What Will Obama Say?

Yesterday, buyers mustered the strength to build on Wednesday's strong rally. In fact, the bulls pushed the S&P 500 above a key resistance point at 1,085.

I've talked at length about how pessimism was at an extreme and a bounce for stocks looked likely. Recent economic data has been good enough to support the notion of an economic recovery, and while not setting records, it is at least strong enough to avoid a double-dip of recession.

Most of the recent data was in line with expectations: factory orders were up 0.1%, productivity was down 1.8% and labor costs were up 1.1%. However, Wednesday's strong new home sales for July (up 5.2% when a loss was expected) was probably the single most important data point.

Homebuilders have moved strongly, and Daily Profit readers might consider a position in Beazer Homes (NYSE:BZH). The stock is very cheap, with a trailing P/E of 4. It currently trades around $4 a share, well below its 52-week high of $7.08.

Non-farmpayrolls came in much better than expected this morning. This will no doubt support further upside for stock prices.

Also, we have a speech from President Obama at 10 AM ET. He is expected to address the economy, and it's likely he will propose some tax cuts to boost business activity.

Sources are suggesting a permanent R&D tax credit is on the table, and I wouldn't be surprised if some sort of cut to payroll taxes is suggested as well.

I also sincerely hope we hear about increased spending on renewable energy development, including natural gas, but that may be pushing it.

As we all know, investors have been highly critical of the Obama administration's fiscal policies recently. Today's speech is probably coming quicker than most expected, and along with the payroll data, should help boost stock prices. Even better than that, some tax cuts should help small businesses and the economy. Better late than never...

Financials and technology have been strong this week., and oil prices have reversed as well.

I'm wondering if any Daily Profit readers picked up shares of Bank of America (NYSE:BAC) after I recommended it on Monday when it was trading at a new 52-week low. The stock is up nearly 10% since Monday's lows, and buy the end of today, will almost certainly be up over 10%.

Let me know if you bought BofA: dailyprofit@wyattresearch.com.

Bonds havebeen getting slaughtered this week, and that's good news for stocks. With yields as low as they are, bond investors are essentially treading water. Now, with improving economic data adding to the case for equities, money coming out of bonds will be going into stocks.