After a bullish performance last week, the market began the day a little off but managed to fight its way into increases across the major indices with the S&P 500 closing at 1556, just 9 points shy of its record closing high in 2007. The Nasdaq was also up, but still well off its 2000 high. Slight concerns over the possibility of rising interest rates drove more money from bond funds to the equity markets. That trend is likely to continue for some time as interest rates are likely to continue to inch higher fueled by steadily better economic releases, albeit slower than the administration might wish.
Financials, Healthcare, Technology and Basic Materials continued as the leading sectors. This week's economic releases are sparse with the Treasury budget due tomorrow, Retail Sales on Wednesday along with Pricing Data and Business Inventories. No real concerns there. Initial Jobless Claims are expected to continue at current levels on Thursday, and the week ends with Industrial Production and the first glance at this month's Michigan Sentiment on Friday. The latter two are each expected to be better than last month.
Rumors continue that Congress and the Administration are slowly getting closer to agreements on key sequestration issues. If so, it is likely that the flow of funds from bonds to equities will fuel higher equity markets especially with valuations at moderate levels and corporate cash at all-time highs.
4 Stock Ideas for this Market
This week I selected four highly-ranked stocks from our universe.
MPC (Marathon Petroleum Corp)
- Trading at 8x current and forward earnings
- Over half of analysts covering have revised estimates upward
- 3% projected EPS growth in 2013, and 9% over the next five years
CTB (Cooper Tire & Rubber Co.)
- Trading at 7.5x current earnings and 7x forward earnings
- Analysts covering the stock are undecided on the current quarter, but overwhelming bullish on the following quarters and year, as they have revised EPS estimates upward in last 30 days
- 105% projected EPS for current quarter and 30.7% next quarter
GNW (Genworth Financial Inc.)
- Trading for 16x current earnings, and 7x forward earnings
- Our top stock for the 2013 calendar year
- Up over 6% today on a credit rating upgrade
- 40% projected EPS growth rate for 2013
STX (Seagate Technology)
- 4.7% Dividend yield
- Trading for 4x current earnings, and 6x forward earnings
- Not expected to deliver spectacular earnings growth, but it is a solid, financially sound, well-run company with excellent free cash flow
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.