David Fry's Daily Market Outlook

Includes: EWA, EWW, SPY, TOL, USO
by: David Fry

"We may be seeing a floor," Toll CEO says. So shouts the headline from MarketWatch.

Naturally you must comb through the article to find the good news. Let's see:

"Toll's outlook below expectations". No, not there. "Fourth quarter earnings down 50%... new orders down 57%... renegotiating land contracts... cancellations up 37%." Nothing too encouraging there is there? So, continue, "These cancellations creating unintended specs, [read, speculative new homes without contracts] we could face increasing margin pressure as we try to sell these homes." said CEO Robert Toll. "We believe many buyers are waiting on the sidelines with concerns about the direction of home prices as builders compete to move their specs", he continued. [Yawn.] And, borrowing more copy from MarketWatch, "He said, the Washington D.C suburbs of Northern Virginia, seem to have stabilized [oh oh], although at levels much lower than it enjoyed a few years back." Then [big finish] he added, "We may be seeing a floor in some markets where deposits and traffic, although erratic from week to week, seem to be dancing on the bottom, or slightly above." [Bing! And we're not talkin' Crosby!]

Rick Murray at Raymond James & Associates also noted... "We would suggest that given the recent turnover in government as a result of mid-term elections, some near-term stabilization [oh oh] would not be totally unexpected..." Huh? Well, the democrats are known as big spenders, so...

So with the markets "awash with cash" which we featured yesterday, this "floor" comment is the nugget of good news buried in negative facts that brings out buyers.

D Fry Market Outlook 06 12 2006_001

Don't get me wrong, we're happy with most conditions now, but much of the rhetoric bouncing about seems silly. Homebuilder's aren't growth stocks, they're cyclical companies. They carry tremendous debt loads and yield little in dividends. But with so much cash floating around fighting the tape is a loser's game.

What else is going on? Same-ol'-same-ol' as far as I can tell. Unit labor costs within today's economic releases came in below expectations while ISM services data were higher than forecast. This put "some" pressure on bonds, held the dollar steady and pushed precious metals lower.

D Fry Market Outlook 06 12 2006_002

D Fry Market Outlook 06 12 2006_003

D Fry Market Outlook 06 12 2006_004

D Fry Market Outlook 06 12 2006_005

D Fry Market Outlook 06 12 2006_006

D Fry Market Outlook 06 12 2006_007

Not too much has changed in major U.S. markets today as the trend in stocks remains firmly higher. MarketWatch's headline titled today's advance as "rational." I've never heard/seen that term applied to financial markets. The big news, notwithstanding some intervening events, is the employment report Friday and another Fed meeting next week.

Let's keep this brief today and just look at a few markets we didn't feature yesterday.

D Fry Market Outlook 06 12 2006_008

D Fry Market Outlook 06 12 2006_009

D Fry Market Outlook 06 12 2006_010

D Fry Market Outlook 06 12 2006_011

D Fry Market Outlook 06 12 2006_012

That's enough for today. While S&P 500 Index (NYSEARCA:SPY) and just about every other equity sector are making fresh highs there's really not much point to posting repetitive charts.

Have a pleasant evening.

Disclaimer: Among other securities, ETF Digest maintains positions in: iShares Lehman 7-10 Yr Treasury Bond ETF (NYSEARCA:IEF), streetTRACKS Gold Trust ETF (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), Central Fund of Canada (NYSEMKT:CEF), United States Oil Fund ETF (NYSEARCA:USO), iShares MSCI Canada Index ETF (NYSEARCA:EWC), iShares MSCI Australia Index (NYSEARCA:EWA), iShares MSCI Brazil Index ETF (NYSEARCA:EWZ), iShares MSCI Mexico Index ETF (NYSEARCA:EWW) and iShares MSCI Malaysia Index (NYSEARCA:EWM).