Hmmm…Some Correction
Ever since the stock market sold off after IBM (NYSE:IBM) and Apple (Nasdaq:AAPL) last week, we’ve been on the lookout for signs that a correction for stock prices would pick up steam.
It’s not like the first couple days of selling took us by surprise, I’ve been warning that a correction could be coming for a few weeks now. And even though we have seen some sellers emerge in the market and take stock prices lower, the damage has been minimal and contained to a few sectors.
Tech stocks have been hit. Oil and oil stocks have dropped as well. And precious metals. But that’s about it.
Looking at the indices, the Dow Industrials is at a 52-week high, the S&P 500 is within 10 points of one. It’s the Nasdaq that is the worse for wear over the past week.
*****Basically, what we’ve seen is traders moving out of some of the biggest momentum trades at the start of earnings season. I would say that traders were moving in anticipation that an oversold market would hit some bad news and a sell-off would occur.
But so far, the bad news that would really get a correction moving has not materialized.
Sure, we’ve seen some poor results from Bank of America (NYSE:BAC) and Citigroup (NYSE:C). But we’ve also seen the euro rally, and a National Association of Business Economics (NABE) report that shows a big jump in hiring and capital spending plans at U.S. corporations.
Also, don’t ignore the full-court press the Obama administration is putting on its economic growth rhetoric. It seems the James Carville words, “it’s the economy, stupid” are finally being heard once again. I think the fact that Paul Volcker stepped down as the head of the President’s economic advisory group and GE (NYSE:GE) CEO Jeffrey Immelt stepped in is significant.
Yes, the government is actively trying to change its “anti-business” image. But that’s not bad. Businesses need to know that they will not be impacted by government policy. Leaning on the CEO of one of America’s biggest CEOs should help.
*****Still, there’s some important economic data to keep an eye on this week. We’d like to see the downward trend in new jobless claims continue. And it would be great to see a jump up in durable goods orders.
We’ll also get the latest word on interest rates and continuing QE2 on Wednesday. But the biggie will be the initial read on Q4 GDP on Friday.
No doubt, there are high hopes for this number. Some are saying +3.5% is likely.
Of course, there’s plenty of room for disappointment. And I think caution is still appropriate. Still, let’s not ignore the possibility that the news flow remains positive.
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