-work store. As the housing crisis continues to worsen more Americans
are losing their jobs, health care and homes, but our fearless leaders want us to believe everything is peaches
and cream.
Oil
will continue to climb as long as GW sets in the Oval Office, even if he wasn't meant to be there. He is an oil
man, his moves have been totally for oil; since the first day and will remain so until his last. The Bush family
trust is raking billions off of this occupation of Iraq, but no one seems to care.
Oil
prices closed out the week at $116.32 a barrel (May's futures on Friday's close), off - 2.20 on the
week and off
- 2.20 on
the month. The price of a barrel of oil has remained over the $60 mark for the last 52 weeks, over the $70 level
for week 40, over the $80 mark for week 29, over the $90 level for 13 weeks, over the $100 mark for week 10 and
back over the 110 mark for week 4.
The
record "weekly" closing high is $118.52
a barrel, set Friday, 4/25/08.
The below table shows how far each index
is up
or off from the 52 week high vs the week before
As
far as the indices this past week: There were no new 52 week highs. Thirty weeks ago there were new highs on the
DJI, XMI, OEX, SPX, NY & Nasdaq. All 11 indices closed at a new 52 week high, on the same day, 4/25/07.
First time in many years, but not again since.
One
index, the SPREAD closed the 24th straight week in correction
territory ( a 10 percent discount to the 52 week
high). Five of the major indices are currently in correction territory, with no indices in bear market territory
( a discount to the 52 week high of more than 20%.)
The Week Ahead
The
latest 1/4 point cut in interest rates the Feds charge banks will do nothing to help the struggling consumer. This
latest rally has no teeth and, since it climbed in spite of much negative economic news, it will not hold. I find
it amazing that the DOW 30 was somehow able to muster the strength to move back over the 13,000 mark. It should
be closer to the 12,000 mark, therefore, look for the markets to start the road back down to where it should be.
This coming week will offer less corporate earnings
reports to gauge how while corporate America is doing, but continued negative news on the real economy, the one
with a different address than Wall Street. Look
for a decent fall back over this week and continue to avoid the big stocks. Stick with bargains in the lower priced
stocks for the better return! Use much caution!
- Remember-
It is not what is "going" to happen that moves the markets,
but what investors "believe" is going to happen!
This
is the kind of market where the smaller companies and the newer companies may be the better place to be. Small
stocks tend to move on their own and not so much with current events. A choice small stock is a great place to
be in such confusing markets. If the move is a good one, the smaller stock will climb at a greater percentage,
allowing a stronger return on fewer dollars.
The
concept does work, but the problem is finding the best and the correct stock to move into. Look for a stock with
a great story, because with small stocks the story is what makes the difference.
Continue
to look for stocks near the lower end of the trading range with strong daily volume, and growing revenue, for the
best bargains. Avoid stocks that seldom have news.
Two Very Important Rules To Follow
"BUY LOW"
"HAVE PATIENCE"
Be sure to visit "The Past Week" for
a look at additional
information, stats and tables covering last week's markets.
Clicking on "Market Comment" will take you there!
Be sure to visit "Monthly Gains & Losses" for a look at the
past "monthly" performance on the indices going back to 1994.
Clicking on the "Index Gains & Losses" will take you there!
Be sure to visit our "Spotlight Futures" for a look at
metals, oil and currency futures updated weekly.
Clicking on the "Spotlight
Futures" will take you there!
Be sure to visit our weekly "Stocks to Watch" section
for brief of updated opinions opinions on several
Spotlight favorites from the past.
Clicking on the "Stocks To Watch"
will take you there!
"If in the right stock, at the right price,
the market direction will mean little!"
There
are many negatives with the economy, and the markets, so continue to use caution and stick with value stocks for
safety. Stay with PUTS to protect profits. Choose
wisely!
I am J.R. Budke and this is my opinion!
| The recommendations and updates in this week ahead may include "forward-
looking" statements as that term is defined in the Private Security Reform Act of 1995, & therefore are
subject to various risks & uncertainties. There can be no assurance that actual results, business conditions,
business developments, losses & contingencies, and local & foreign factors will not differ materially from
those suggested in the "forward-looking" statements as a result of various factors, including market
conditions, competition, advances in technology, acquisitions, potential litigation, personnel changes, capital
availability, and all sorts of other factors. Do not make investments based on the material provided in this article.
Investors should not make decisions based on any of the material featured here without first consulting with their
brokers and/or financial advisors. |
J.R. Budke was a stock broker from 1981 to 2000, an options principle
since 1982 and a branch office manager since 1987. JR became inactive as a stockbroker on 12/31/99. J.R. writes
most of the articles and opinions for the Stocks in the Spotlight. The
stories and stocks found on this site, or any "Stocks in the Spotlight" written material, are the opinions
of J.R. Budke, unless other wise stated, and should not be considered as advice.
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