Thursday, February 03, 2011

Market Ignores Strong Round of Economic Data, Retail Sales

The market is lower in early trading, despite a batch of solid economic news and a raft of better than expected same-store sales reports from retailers. There was also another round of earnings reports coming out last night and this morning, with mixed reactions among those stocks reporting (V, NOV, HIG, MRK, CVS, CI, etc).

A couple of notable retailers included Costco (COST), whose strong report spiked the stock to a new high this morning. And BJ Wholesale (BJ), which is rocketing higher after the company said it would pursue strategic alternatives (read: sell itself).

In economic news, the ISM Services index rose to a better than expected 59.4, which marks a five-year high. Weekly jobless claims fell by more than expected, and nonfarm productivity for Q4 rose 2.6%, above estimates. Also, unit labor costs fell -0.6%, dampening inflation fears. The 10-year yield is higher on the solid economic reports, topping the 3.50% level.

China and Hong Kong markets were closed overnight, and Japan fell slightly. Europe is also lower this morning as conditions in Egypt have become more violent.

The dollar is rising today, which is weighing on commodities. Oil is down slightly to $90.68, and gold is also a little lower near $1328. The volatility index (VIX) is higher by 1.3% to 17.50.

Trading comment: More growth stocks are emerging from their recent corrections, which makes me think we are more likely to see sideways consolidation for the overall market than an outright correction. But as we know, anything can happen, which is why we monitor conditions daily. Nonetheless, I am buying partial positions in breakouts I am seeing with an eye towards adding to them on pullbacks. Some of the stocks I am eyeing include CMG, LULU, PCLN, and GILD to name a few.


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