Nine Reasons To Be Bullish on Stocks

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(MoneyWatch)

The Dow Jones Industrial Average closed above 13,000 for the first time since May 2008and the broader S&P 500 has gained a remarkable 15 percent in just three months. Of course stocks never move in a straight line, so anytime markets rally sharply and quickly, it’s not a bad idea to brace for a pause or pullback.

But to those who fear that stocks are out of touch with economic reality, Tom Sowanick, chief investment officer at OmniVest Group, says that mindset is “simply wrong.”

“The performance of global equities continues to be decried by most market observers as ‘too much too fast,'” Sownanick says in a new note to clients. “Another frequent comment is that equity rally is flawed because fundamentally nothing has changed in the global economy. Europe remains broken, Greece is unresolved and deflation is a bigger risk than inflation.”

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Yet the naysayers are ignoring critical economic and technical pillars supporting the case for stocks only gaining steam and momentum, Sowanick says. Here are his nine reasons the market will keep climbing:

1. The Federal Reserve and central banks in China, Europe and Japan are all engaged in either quantitative easing or some other form of monetary stimulus.

2. Economic confidence is on the rise in Europe, as is consumer confidence in the U.S.

3. At 8.3 percent, the U.S. unemployment rate is at its lowest level since February 2009. While the unemployment is still unacceptably high, it is important to recognize that the U.S. has added 2.52 million jobs in the past 16 months.

4. Germany’s 6.7 percent unemployment rate is at its lowest level since the series was started in December 1991.

5. While equity markets have risen sharply since bottoming in the spring of 2009, the rally has been accompanied with an even sharper increase in corporate earnings.

6. Since the start of the year, bullish sentiment has declined from 48.88 to 43.69 while bearish sentiment has increased from 17.16 to 27.51. It is hard to find any hint that exuberance is being priced into the market.

7. Market leadership has been very consistent with the firming of economic data. The market is being led by financials, materials, industrials and technology. Conversely, lagging sectors of the market include utilities, consumer staples and telecommunications.

8. Iran is a problem and so too is the rise in oil and gasoline prices. However, offsetting higher gas prices are extremely low natural gas prices, as well as a very mild winter for much of the U.S.

9. Another factor helping consumers deal with high gas prices is the fact that consumers have been paying off debt for the past three years, Sowanick says.

Stocks are the best investment out there right now, while government bonds are returning less than inflation, says Omega Advisors CEO Leon Cooperman.

“We find plenty of attractive stocks,” Cooperman says, according to CNBC.

Low interest rates make Treasury bills, cash and other investments less attractive namely because inflation outpaces the return.

“Then you’re left with equities,” Cooperman says, adding financial stocks are attractive as well.

Banks are lending less these days and have recapitalized in recent years, which makes their stocks stable although they often return less.

Good stocks in the financial sector include Bank of America, JPMorgan Chase and Citigroup, Cooperman says.

Some market watchers say stocks are due for break, including Doug Kass, who has set a target for the S&P 500 of 1,345, down from about 1,367.

“While I recognize the positive price momentum and the possibility of a further overshoot of my fair-value calculation, I remain cautious over the shorter term,” Kass writes on TheStreet.com.

Others agree a correction is coming, including Sam Stovall, chief equity strategist at S&P Capital IQ.

“The market continues to work its way higher. We are knocking on the door of the April 29 recovery high. It feels like there are an awful lot of people calling for a correction — or at least a digestion — and I’m one of them,” says Stovall, according to CNBC.

“We think we’re going to get to where we are now, or even as high as 1380 (on the S&P) and then maybe go down to the low 1300s before approaching 1400. That’s the scenario our technicians are talking about.”

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“Despite improving economic indicators, the U.S. economy remains at risk for a double-dip recession, which would indicate the country is likely mired in depression, says James Rickards, a hedge fund manager and the author of “Currency Wars: The Making of the Next Global Crisis.”

Unemployment rates and initial jobless claims are falling, growth rates are up and so are stock prices.

That doesn’t mean the country is out of the woods by any means.

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AAPL is trading @ $545; sporting a $500 billion market cap….

Economist and former U.S. Secretary of Labor Robert Reich says the biggest continuing problem for most Americans is their homes.

“Houses are the major assets of the middle class,” Reich writes in the Financial Times.

“Most Americans are therefore far poorer than they were six years ago. Almost one out of three homeowners with a mortgage is now ‘underwater,’ owing more to the banks than their homes are worth on the market,” writes Reich, now a professor of public policy at the University of California at Berkeley…”

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Full article

“If Windows Vista was Microsoft’s folly – a mish-mash of ideas not fully baked and aimed at multiple constituencies – Windows 8 is Microsoft’s rebirth. To get to ecstatic about it isn’t quite the direction I’d like to take this mini-review, but let’s just say that Microsoft is on the cusp of getting things right.

As we said before, Windows 8 will ruffle a lot of feathers. The first and most obvious comparison is with the new Windows Phone interface. The “Start” menu is gone, replaced by what amounts to the entire Metro UI. This UI – the one with the multiple, animated squares, is the one that matters.

Then there’s the Explorer. Every so often – and it will happen more in the beginning of Win8′s life cycle, the OS drops into “original” Windows, the Windows of tiny, uselessly-labeled buttons and overlapping windows and notification screens. Gone are the tiles and gently pulsing images, in comes Windows 95.

Woe betide Microsoft for maintaining ties to the original Windows with this odd accretion of functionality – they’re going to be ripped apart by the blogging masses – but this is the second time I’ve seen the interface and I’m accepting of the compromise. Going from Metro to “Windows” is like going from the Museum of Modern Art to a bodega Across the street. You’ll get more done, but damned if you don’t miss the cool, calm design and attention to detail….”

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“NEW YORK (Reuters) – The Justice Department is conducting a criminal probe into whether the world’s biggest banks manipulated a global benchmark rate that is at the heart of a wide range of loans and derivatives, from trillions of dollars of mortgages and bonds tointerest rate swaps, a person familiar with the matter said.

While the Justice Department’s inquiry into the setting of theLondon interbank offered rate, or Libor, was known, the criminal aspect of the probe was not.

A criminal inquiry underscores the serious nature of a worldwide investigation that includes regulators and law-enforcement agencies in the United States, Japan, Canada and the UK.

Several major global banks, including Citigroup Inc, HSBC Holdings Plc, Royal Bank of Scotland Group Plc and UBS AG, have disclosed that they have been approached by authorities investigating how Libor is set.

No bank or trader has been criminally charged in the Libor probes. It wasn’t clear which banks or traders the Justice Department is targeting in its criminal probe.

The Justice Department and the banks declined to comment….”

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(Reuters) – Costco Wholesale Corp posted a bigger-than-expected rise in quarterly profit on Wednesday, as rising gasoline prices led more members to fill up at the warehouse club’s discounted gas stations and then shop inside.

Rising gasoline prices had a positive impact on sales at Costco, which prices its fuel below nearby stations.

Sales at stores open at least a year, or same-store sales, rose 8 percent in February, outpacing a 7.6 percent rise that analysts had expected, according to Thomson Reuters data.

Sales rose 10 percent to $22.51 billion in the second quarter that ended on February 12, from $20.45 billion a year earlier.

Analysts on average were expecting $22.83 billion, according to Thomson Reuters I/B/E/S….”

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How stupid can you be?

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Mark Zuckerberg gives a second interview to 60 minutes yesterday….

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Collective Brands Inc. (PSS) : The owner of the Payless ShoeSource chain reported a smaller fourth-quarter loss than analysts estimated as new product assortments boosted sales.

Costco Wholesale Corp. (COST) rallied 1.3 percent to $86.40. The largest U.S. warehouse-club chain posted second- quarter profit that topped analysts’ estimates and said revenue growth was maintained in February.

DreamWorks Animation SKG Inc. (DWA) : The maker of the “Kung Fu Panda” films said fourth-quarter profit tumbled 72 percent as DVD sales declined.

Ferro Corp. (FOE) dropped 5.6 percent to $6.46. The maker of porcelain enamel for cookware and appliances reported an adjusted fourth-quarter loss of 8 cents a share, wider than the estimated loss of 4 cents a share.

FirstEnergy Corp. (FE) : The owner of utilities in Ohio, Pennsylvania and New Jersey said earnings excluding some items will be $3.30 to $3.60 a basic share this year, more than the average analyst estimate of $3.27 in a Bloomberg survey.

First Solar Inc. (FSLR) fell 8.2 percent to $33.40. The world’s largest maker of thin-film solar panels reported a fourth-quarter loss as panel prices dropped and it took charges related to restructuring efforts.

Kodiak Oil & Gas Corp. (KOG) dropped 3.4 percent to $9.97. The Denver-based oil and natural gas explorer with assets in the Williston Basin of North Dakota reported fourth-quarter revenue of $55 million, missing the average analyst estimate of $58.9 million.

LSB Industries Inc. (LXU) : The maker of chemical and climate-control products reported fourth-quarter earnings of $1.19 a share, beating the average analyst estimate of 86 cents.

Mylan Inc. (MYL) (MYL US): The generic-drug company agreed to pay $57 million to settle claims it caused the U.S. and California to overpay for drugs.

TeleTech Holdings Inc. (TTEC) : The provider of customer management support to companies reported fourth-quarter profit of 29 cents a share, excluding some items, missing the average analyst estimate of 39 cents. The company also announced the purchase of marketing analytics firm iKnowtion.

Universal Display Corp. (PANL) : The developer of technologies used in flat-panel displays reported fourth-quarter revenue of $18.7 million, topping the average analyst estimate of $17.9 million.

Gapping up 

VRSK +9.1%, APEI +6.9%, PSS +4.1%, CPRT +2.6%, Y +1.9%, WDC +1.6%, DB +1.2%, IRE +2.8%, IBN +2.1%, DB +1.8%, CS +0.9%, BCS +0.8%, MDW +3.7%,

VRSK +4.3%, SPLS +3.1%, CPRT +2.6%, SDRL +1.8%, COST +1.7%, LIZ +1.1%, FARO +0.4% , PAAS +2.5%, WDC +1.6%,  TOL +1%,  FRC +0.6%,

SVM +1.4%, HL +1.0%, GOLD +0.9%, SLV +0.9%, AU +0.9%, SLW +0.8%, BHP +0.7%,

Gapping down

TTEC -16.1%, FSLR -8.5%, PANL -5.9%, DWA -5.3%, VOCS -5.1%, KOG -5%, EXLP -4.5%, KYN -4.5%, SGY -3%, MWE -3%, NLST -1.3%, SODA -13.7%, CEDC -10.3%,

FSLR -6.6%, PANL -5.9%, FOE -5.6%, DWA -5.3%, KOG -5%, MWE -3%, RLH -2.6%, FE -0.9%, CSTR -1.8%, MRO -0.8%,CNQ -0.6%,  APOL -0.3%,

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Amazon.com Inc. (NASDAQ: AMZN) cut to Underperform and named the Bear of the Day at Zacks.
Apollo Group Inc. (NASDAQ: APOL) Cut to Hold at Deutsche Bank.
Cablevision Systems Corporation (NYSE: CVC) Cut to Neutral at Collins Stewart.
Chevron Corporation (NYSE: CVX) Raised to Buy at Deutsche Bank.
Coinstar, Inc. (NASDAQ: CSTR) Cut to Neutral at JPMorgan.
Discover Financial Services (NYSE: DFS) Raised to Outperform as Bull of the Day at Zacks.
Domino’s Pizza Inc. (NYSE: DPZ) Cut to Neutral at JPMorgan.
MetroPCS Communications, Inc. (NYSE: PCS) Cut to Neutral at UBS; Started as Neutral at Nomura.
Valmont Industries, Inc. (NYSE: VMI) named as Value stock of the day at Zacks.
Williams Companies, Inc. (NYSE: WMB) Raised to Conviction Buy List at Goldman Sachs; Started as Overweight at Barclays.
YRC Worldwide. Inc. (NASDAQ: YRCW) maintained Underperform but cut target to $6 from $15 at Credit Suisse.

In Play 

On the Wires

“The S&P 500 is likely to retreat to 1,330 as sluggish domestic growth, high oil prices and Europe’s debt woes take their toll on US stocks, according to Kevin Cook, senior stock strategist at Zacks.com.

Rose | Mueller | Stock4B | Getty Images

“This market is building a wall of worry,” Cook told CNBC recently. “The train has left the station and left a lot of fund managers behind who wish they’d bought. They all want a pullback and that’s why we’re not getting it at the moment. A pullback will be bought even before 1,330 on the S&P.”

In a note, Cook identifies a number of what he calls “bricks for a wall of worry” that could contribute to a retreat of the S&P 500 [.SPX  1372.18  —  UNCH    ] from the current levels, including a slowdown in the economy.

He believes that first quarter US gross domestic product growth could be close to 1 percent, as the 2.8 percent expansion seen in the fourth quarter of last year was largely due to inventory rebuilding.

Cook also says that the index could tilt downwards as earnings and sales forecasts at US companies become flat.

“These and other factors make a good wall for markets to climb near-term,” Cook said. “I’m a buyer of 3-6 percent pullbacks to S&P 1330 and 1300.”

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“The scale of money printing in the West has become so massive that the world may fall prey to “monetary anarchy,” with traces of bubbles appearing everywhere.

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At least that’s what some critics see in the latest round of cash pumping by major central banks.

It is also an eerily reminiscent of 2011, when similarly generous monetary easing sparked higher oil prices, slowed the recovery and stoked speculative hot money flows into vulnerable emerging markets.

The European Central Bank  alone is expected to lend another half trillion euros or more of super-cheap money to banks on Wednesday, following Japan and Britain which have already injected fresh cash. The Federal Reserve has promised to keep interest rates low until 2014 and act further if needed.

There is a sense of deja-vu in financial markets. Just like the last time a wave of money was pumped into the world financial systems in 2011, crude oil – fuelled also this time by Middle East tensions – has jumped 15 percent this year.

As a result, riskier assets such as equities are already coming off new year highs. Rising emerging market currencies are forcing some central banks there to intervene.

The scale of money creation since the onset of the global credit shock can be seen in the size of central banks’ balance sheet expansion.

JP Morgan says G4 central bank balance sheets have more than doubled since 2007 to 24 percent of combined gross domestic product and will reach 26 percent this year.

“We have Monetary Anarchy running riot, where the elastic band between the real economy and the current liquidity-fuelled markets is stretched further and further beyond credulity,” Bob Janjuah, head of tactical asset allocation at Nomura, noted.

He said bubbles were visible in all asset classes because central bank balance sheets are at the core.

“If/when the current cycle implodes, central banks which have seen explosive balance sheet growth will add to the problems, rather than being able to act as credible lenders of last resort,” he said.

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