Stock Preacher

The benchmark S&P 500 should move back to its October 2007 record high above 1,500 by the end of 2012, provided the US economy sees a V-shaped recovery, JPMorgan Chase Chief U.S. Equity Strategist Thomas Lee said last Wednesday. “The global economy is in the midst of a synchronized recovery,” Lee said at the Reuters Investment Outlook Summit “If we end up with a V-shaped recovery, we could go back to our record high of 1,500 in 2011-2012,” he added, referring to the S&P 500. Lee also reiterated his year end 2009 target of 1,100 for the S&P 500, saying the United States will likely come out of its recession some time this summer, followed by the rest of the developed world. In October 2007, the S&P 500 hit a record closing high of 1,565.15, before falling back. In March of this year, it slumped to a 12-year closing low, but has rebounded by about 35% on hopes the recession that begun in December 2007 was moderating. Lee added that a market correction in the wake of the recent run-up would be “healthy,” and could lure back investors who opted to sit out the recent rally. “This rally has left many investors uninvested or underinvested. The pullback is the entry point to really see more meaningful money put to work,” said Lee, who has been named a top analyst in Institutional Investor magazine’s annual all-star poll. He favors the financials, industrials, technology and consumer discretionaries sectors, in that order, saying the sectors would be the biggest beneficiaries of an economic recovery. Within financials, he favors asset managers. The S&P financial index .GSPF is up 84 percent since the broader market’s 12-year low on March 9, 2009

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One of Wall Street’s most optimistic equity strategists told clients that the S&P 500 may rise even more than he expected this year. “There is actually upside risk,” JPMorgan Chase & Co.’s Thomas Lee wrote in a report on Thursday and that he expects the S&P 500 to end the year at 1,100, or 21% higher than Thursday’s close. Stable retail sales, a pickup in pending home sales, and other indicators signal the recession may hit bottom by midyear, leading to higher share prices, the report said. The S&P 500 rose 34+% from its March 9 low through Thursday’s close. “We want to become ‘slow buyers’ of stocks,” he wrote, citing the likelihood that prices will drop below their March lows before rising anew. This so-called retest would serve as a trigger to buy “in a larger way.”

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Savvy stock market strategists are seeing the up arrows as the Big Q on the Street is: how much further the Bull can Charge before it stalls and lays down?.
Some traders believe a pullback has got to come and that this week is as good as any for that to happen, because of the low trade volume of trading, but others, many others several strategists say in notes they see stocks moving higher warning the naysayers could be proven wrong, and that this could be the beginning of a new Bull Market and a above average one at that..
Goldman Sachs strategists said they see progress on a number of economic fronts and are now boosting their exposure to cyclical stocks. Laszlo Birinyi says, if you look at history, it looks like the market’s still moving higher.
Citigroup’s Levkovich, chief U.S. equities strategist, said the investment community is “almost shocked” by the near 30 percent rise in the S&P 500 since early March, and that the case is building for a second half of Y 2009 recovery, that many investors are ignoring the fundamentals and following only the technicals in here.

Since early March, financials have risen 74%; cyclical consumer discretionary are + 46%; industrials gained 44%, and materials are up 41%, as the defensive sectors are under-performing. The move higher in the stock market is boosting US consumer confidence. For that reason, the market is seeing much better that average movement higher. A Key factor is that there are many of investors who missed the moves and are sitting with large cash hordes, about US$9.2Trillion.

Laszlo Biriniy says the market’s 53-day gain and 10 percent move above the 50-day moving average are second only to the market’s performance in 1933. He also says in a note that the net advances over the past 10 days are the third strongest in market history, and he makes a case for even more gains.
Brown Brothers Harriman’s Brian Rauscher, a long-time Bear turned Bullish in early March. He was concerned last month that the market could be showing signs of moving too far, too fast. But last Friday when asked does he think the market will go higher. He answered: “May have take a deep breath to get through 900 (a day or so), but this market is moving higher.”

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Stocks around the Globe recovered sharply last week, bouncing in what may mark a bottom, or represent a Bear Market Rally that will fade in short order. Bear Market Rallies are usually short and explosive in nature as they occur in the wake of excessive selling. This month, the S&P 500 index closed at its lowest level since September 1996, at 676.52 pts. That low represented a decline of nearly 60 % from the index’s record high in October 2007. Many investors expected some type of bounce, with short sellers seen buying back stocks to close out their profitable trades. The S&P has subsequently bounced nearly 12% from its low, trimming its loss for the year to around 16 %. Jack Ablin, chief investment officer at Harris Private Bank, says: “At this stage, we’re snapping back from a heavily oversold situation. Pessimism was so extreme.”

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This is what happened last week…

Last Tuesday began what the world community views as a major event in US history, the inauguration of Barack H. Obama as its 44th President and its 1st Black American President.
Some of President Obama’s executive orders on his 1st day in office:

1. A freeze on salaries for White House staff earning $100,000 or more, about 100 people in all.

2. New Freedom of Information Act rules, making it harder to keep the workings of government secret.

3. Tighter ethics rules governing when administration officials can work on issues on which they previously lobbied governmental agencies, and banning them from lobbying the Obama administration after leaving government service.

The week in the markets, however, continued to be bathed in the glow of uncertainty within the financial sector and coupled with Qs about the timing of the economic recovery.
Couple that with headlines announcing that China’s Y 2008 Q 4 GDP contracted from 9% to 6.8%, the UK reporting a GDP decline of 1.5%, the largest since 1980, US housing starts fell to their lowest level on record, and initial jobless claims returned to Christmas levels, matching the 26 yr. high of 589,000 set in December 2008.
Though Microsoft disappointed, IBM and AAPL rang the bell with GOOG beating too, and coming in better than expected.
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This is what happened last week…

Bad news, bad news and bad news again (tell’em, tell’em again and tell’em what you told them). Nevertheless, last Friday, the market rallied some off of Thursday’s technical reversal action.
The banks are still sending out the worst news, what with Citi breaking up and Bank of America needing more cash to digest Merrill Lynch, it is a fact that Wall Street has moved to Washington, D.C., perhaps never to return to Manhattan. If that was not enough, the production capacity numbers were worse than anyone expected.
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