Rally Over So Soon?

Tuesday morning stocks had a nice follow through from the strong bounce on Monday. Yet in the last hour it all frittered away with the S&P barely above breakeven. Even more telling was the -0.65% decline of the small cap laden Russell 2000.

What does it all mean?

In short... investors don't trust this bounce. I can't blame them as I was also getting ready to become more defensive on the run up. However, there is some new information that gives me pause on that strategy.

What's that?

European leaders are finally responding to the recent concerns. There seems to be a greater likelihood that Eurobonds will be part of the solution.

Germany and France used to be the main dissenters to that notion. However, with a change of leadership in France, the Germans will find it hard being the lone dissenter among the 17 member nations. The key for them is they need some kind of austerity measures in place by the other nations to agree with Eurobonds and growth oriented programs. That is a fair trade for all concerned.

On that news, key bond rates were down in Europe. And stocks were up 1-2% in most nations. If this positive trend continues, then investors should bid up US stocks as they are a good spot off their recent highs. So I think best for us to pause to see which way the trend emerges.

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Best,

Steve Reitmeister (aka Reity... pronounced "Righty")
Executive VP, Zacks Investment Research

Today's Top Stories: Wednesday- May 23, 2012

ZACKS RANK BUY STOCKS

• Aggressive Growth - Valeant Pharmaceuticals (VRX) topped the Zacks Consensus Estimate in the last four quarters. The average beat has been $0.075 above the Zacks Consensus Estimate working out to a beat of 9.2%. Read More...
   
• Growth & Income - Taubman Centers, Inc. (TCO) Zacks Consensus Estimate for 2012 is now $3.23, within guidance, and representing 14% growth. The 2013 consensus is currently $3.46, corresponding with 7% growth. Read More...
   
• Momentum - Datalink Corp. (DTLK) products and services revenues were both up by double-digits. However, product revenue growth was stronger, driven by networking and servers (up 147.1%). Read More...
   
• Value - Penske Automotive Group, Inc. (PAG) earnings are expected to grow in the double digits in 2012. Yet this Zacks #1 Rank (Strong Buy) also has attractive valuations with a forward P/E of just 11.4. Read More...
   

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• Facebook plunges 18% below IPO price @ CNNMoney.com
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