Climbing the Wall Of Worry... But Will it Last?

The ADP employment report came in at +91,000 which was about 20% under expectations. And with that stocks went higher.

SAY WHAT???

We've seen a lot of that lately as stocks are shaking off weak economic news as it continues to rise. There are 2 reasons for this:

Technical Reason: The chartists here at Zacks tell me that the stock market usually retraces to the 50 day moving average after a major decline. That would be around 1260 on the S&P 500. These technicians are not necessarily predicting a rise above that. (And neither am I).

Fundamental Reason: The worse the news the more likely we see Fed or Government intervention to which indeed could spark the economy and therefore stocks. So each bout of bad news increases the odds of this happening.

So why am I still bearish given the notions above? Because the market moves over the long haul based upon the fundamental outlook for corporate earnings. So easy to write off the short term technical picture as that has no bearing on the main issue.

It is tempting to believe that a new round of stimulus or QE could cure what ails us. Unfortunately, it is most likely too late to fend off the looming downturn given the current fear of the populace. This leads to plummeting demand which makes businesses less likely to invest in expansion. This dastardly combination usually spells recession and lower stock prices.

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Best,

Steve Reitmeister
Executive VP, Zacks Investment Research0

Today's Top Stories: Thursday- September 01, 2011

ZACKS RANK BUY STOCKS

• Aggressive Growth - International Game Technology (IGT) projections for this fiscal year are up a nickel, to $0.94. Next year's estimates rose 6 cents, to $1.10. This is expected growth rates of 10% and 17%, respectively. Read More...
   
• Growth & Income - InterContinental Hotels Group Plc (IHG) Zacks Consensus Estimate for 2011 is $1.18, representing 25% EPS growth over 2010. The 2012 consensus estimate is 16% higher at $1.37. Read More...
   
• Momentum - Foot Locker, Inc. (FL) earnings came in strong at 24 cents, doubling the Zacks Consensus Estimate calling for 12 cents. That lifted the company's average earnings surprise 60% over the last four quarters. Read More...
   
• Value - OM Group, Inc. (OMG) has a P/S ratio under 1.0, which indicates a company is undervalued, and trades with a forward P/E of just 10x. It also has a price-to-book of only 0.7, which is well below the 3.0 cut off I use for value stocks. Read More...
   

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

• Top 5 Aggressive Growth Mutual Funds Read More...
• Mutual Fund Homepage

• Bull Of The Day: Cabot Oil & Gas
  Full Zacks research report: Read More...
  
  
• Bear Of The Day: Applied Materials, Inc.
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• Zacks Industry Outlook: Aerospace & Defense Stock Overview - Aug. 2011
  Given the growing debate over deficits and spending cuts, the outlook for defense outlays remains quite uncertain. Read More...
  
  
• Analyst Blog Highlights
• Liberty Property Upgraded to Neutral
• Statoil Hits Gas in North Sea
• U.S. Rig Count Up by 1 Unit
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• Gray Skies Scenario: S&P to 1,050
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PeopleAndPicks.com:

VIP "InvestmentMAGE" maintains the lead with double digit returns on BUY calls (CBE), (HPQ), (MCO) and (UA). Read More...

• Stocks end ugly August on slightly higher note @ CNNMoney.com
• DOJ Attempts to Scuttle AT&T's $39B T-Mobile Buy @ FOXBUSINESS.com
• Stocks to watch Thursday: Ciena, Quiksilver @ MarketWatch

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