Marching Toward 2011 (With 4 Stock Ideas)

 |  Includes: DIA, EV, IEC, MIND, QQQ, SPY, VAL
by: David Brown

So, was Santa’s bag half full or half empty? And was it candy or coal?

That’s hard to say. The market continued to reach more two-year highs last week as it marched toward the New Year, and yesterday the S&P 500 closed at 1257, just a hair below the latest two-year high that it reached last Wednesday, so I’d say that was a nice bit of candy Santa left us.

As to the half-full, half-empty question, it’s a tossup if we’re talking economic reports. GDP was up 2.6%, a slight disappointment from the expected 2.7%. Existing home sales were 4.68 million, which was slightly better than the expected 4.65 million. Personal income growth was 0.3% for November, which was better than the expected 0.2%. Initial jobless claims held steady, but continuing claims fell considerably, down 103,000. Durable goods orders were a big disappointment, down -1.3% vs. an expected -1.0%, but the biggest disappointment of the week was new home sales, which failed to follow the lead of the improved permits and starts of the previous week. Sales of new homes were 290,000 versus the expected 300,000, and the numbers took the steam out of the building-related stocks for the week.

Market Stats. The leading cap/style last week was Mid-Cap Value, up +2.05%, while Large-Cap Growth was the worst but still positive, up +0.8%. FYI, except for last week, Small-Cap Growth continues to lead for the 12 months, while Large-Cap Growth was the worst performer for the past month and Large-Cap Value, the worst performer for most of the past 12 months.

Our forward looking SectorCast had its best predictions of the year last week, with four of its top five forward-looking sectors — Basic Industries, Finance, Technology and Public Utilities — turning in the best or near-best actual performance, and five of its six lagging sectors — Transportation, Consumer Durables, Consumer Non-Durables, Consumer Services, and Capital Goods — turning in the worst or near-worst actual performance. The only surprises were Energy, predicted to be #7 but coming in as the #1 performer last week, and Health Care, predicted to be #4, sinking all the way to #10 in actual performance.

This week, SectorCast is forecasting Finance, Technology, Public Utilities and Energy as the top four, with Transportation, Consumer Services, Consumer Durables, and Capital Goods as the bottom four.

The Week Ahead. We expect the volume to be light this week, due to the holidays and that wicked snow storm which has slowed the East Coast to an icy crawl. Aiding the expected light volume is a dearth of economic news. The only noteworthy reports this week are consumer confidence on Tuesday and the Chicago PMI on Thursday, along with initial jobless claims.

So, Happy New Year! May 2011 bring a full economic recovery and a healthy, happy market!

Below are four stocks ideas for this market, and here is a lagniappe for the New Year:

4 Stock Ideas for This Market

This week, I started with the Small Wonders preset search in MyStockFinder, but added Mid and Small Caps along with Micro Caps. Here are four stock ideas worth investigating in some of our top-ranked sectors:

  1. Eaton Vance (NYSE:EV) – Finance
  2. IEC Electronics (NYSEMKT:IEC) – Technology
  3. Mitcham Industries (NASDAQ:MIND) – Energy
  4. Valspar (NYSE:VAL) – Basic Industries