Exhausted Sellers, and Calm

Tuesday's rally was something I've been writing about for a couple of weeks now. The "probable recession" priced in, and fear abating, stocks are finding support below S&P 1,150. And stocks can continue to drift higher as we wait for more evidence, or for Europe's banking system to unravel.

Modestly good news from China's manufacturing sector helped industrial, energy, and materials stocks especially. And the Good Dr. Copper lifted its head above $4 a pound. As you know, this is a key commodity whose demand and price trends can signal expansion or contraction.

Speaking of recession, you've probably heard Steve say here more than once that stocks are the best forecaster of an economic decline. How does it go? Oh yeah... the stock market has accurately predicted 14 of the last 9 recessions.

Why might the relief rally continue until we know how bad the recession could get? Corporate cash and stock buy backs. Academic studies prove a strong positive correlation between rising equity markets and buy back levels. See my piece below about an economist named Smithers for more insight.

Featured Commentaries on Zacks.com
•  Upgraded Broker Ratings
•  New Home Sales Drop Again
•  Smithereens Scenario

Best,

Kevin Cook
Senior Stock Strategist, Zacks Investment Research

Today's Top Stories: Wednesday- August 24, 2011

ZACKS RANK BUY STOCKS

• Aggressive Growth - Rocky Brands, Inc. (RCKY) 2011 Zacks Consensus Estimate is up a dime, putting the expected growth rate at 24%. Estimates for 2012 are also up a dime, to $1.71, giving a 12% expected growth rate. Read More...
   
• Growth & Income - Walgreen Co. (WAG) analysts are projecting strong EPS growth over the next two years. The Zacks Consensus Estimate for 2011 is $2.62, representing 24% growth over 2010 EPS. Read More...
   
• Momentum - Ralph Lauren Corp. (RL) earnings came in strong at $1.90, 31% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 30% over the last four quarters. Read More...
   
• Value - Boston Scientific Corporation (BSX) is bullish on the rest of 2011 as it raised its full year guidance to the range of 64 to 70 cents per share from its prior forecast of 58 cents to 68 cents per share. Read More...
   

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

• Top 5 Government Bond Mutual Funds Read More...
• Top 5 Legg Mason Mutual Funds Read More...
• Mutual Fund Homepage

• Bull Of The Day: CIGNA Corporation
  Full Zacks research report: Read More...
  
  
• Bear Of The Day: Computer Sciences Corp.
  Full Zacks research report: Read More...
  
  
• Ahead of Wall Street
  Read More...
  


• Zacks Industry Outlook: Airline Industry Stock Outlook - Aug. 2011
  This year, the ongoing market turmoil, natural calamities as well as rising fuel prices have stalled the recovery and hit hard the industry's profitability. Read More...
  
  
• Analyst Blog Highlights
• Cooper Recalls Avaira Toric Lenses
• Fast Track Status for Bayer's Drug
• ReneSola Under Repurchase Program
• Full Analyst Blog

INVESTMENT IDEAS: Value is the Best Defense

The recent market weakness and heightened risk of another recession isn't a reason to dump equities altogether. Read More...

• Aggressive Growth Stock Picks-Aug. 23, 2011
• What Does Europe & Libya Mean for Us?
• Value Stock Picks-Aug. 22, 2011

PeopleAndPicks.com:

VIP "InvestmentMAGE" is rallying to the top of the leaderboard with BUY calls in (BRC), (CBE), (MCO) and (UA). Read More...

EARNINGS TRENDS: Expectations for 2012 Begin Falling

Even though more analysts are raising their estimates for 2012 than cutting them, the total net income expected for 2012 has come down by $40 billion over the last month, with $30 billion fo that coming from the Financials. Read More...

• Stocks in rally mode @ CNNMoney.com
• How Healthy are U.S. Financials? @ FOXBUSINESS.com
• Automakers gain in upbeat Asia session @ MarketWatch.com

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Executive VP, Zacks Investment Research

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