It has been a week of sparse market-moving news, but what news there was continued to be generally supportive of the market’s slow growth recovery. Remarkably, volatility continues to be very low. Unlike the 6 to 10% gyrations (in both directions) of late 2008 and early 2009, we’ve seen very few days this year when the market has moved more than 1% in either direction.
That could change — maybe soon, as this week is packed full of potentially market moving reports.
On the government side, we have trade balance data Tuesday, along with export and import price data. Wednesday brings the Consumer Price Index (CPI), retail sales, and business inventories. Thursday we have the weekly initial jobless claims, along with the fairly important industrial production report and capacity utilization. On Friday, building permits and housing starts top off the week.
On the corporate front, Alcoa (NYSE:AA) initiated the quarterly earnings season after hours Monday with a mixed report that was received with little price impact. Later in the week we have Google (NASDAQ:GOOG), JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), General Electric (NYSE:GE), Intel (NASDAQ:INTC), and others. These reports, along with their guidance, could dictate where the market goes from here.
Keep in mind that we have been on a bullish trend for over a full year now, with the S&P 500 reaching new 18 month highs almost every day, including today, and closing in on doubling the price it reached on March 6, 2009.
Market Stats. Small-cap Value led the way last week (+3.45%), with Large-cap Growth up the least (+1.1%). Basically, the smaller you were and the better your valuation, the better your performance.
The sectors came in pretty much as we expected, led by Financials, Energy and Information Technology, but Consumer Discretionary surprisingly caught the #2 slot when we expected it to be near the bottom. It is surprising to us because some of the valuations in that sector are running on the high side.
Consumer Staples finished near the bottom, much as it has for several weeks, and Healthcare was dead last, although it showed somewhat of a split personality. In the industry performance stats, Healthcare Technology gained +4.5% for the week, landing it in the top 5 industries, while Healthcare Providers & Services was the absolute worst performer with a -0.85% return. It would appear that the market approves of the technology trends for healthcare applications but isn’t particularly optimistic that caring for patients will make any money. Probably, the latter is related to the passage of the healthcare bill.
Looking Ahead. Sabrient’s forward-looking SectorCast model continues to favor Energy, Financials and Technology and is fairly gloomy about Consumer Staples, Utilities and Industrials. Materials, Consumer Discretionary and Healthcare continue to confound us.
As the market marches forward on its methodical and relentless upward path, we still recommend caution, the diligent search for bargains and the ongoing culling of overvalued positions.
4 Stock Ideas for This Market
This week, I started with the Insider Buying preset search on MyStockFinder (http://MyStockFinder.com), but I also up-weighted Technicals, Value, and Growth slightly. I also focused the search on Financials, Energy, Telecom, and InfoTech to identify four new stock ideas in these favored sectors that display strong insider buying and good Sabrient scores.