Key Market Factors Plus Hot Stocks

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Stocks are lacking confirmed direction at the start of trading, with the SPDR S&P 500 (NYSE: SPY), the SPDR Dow Jones Industrials (NYSE: DIA) and the PowerShares QQQ (NASDAQ: QQQ) trading about unchanged. Overseas, Asian shares seemed confused as well, with the Hang Seng rising fractionally and the Nikkei 225 slipping fractionally. In Europe, the Euro STOXX 50 was unchanged, though the CAC 40 was down 0.6% as the IBEX 35 gained 0.78%. Spain unveiled new austerity under European pressure; the plan aims at cutting 65 billion euros from the deficit by 2014. In the States, all eyes are on the Fed.

The Fed's FOMC meeting minutes will dominate the media Wednesday from start to finish. The 2:00 PM release of the Federal Open Market Committee (FOMC) meeting minutes from its June assembly will have all the attention of market mavens and press alike today. They'll be looking for insight into the next Fed move, and the information does carry significant weight. However, considering the dynamic nature of today's news flow, the "minutes" are a bit aged already and some opinions may have changed. Data gets old that fast today.

New International Trade data was reported today for the month of May. The trade deficit narrowed to $48.7 billion in May, meeting the consensus of analysts' views. It marked a narrowing from $50.6 billion in April, revised from $50.1 billion reported initially. As exports rose by just $0.4 billion, imports decreased by $1.6 billion, driving the deficit expansion. This is not representative of a healthy American consumption economy, nor does it reflect good news about Europe. In a healthy American state, our imports tend to exceed exports in growth, driving widening deficits. The long-term hope, though, is that eventually our manufacturing sector might benefit from China's growth by serving its burgeoning middle class. We already benefit because of the low price of goods thanks to importing, though at the cost of American labor and in many cases quality of goods. In any event, today's report is a net negative for stocks in my view.

The Mortgage Bankers Association (MBA) said weekly mortgage applications fell in the week ending July 6 by 2.1%, with mortgage applications tied to the purchase of homes higher by 3.0%. The (NYSE: XHB) was down ever so slightly. Refinancing activity fell by 3.0%; the (NYSE: XLF) was only up fractionally. Generally speaking, rates at historical lows have had little effect on mortgage activity, but the Home Affordable Refinance Program and recent changes to FHA fees have spurred activity. This data is not likely to play a significant role for stocks today.

At 10:00 AM, the government will report on Wholesale Trade for the month of May. Economists see wholesale inventories rising 0.3%, against the 0.6% increase in April. More importantly, you'll want to see how inventory growth compared against sales. The inventory-to-sales ratio stayed at 1.17 in April, versus March, which was also very close to last year's 1.15 reading.

The Petroleum Status Report (pdf) reaches the wire at 10:30 AM. Last week's report covering the week ending June 29 showed crude oil inventory decreased by 4.3 million barrels, though stores stayed above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 0.2 million barrels, but they were below the lower limit of the average range for this time of year.

Just when you thought the fight was over, House Republicans will vote on whether to repeal the President's health care reform law. It's a terrible waste of the nation's resources given the definite failure of such legislation, given the president's veto, if it were to even get that far.


Corn prices are on the rise ahead of the government crops report that is expected to show a cut in the crop forecast due to drought across the Midwest. December delivery corn had gained 1.3% to reach $7.265 a bushel on the Chicago Board of Trade. Shares of Monsanto (NYSE: MON), Mosaic (NYSE: MOS) and Potash Corp. (NYSE: POT) are sharply higher on the news. Near contract WTI Crude is up $1.28 to above $85 a barrel, and gold is down half a point to $1571.70 in early morning trade.

Hot Stocks:

Semiconductor stocks are hot, after the last few days' warnings from Applied Materials (NASDAQ: AMAT) and Advanced Micro Devices (NYSE: AMD). Some are warning about semis selling into the PC space, like Micron (NYSE: MU) and Seagate (NYSE: STX). The same report suggests discretion between groups of semiconductor names, and favors those tied to Apple (NASDAQ: AAPL), like Cirrus Logic (NASDAQ: CRUS), TriQuint Semiconductor (NASDAQ: TQNT), Skyworks Solutions (NASDAQ: SWKS) and Avago Technologies (NASDAQ: AVGO). The report also suggests looking to Taiwan Semiconductor (NYSE: TSM) for indication of where strength is, pointing to Broadcom (NASDAQ: BRCM), Nvidia (NASDAQ: NVDA) and Qualcomm (NASDAQ: QCOM) as probable points of focus.

J.C. Penney (NYSE: JCP) said it will cut another 350 jobs from its headquarters to save $900 million by the end of the year. The shares are still down 0.8% at the get-go Wednesday. I recently published my negative view of JCP.

The day's corporate wire has Nortel Networks in bankruptcy court seeking absolution from its $3.1 billion U.K. pension plan liability. Chevron (NYSE: CVX) will offer its update for the second quarter today. Confirmed earnings reports include ADTRAN (NASDAQ: ADTN), API Technologies (NASDAQ: ATNY), Art's Way Manufacturing (NASDAQ: ARTW), Cazador Acquisition (NASDAQ: CAZAU), Intervest Bancshares (NASDAQ: IBCA), Itron (NASDAQ: ITRI), Jewett-Cameron Trading Co. (NASDAQ: JCTCF), Marriott Int'l (NYSE: MAR), Material Sciences (NASDAQ: MASC), Merrimack Pharmaceuticals (NASDAQ: MACK), Northern Technologies Int'l (NASDAQ: NTIC), Pansoft (NASDAQ: PSOF), Premier Exhibitions (NASDAQ: PRXI), Simulations Plus (NASDAQ: SLP) and Texas Industries (NYSE: TXI).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.