*****Honestly, I’m glad stocks didn’t stage another huge rally Tuesday. The Dow closed at 9,387 on Monday after a 936 point jump. Another 300-400 points would have it pushing 10,000 two days after it dropped below 8,000.
The fact that it wouldn’t be good for my blood pressure aside, do we really think that stocks can simply move back to their prices of a few weeks ago and everything’s suddenly hunky-dory?
No, trepidation and caution are always good traits for investors, especially these days. Profit-taking when you have the opportunity is a good thing, too.
The stock market is the ultimate barometer of fear and greed. When the Dow broke below 8,000 on Friday, greed sparked a 1,019 point reversal. Greed propelled it up close to another 1,000 points Monday.
And with good reason, I might add. Even though Treasury Secretary Henry Paulson hasn’t yet done everything possible to end this credit crisis, some stability has been restored. That should lead stocks higher, and it did.
But of course, the credit crisis isn’t "fixed." And nobody yet knows what the ramifications of a global recession will mean. So it’s fine by me if stocks go on looking cheap for a while.
*****Microsoft (Nasdaq:MSFT) was downgraded yesterday. And as I’ve been discussing here in the Daily Profit, other downgrades are certain to follow.
Analyst forecasts are still calling for record S&P 500 profits, but that hardly seems reasonable given what’s just happened to the financial markets.
NYU economics professor Nouriel Roubini told Bloomberg that "[t]here are significant downside risks still to the market and the economy. We’re going to be surprised by the severity of the recession and the severity of the financial losses.”
He’s calling for unemployment to hit 9% in 2009. That’s clearly not good news and would make for a severe recession. But the news that Pepsi just missed earnings and announced 3,300 job cuts seems to validate this view.
*****Intel (Nasdaq:INTC) beat earnings expectations by a penny yesterday. And while the company essentially reaffirmed earnings expectations going forward, it also said the forecast was "murky."
Intel also said it would be keeping its capital expenditures steady, which is good news for the tech sector.
JP Morgan (NYSE:JPM) didn’t fare so well. Profits were down 64% and revenues were less than expected. It’s hard to say this was unexpected though, given the financial massacre investment banks have experienced.
*****Here’s a welcomed trend: U.S. companies moving their manufacturing from China to the U.S. Exxel Outdoors found it would be 3% cheaper to move its sleeping bag manufacturing facility from China to Alabama. A rise in the yuan made materials more expensive. Rising wages in China and shipping costs were also factors.
Today it’s sleeping bags. But down the line, both Caterpillar (NYSE:CAT) and Home Depot (NYSE:HD) plan to increase, production and purchasing in the U.S. And Ikea opened its first factory in the U.S. in May.

Published by Wyatt Investment Research at