Analyst Downgrades Drag Down Stocks

Have you noticed that analysts are starting to downgrade stocks? Sprint Nextel (NYSE:S), Yum Brands (NYSE:YUM), PETsMART (Nasdaq:PETM), MBIA (NYSE:MBI) and Aegon (NYSE:AEG) were all marked down by analysts yesterday. 
Coverage was initiated on American Express (NYSE:AXP) at "Sell" by Ladenburg Thalman. Boeing (NYSE:BA) and Research in Motion (Nasdaq:RIMM) have also been downgraded in the last few days.

Is There Evidence That We’ve Passed the Bottom?

Nobel Prize winning economist Paul Krugman thinks August is the trough month for the U.S. economy. And yes, he is reading a lot into the improved unemployment numbers from July. 
Of course, it took trillions in direct spending, guarantees and loans to do it, but he believes we’ve got actual growth coming. It’s worth noting, too, that Krugman estimates the stimulus plans have saved 1 million jobs. So, without the stimulus, unemployment would be around 12%.

Unemployment Numbers Boost Friday’s Trading

The unemployment rate…fell? 247,000 people lost their job in July and that was enough to push the jobless rate down to 9.4% from 9.5%. 
July was a lot better than June, when 443,000 people lost their jobs. And the talking heads are already saying its more evidence that the economy is stabilizing. 

Where is the Downside in the Market?

Stocks rallied out of the hole yesterday, as expected. It should be clear now that government intervention in the financial markets is supporting asset prices across the board. That includes cars, houses, stocks, bonds – you name it.
Now, I don’t mean to suggest that economic fundamentals support current stocks prices. Most likely, earnings expectations and valuations are getting a little out of whack. Barron’s has the P…E ratio for the Dow Industrials at 14.76 and the Wall Street Journal says it’s 15.03. And forward estimates are about the same. In the current environment, that’s fair value at best. 

Is the Only Way to Make Money to Earn It?

Oil prices are slightly lower this morning. That should mean stocks will trade lower today as well. And while many are saying the fundamentals of this economic recovery do not support current prices for stocks or oil, I wouldn’t get too excited about an imminent trade-worthy decline. 
More likely, we will see any dip get bought by the bulls. And I doubt any dip will last for more than two days… 

Is the Rally True? Does It Matter?

Stocks look poised to continue moving higher. Our leading indicator for investor expectations, oil prices, is up over $70 a barrel.
Despite the still-compelling argument that the economy is staging a tepid recovery that will take years to gather steam, and even though many feel that housing prices and unemployment have not yet bottomed, stock prices are clearly showing that investors believe that the financial crisis is past.

Stocks React to Q2 GDP Numbers?

Today was the big one. Say what you want about yesterday’s rally, the reaction to this morning’s 2Q GDP number should be expected to influence trading going forward. 
Now, I’m going to let TradeMaster Jason Cimpl’s morning commentary to his traders provide the in-depth analysis to the GDP number:

More Correction Talk

Stocks have traded in a pretty tight range over the last several sessions. There’s been an appearance of weakness, and some comments from talking heads that a correction is coming, or may have started. It’s sure not looking that way today. 
Stocks are big in the early going. The sell-off in China I mentioned the other day has reversed. All the talk of an imminent overheating of China’s economy now sounds like a deliberate attempt to work stocks lower so dips could be bought. 

There should be no doubt that games are being played right now.

Chinese Stocks Drop 5% Overnight

With the exception of the Nasdaq, the major indices finished yesterday with slight losses. And it looks like an even money bet whether they’ll finish in the red today. We’ve seen an unlikely move over the last two weeks. The S&P 500 has made gains in 9 of the last 11 sessions and moved 11.3% higher. Volume hasn’t been especially strong during this move, but it is summer. Volume is always a bit lighter in the summer.