Lower Bond Ratings = Lower Bond Yields = Higher Stock Prices???

The above equation shouldn't happen. Meaning that when rating agencies like S&P, Fitch, and Moody's inform investors of the increased risks in the bonds of certain nations, then everyone should head for the hills. Yet, that is not happening now. In fact, France had a great bond auction on Monday. And the main European stock markets actually rallied on Monday.

Essentially investors are saying to the rating agencies "You are late to the party... again!" And if anything, investors are becoming slightly more comfortable with the odds of success in Europe.

Investor attention will now rotate to corporate earnings as quarterly reporting season heats up. By weeks end we will hear from some bellwethers like: Citigroup, General Electric, Goldman Sachs, Intel, IBM, Microsoft, and Union Pacific. The results and future guidance of these companies will likely set the course for stocks over the next couple months.

Do your best not to become overly swayed by any singular report. Look for the overall picture of whether things are getting better or not. That will help you judge how long or short the market you want to be at this time. We here at Zacks will certainly keep you informed of our view as the understanding of earnings is a specialty of ours.

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Best,

Steve Reitmeister
Executive VP, Zacks Investment Research

Today's Top Stories: Tuesday- January 17, 2012

ZACKS RANK BUY STOCKS

• Aggressive Growth - CEVA Inc. (CEVA) has had a positive earnings surprise in each of the last six reporting quarters. On average the surprise percentage has been 22%, suggesting the company will continue to post positive surprises. Read More...
   
• Growth & Income - MSA (MSA) Zacks Consensus Estimate for 2011 is $2.02, representing 35% growth over 2010 EPS. The 2012 consensus estimate is currently $2.28, corresponding with 13% growth. Read More...
   
• Momentum - American Water Works Co., Inc. (AWK) is expected to earn $1.78 in FY2011. The company also has been showing strong growth over the past 3 years and recently declared a dividend of 23 cents per quarter. (2.9% yield). Read More...
   
• Value - Unit Corporation (UNT) is an attractive value stock with a P/E of 9.3 well below the S&P 500 average of 12.4. Unit also has a price-to-book of just 1.1. A P/B ratio under 3.0 usually indicates value. Read More...
   

Learn how to profit from our exclusive Zacks Rank stock-ranking system with free resources. Read More...

• Top 5 Diversified Bond Mutual Funds Read More...
• Mutual Fund Homepage

• Bull Of The Day: International Paper Co.
  Full Zacks research report: Read More...
  
  
• Bear Of The Day: hhgregg, Inc.
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• Ahead of Wall Street
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• Zacks Industry Outlook: U.S. Banks Stock Outlook - Jan. 2011
  The potency of the sector is not expected to return to its pre-recession peak anytime soon. The economic intricacy may even result in further disappointments in the upcoming quarters. Read More...
  
  
• Analyst Blog Highlights
• Outperform on Reliance Steel
• Neutral on Xilinx
• Shire, Prasco Ink Deal
• Full Analyst Blog

• Earnings vs. Europe… Still
• Stock Picks for Trucking, Tractors, and Trillions in Derivatives
• Calendar Call Spread: A Neutral to Bullish Strategy

PeopleAndPicks.com:

VIP "rjm77me" continues to dominate the leaderboard with BUY calls in (ACN), (CS), (POT) and (TIBX). Read More...

• BIG SITES PLAN BLACKOUT @ CNNMoney.com
• S&P Downgrades Eurozone Bailout Fund (Update1) @ TheStreet.com
• NYSE Officials to Make Case for Merger Clearance at Davos @ FOXBUSINESS.com
• Samsung Electronics in OS talks with Intel @ MarketWatch.com

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Best,

Steve Reitmeister
Executive VP, Zacks Investment Research

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