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

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
readers might consider a position in Beazer Homes
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.

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

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

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

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: [email protected].

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.

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