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Market Commentary Stocks rallied on earning and economic optimism. Stocks rallied on earning and economic optimism. Several mid tier mergers added further impetus. Like all we are nervous about the advance and believe a 5%-7% pullback can occur at anytime. However as widely written equities require a “Wall of Worry” to move higher. Advances only end when a cloud does not appear in the sky…aka the business cycle is dead or securitization has diversified risk away. As written several times I think the averages could undergo a period of rough sledding when the Federal Reserve alters monetary policy. Logically speaking, the decline would be illogical as such tightening is an indicator of strength. However who ever said markets are logical or rational as markets are people and people move markets. Once this period of “rough sledding” concludes, I reiterate my long held view the averages could end the year higher by 10%-12%. Today housing starts and permits are released. Consensus is expecting 610,000 starts and 625,000 permits. As also written many times innate housing demand is about 1.5 million units per year. Housing starts have been below this magical level since December 2006 and below 600,000 units since November 2008 for the exception of 611,000 starts in January 2010. Will starts exceed expectations? Yesterday’s release of the National Association of Homebuilders (NAHB) sentiment survey unexpectedly rose to 19, matching the tax credit induced cyclic high of 19 achieved in September 2009. While this is an incredibly low number as 50 is normally regarded as the inflection point between positive and negative outlook, it is suggesting that today’s housing data could exceed on the upside. The data is released at Last night the foreign markets were quiet. The Dow should open marginally lower on mixed earnings. Financials are exceeding profit expectations while technology disappointed. The 10-year is up 4/32 to yield 3.82%. 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. © Copyright 2008 Capitol Securities, Inc. All Rights Reserved. |
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