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Courtesy of Walter Gault, Communications Editor, Sabrient
Editor’s note: Walt Gault is the guest author this week. David Brown will be back next week.
The major averages ended the day with strong gains for the first trading session of the second quarter. Equities opened with modest losses, but quickly reversed to gains following the ISM Index reading of 53.4, beating forecasts, combined with China’s Purchasing Manager’s Index hitting an 11-month high, and ended the session at a four-year high. The Nasdaq’s +0.9% surge was pacing the advance while the S&P 500 climbed +0.7%, and the Dow lagged with a gain of +0.4%. The S&P 500 and the Dow both closed at multi-year highs.
All Small-cap styles led today with Value up +1.31%, Growth up +1.09%, and the entire cap up +1.22%. Large-cap Growth followed, up +0.86%, while Mid-cap Value came in “last,” up +0.46%. The market stats are delayed today, so please look on our website tomorrow for an update.
China’s PMI report takes away some of the concern investors had for a hard landing. Another concern addressed today in the ISM report was that the strong first quarter was caused by the relatively mild winter. Today’s action could bode well for investors as April has been a historically strong month for the S&P 500.
To the contrary, there are concerning developments that might eventually crash the party. Construction spending was down -1.1% from the last report and 1.8% below the consensus estimate. Of further concern, unemployment in Europe continued to climb to 10.8% from 10.7%, the highest level since June, 1997. The purchasing managers’ index for the European manufacturing sector fell to 47.7 in March from 49.0 in February, tilting activity into its steepest decline in the last 3 months.
Despite the excitingly strong start to 2012, uncertainty lies ahead. The best remedy is to buy GARP (Growth at a Reasonable Price) and consider using the VIX Short-Term Futures (VXX) as a hedge.
4 Stock Ideas for this Market
This week, I used the GARP preset search in MyStockFinder. Here are four stock ideas for your consideration:
General Motors, Co. (GM)–Cyclical Consumer
Deckers Outdoor Corp. (DECK)–Cyclical Consumer
CVR Energy Inc. (CVI)—Energy
United Therapeutics Corp. (UTHR)—Healthcare
Until next week,
Walt Gault
Full disclosure: The author does not hold positions in any of the stocks mentioned in this article.
Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.
