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Market Commentary Stocks rallied on a stronger than expected Stocks rallied on a stronger than expected reading for pending home sales, the result of expiration of the home buyer tax credit. As stated yesterday I believe housing has bottomed and this tax incentive worked in the same manner as last summer’s “Cash for Clunkers” program. Te refresh, in my view “Cash for Clunkers” was instrumental in reducing bloated automobile inventory levels, offering a strong incentive for reticent potential buyers to finally commit to purchasing a car. Yes new car sales did spike to a 14.09 million rate however since spiking sales have been consistently around the 11.2 million rate, considerably higher than 9.1 million level registered at the crisis lows. I don’t think new car sales will rebound to the previous peak of 17 million units in the intermediate future, I do think the current 11-12 million units is sustainable. This rebound in auto manufacturing is a major reason why manufacturing employment has rebounded at its current strong pace. Speaking of employment, today the influential ADP Private Employment Survey is released. Many still view this as a top tier indicator even though the data has understated the growth in the private labor force as measured by the BLS employment report for 12 consecutive months. 70,000 private sector jobs are expected to be created during May as per this survey. Analysts are expecting a 225K increase in private payrolls for tomorrow’s BLS survey. Today the ISM Non Manufacturing survey is released. This data point has only been in existence for 13 years but is quickly gaining in importance given that it represents about 70% of the economy. Its 13 year average is 53.7 and its highest readings were obtained in 2004 and 2005…58.7 and 58.0 respectively. Analysts are expecting a 55.6 reading, nominally higher than April’s 55.4 reading. [Note: Any reading over 50 indicates an expanding service sector and vice versa.] Will it surprise on the upside as its ISM Manufacturing sister did on Tuesday? Weekly jobless claims, chain store sales as well as April’s factory orders are released today. How will the market interpret these statistics? As stated above, equities opened strong on the pending home sales. The final hour of trading stocks gained momentum as Bank Last night the foreign markets were up. The Dow should open nominally higher. The 10-year is off 16/32 to yield 3.40%. 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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