Capitol Securities Market Commentary

By Kent Engelke
Chief Economic Strategist

Market Commentary

Stocks ended lower Friday on quiet trading.
March 22, 2010

Stocks ended lower Friday on quiet trading. Some claim equities came under some much needed profit taking. Others blamed the nominal decline on an unexpected increase in Indian interest rates, the first increase since July 2008. While others hypothesized the drop was from economic and earnings fears. Few suggested it was the result of the cantankerous debate over healthcare.

I think it was all the above. Earning warning season starts this week. Will there be a dearth of warnings as quarter’s past? As per Bloomberg, at this juncture profits are expected to rise about 30% from last year.

Regarding India’s monetary policy, many are fearful China might take similar actions. Waxing philosophically, is it not ironic that a state controlled communist country could have such an impact upon a capitalist country especially as sustainable growth for China is dependent upon a vibrant West.

Most will accept China’s strong growth rate is predicated upon last year’s huge increase in spending for infrastructure and plant/equipment, building more factories to produce yet even more goods to sell to the West. This huge buildup was necessary to prevent a major domestic slow down as exports slowed.

And then there is healthcare. Is the debate over? Or have we just begun? While I believe reform is necessary, the few parts of the bill that I did read courtesy of Virginia Senator John Warner’s office were confusing, oblique and uncomprehending. I ask rhetorically has or did anyone really read it or know what is in it to at least debate intelligently? Or are all just basing arguments on rhetoric and conjecture?

What will occur this week? The economic calendar is moderate. Existing and new home sales are released so is durable goods orders and weekly jobless claims.

Last night the foreign markets were down. London was down 1.12%, Paris down 1.11% and Frankfurt down 0.85%. Japan was up 0.75% and Hang Sang down 2.05%.

The Dow should open moderately lower on sovereign debt concerns and interest rate concerns. The 10-year is up 1/32 to yield 3.68%.

The information is the personal views of Kent Engelke and is not necessarily indicative of those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed here are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results.

Capitol Securities Management, Inc. is a Mid-Atlantic based, privately owned brokerage and investment firm with branch offices in Mclean and Richmond, VA, Boston MA, Hickory, NC, Florham Park, NJ and Tampa, FL. Capitol employs over 170 fulltime investment professionals and independent affiliates in locations from New England to Florida and has been serving the needs of its investors for over 25 years. It is a member of FINRA and SIPC.