Anecdotal evidence is better than no evidence
Here’s what’s going in stocks:
Stocks were higher at midday Thursday as the Obama administration increased efforts to aid browbeaten banks in the weary financial sector.
At 11:51 am ET, the Russell 2000 (NYSE:IWM) is up 1.96, or 0.49%, to 403.40, while the Dow is up 0.78% to 7,327.68 and the S&P 500 is up 0.55% to 770.67.
Though Congress has already set aside $700 billion for embattled banks, President Obama has now proposed a $3.55 trillion budget that will allot $750 billion more to struggling financial firms. The plan, which is being sent to Congress today for approval, predicts that the U.S. government’s 2009 deficit will be $1.75 trillion.
Earlier today, investors analyzed tepid news out on the data front. This morning the Commerce Department released a consumer report that showed orders for big-ticket goods plunged by a larger-than-expected 5.2% in January as global economic troubles continue to cut into demand from U.S. and global customers. The report showed that orders have fallen for six straight months, and that orders for autos, metal products, machinery, computers and electrical equipment and household appliances predominantly posted declines.
The Commerce Department also released new-home sales numbers, which fell to a record low pace — 10.2% — in January to 309,000. This is the worst number on record since 1963. Prior to the release, the all-time low had been set in September 1981.
In other data out this morning, the Labor Department said continuing jobless claims hit a new record in the second week of February, increasing 114,000 to 5.113 million, over the forecast for 5 million.
SXC Health Systems
While Bernanke’s testimony before Congress on Monday was far more significant than any specifics Obama mentioned Wednesday night, neither event seems to be affecting stocks much. Except for HMO stocks. They’ve been killed this week as Obama makes a push for healthcare reform.
Medical insurers could be hurt by healthcare reform, though I doubt anyone feels particularly bad for these companies. I do think, though, that regardless of potential reform, there’s still some phenomenal upside for certain healthcare and biotech stocks.
My current favorite is SXC Health Systems (Nasdaq:SXCI). This small cap helps process prescription transactions. And its technology was involved in nearly 25% of the 3.5 billion prescriptions processed last year. Obama’s push to digitize medical records should be a big catalyst for this stock.
SXC Health Systems did $593 million in revenue in the last year, but it's valued at just $469 million. And it's one of the few impressive companies where earnings estimates are actually rising. For a fast-growing, profitable company in a critical industry, the stock looks very cheap.
Anecdotal Evidence
I came across a very interesting survey from a workforce consulting firm named Watson Wyatt Worldwide (no relation). Their survey concluded that more companies are resorting to pay and hiring freezes, rather than payroll reductions, to weather the recession.
More than half, or 52% of the 245 companies surveyed, said they’ve already made job cuts. Job cuts were being planned by 13% of respondents, down from 23% in December.
The survey had a 6.2% margin of error. That’s pretty high, but it doesn’t change the conclusions--that we may have actually seen the worst of the lay-offs.
I know, that seems hard to believe. And I’m certainly not calling a bottom (or a top, as the case may be) for the rate at which employees are being laid off. Because there are still potential bankruptcies that could result in spikes in unemployment. Also, some companies planning to muddle through might change their plans.
But still, this is anecdotal good news – exactly what we should be watching to get a feel for what’s really going on. And when the employment tide really starts to shift, it is in anecdotal news that we’ll see the first signs.
*****More anecdotal evidence came from Intel (Nasdaq:INTC). CEO Otellini said that some of the predictability in the semiconductor market was returning. Trading volume on Intel stock was huge Wednesday, too. Clearly, some investors see value with the stock trading at 1996 levels.
Stock market news, commentary, and analysis from Chief Investment Strategist Ian Wyatt.
