Midday Market Update

Stocks are drifting to the lows of the day on the back of another round of weak economic numbers. The weekly jobless claims remained high (see earlier blog post) and the Philly Fed reading fell to a -16.7, well below the estimate of 0.

Combine that with weak manufacturing numbers out of Germany and China last night and it was the perfect storm for investors to continue selling after the markets best 4-day winning streak of the year ended yesterday.

The one silver lining I see out of today's economic numbers is that it is one more reason for the Fed and other central banks around the globe to ease monetary policy further. The odds of QE3 and other actions from foreign countries increased again today and I believe it is almost a certainty in the next couple of months. If I am correct it will result in a rally in stocks and commodities and a drop in the US Dollar. This is one major reason I remain bullish on the US and emerging market stock markets.

Breaking Down the Jobs Numbers

The weekly jobs number was released this morning at 8:30 and it appears the labor market is not improving. Here is the breakdown:

• Weekly jobless claims came in at 387,000 a decline of 2,000 from last week but still way too elevated for even a modest economic recovery.
• The claims from the prior reading were revised up by 3,000 to 389,000. This has been an ongoing trend - revisions are almost always higher the following week. The number could hit 390,00 if that trend continues next week.
• The 4-week moving average increased by 3,500 to 386,250, the highest level since December of last year. This number is more important because it shows the trend and unfortunately it is going in the wrong direction.
• The big question is whether this trend suggest the monthly numbers will be even worse? Unfortunately it appears that will be the case when the June numbers are reported in early July.
  

Investing "Cheap" Brazil

In a recent article in the Wall Street Journal the country of Brazil was highlighted along with the entire emerging markets sector as "cheap" based on valuations. The Bovespa, which is the major Brazilian stock index, is trading with a P/E ratio of 9.2 , below the 12.0 for the US and 9.7 for the Stoxx Europe 600.

In 2011 the Brazilian economy expanded by 2.7% and recent estimates have 2012 coming in at 2.5% and 2013 at 4.3%. The situation in Europe has weighed heavily on the country, however a government willing to stimulate the economy could boost the future growth. The valuations combined with good growth numbers make Brazil attractive as a long-term investment option.

Brazil ETFs

• iShares Brazil ETF ($EWZ) invests in the large-cap stocks in the country.
• EG Shares Brazil Infrastructure ETF ($BRXX) is a niche ETF that focuses on infrastructure-related stocks in the country. With the World Cup and Olympics coming to Brazil in the next few years it could spend upwards of $1 trillion on infrastructure.

Brazil Stocks

• Brasil Foods ($BRFS) is a food supplier in the country that has pulled well back from higher earlier in the year and is now trading with a PEG of 0.72 - extremely undervalued.
• CIA Energetica Minas Gerais ($CIG) is a large utility company in Brazil with a 3.5% dividend yield.

Fed Highlights

A few highlights from today's Federal Reserve announcement.

• The Operation Twist was extended until the end of the year.
• The statement said the Fed is prepared to take additional steps necessary.
• Statement: "Growth in employment has slowed in recent months ... Household spending appears to be rising at a somewhat slower pace."
• The market initially falls big on the news that a new round of QE was not announced, but it quickly rebounded to to levels (-0.3%) it was trading at before the announcement.
• Expect more volatility around the 2:15et presser with Ben Bernanke.
• Gold also took a dive after the announcement, but is trying to work its way back. $GLD is down 0.9%

Will Fed Extend Operation Twist??

The big question looming over the midday Fed announcement is whether or not they will extend Operation Twist or give any hint to a new quantitative easing plan?

Through the first 90 minutes of trading the stock market has been teetering between a loss of 0.3% and breakeven. I expect the narrow trading to remain until the Fed announcement is made around 12:30et. Overall the market is looking good after the S&P 500 broke above its 50-day moving average for the first time in months.

Sectors moving today include:

• Consumer Staples ($XLP) are falling after Proctor & Gamble ($PG) has poor guidance last night.
• Financials ($XLF) are moving higher after a rally in shares of JPMorgan Chase ($JPM).
• Overall the moves (up and down) are muted.
  

Midday Market Update - SPY Breakout

Lunchtime on the East Coast has the stock market up 1% on the back of a slow news day out of Europe as a relief rally is underway.

Some of the hardest hit sectors/stocks are moving higher today as the risk-on trade is back in full force for at least the day. I expect the momentum could continue for a few more days.

The Solar Stocks are moving again with the Guggenheim Solar ETF ($TAN) up 2.2%to the best level in over a month. Do not get too excited, the ETF is still down 22% for the year!

Corn futures are spiking for the second consecutive day as hot and dry weather in the Midwest have speculators believing the result could be a lower crop output. The Teucrieum Corn ETF ($CORN) is up 8.5% in the last two sessions. One of our holdings in The "new" ETF Bulletin newsletter is also enjoying a rally on the corn news - Market Vectors Agribusiness ETF ($MOO) is up 2.3% today a new one-month high.

The SPDR S&P 500 ETF ($SPY) is trading above its 50-day moving average for the first time since 5/3/12 and the index has confirmed an intermediate-term breakout with today's move. Support for $SPY is now at the $135 area and the last trade is $135.83.  A few days of closing above the 50-day moving average is a very bullish signal for the near-term future of the ETF.

Free Colorado Seminar Details

At the end of the month Matt McCall will be a the featured guest at a Winning on Wall Street investment seminar taking place in Broomfield, Colorado.

This will be Matt’s first speaking appearance in Colorado in many years – do not miss the opportunity to find out what stocks and ETFs Matt is buying for the second half of the year.

The seminar will cover topics that range from:

·      Investment Ideas for the remainder of 2012

·      Increasing your savings income to 10% with ETFs and stocks

·      Learning to become your own Money Manager

·      Using ETFs for sector rotation and generating income

·      And the famous Crystal Ball Readings of your stocks and ETFs

The seminar is 100% FREE, but you must sign-up today to reserve your seat as there will be limited availability.

The seminar is taking place on Saturday June 30^th at the Omni Interlocken Resort in Broomfield, Colorado from 10am to 1pm local time.

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Markets Open Higher - Sector Leaders

The broad markets opened higher after the news out of Europe slowed and the yield on Spanish bonds halted their rise to unbearable levels.

This may be a short-term reprieve for stocks when it comes to news out of Europe, but as investors we will take what we are given. Plus the fact there are many other reasons to be bullish on the U.S. and Emerging Market regions.

The "Risk On" trade is definitely back on today and it is evident in the leading sector ETFs this morning. The top performers are:

• iShares Biotech ETF ($IBB) up 2% and hitting a new all-time high!
• SPDR S&P Retail ETF ($XRT) up 1.7% on the back on the weekly retail numbers.
• SPDR Financial ETF ($XLF) up 1.5% as the fears of a banking collapse in Europe subside for the day.

The top performing Country ETFs are the countries that have caused most of the pain throughout the global markets. The top performers are Greece ($GREK), Italy ($EWI), and Spain ($EWP).

Market Wrap - Disappearing Greek Rally

As the election results came pouring in yesterday that the Greek elections will likely lead to the country remaining in the EU for the near future the consensus was a rally would take place today in the US markets. A rally overnight was greeted with selling this morning and an up and down session that saw the S&P 500 finish the day with a minimal gain of 2 points. The gain was enough to close at the best level in over a month for the index.

The attention quickly moved from the Greek election to the situation in Spain and Italy. The yields on the Spanish 10-year bonds rose well above 7% to levels that nearly every believes is unsustainable. The iShares Spain ETF ($EWP) fell by 3.5% and the iShares Italy ETF ($EWI) lost 2.8%. Even the Global X Greek ETF ($GREK) lost 2.5% after a major rally last week.

The SPDRs S&P 500 ETF ($EWP) is on the verge of breaking above its 50-day moving average for the first time since early May if it can close above $135/share. The ETF closed today at $134.41.

The rest of the week will be driven by news and rumors out of Europe as well as the Fed announcement midweek. Look for above average volatility.

**I remain a buyer on weakness!!

The Greek Election and Your Portfolio

Now that the anti-climatic Greek election is hours behind us, we can now turn our attention back to the U.S. market and making money. Or at the very least, not losing money.

The situation in Greece is still a mess. Just because the country will stay in the E.U. for the near-term it does not make the mess go away. If the New Democracy party would have lost yesterday it would have sent the markets much lower instead of flat (as they are midday on Monday). Many expected the market to rally on the news of the New Democracy victory on Sunday night, but as I was broadcasting live late Sunday I made it known that traders would sell into the strength and they did just that on Monday morning.

I do not want to get into the specifics of the Greek situation, but I want to cover briefly what the situation in the E.U. means to your portfolio.

• Expect more volatility for the remainder of the summer as Greece attempts to put together a government and Spain deals with yields above 7.25%.
• In the near-term the news out of the E.U. (other than Spain) could slow, thus putting the emphasis on the U.S. economic numbers. They are mixed with the government numbers trending lower, but U.S. corporations are doing well. This makes it difficult for investors cannot disconnect the two. Long-term investors must look at solid companies as well as diverse ETFs.
• If the Spain yields continue to rise and the rhetoric out of the E.U. does not improve expect a coordinated effort by central banks around the globe to inject liquidity into the markets. This will result in stocks and commodities rallying. The odds of this happening are approximately 70%.

My 5 Favorite New 52-Week Highs

With the market flat at midday there are a handful of stocks breaking out to new highs and there are five that are grabbing my attention. They are either already on my WatchList or have been added today on the breakout.

Cerner ($CERN) - Healthcare IT company that is breaking out again. I love the business model.

Ebay ($EBAY) - This stock has been on my radar due to its PayPal unit and I am looking to enter in the near future.

Ross Store ($ROST) - The discount retailer has one of the best charts in the market and based on the current and future of the consumer it should continue to be a winner.

Equinix ($EQIX) - A play on the cloud computing craze, the stock has been a huge winner. That being said, with my view that money will start to move into technology the remainder of the year, EQIX looks good on a pullback.

iShares High Dividend Equity ETF ($HDV) - Had to add an ETF on here and one that we own for some clients. The large-cap dividend stocks continue to outperform and what better way to capture it than with a low-cost ETF.

Retail Investors Giving Up on Stock Market

From Seeking Alpha:

Since Facebook's bungled IPO, small investors have pulled out a net $4.9B from U.S. stock funds - including $3B in the week afterwards - adding to ~$370B of withdrawals following the "flash crash" of May 2010.


I would love to know where the retail investors is going? Are they putting their money into money markets? Bonds? Under their bed? 


With bond yields near historic lows and money markets paying next to zero, how will investors be able to grow their money for retirement?


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