Financial Professionals

Market Insights

A A A

The First Week of June

06/01/2010

First, let's touch on the equity markets coming out of May. I currently remain "invested," having moved in late May from "underweight" back toward "market weight." Remember that we drive three speeds in 2010: underweight, market weight, and overweight -just don't get off the track completely. The names I have acquired are all defensive, not the go-go Hedge Fund VIP list names. A weekly close below 1040 in the S&P 500 Index will encourage further downside momentum but obviously by my positions I more inclined toward "hanging above."

S&P 500 Index

Source: Bloomberg

 

The first week of June presents many critical economic data points

Tuesday June 1
ISM manufacturing: 10am Last month, the ISM accelerated to 60.4, the highest level since 2004. The improvement in ISM, and dramatic 2009 surge, was a leading indicator for the 2009 capital markets recovery. Now I expect moderation, with 60 becoming a "resistance" level. That's ok though, we will take it. Remaining above 50 is what is critical over the next few months; we don't want to slip below 50 which would signal contraction in manufacturing. The Street is looking for Tuesday's figure to come in at 58 to 59.


Source: Bloomberg 

Wednesday June 2
MBA Mortgage Applications: 7am - last week +11.3%

Pending Home Sales: 10am - month-on-month the street is expecting +5.0% versus last month +5.3%
Domestic Vehicle Sales: early afternoon - last month 8.78 million, this month 8.90 million - annual rates

Mortgage Apps surged last week on the drop in mortgage rates. However, I still expect all housing numbers to soften - a soft patch ahead - with the expiration of the government homebuyer tax credit.

Domestic Vehicle Sales should increase modestly. The most relevant development in the past week is the that U.S. Treasury is seeking a lead underwriter for a General Motors IPO. Taxpayers own 61% and will unload those shares by the end of this year. This will be a positive development for the capital markets. I for one will be a buyer of some IPO shares. Why not?  I am the proud owner of two GM Vehicles.

Friday June 4
Change in Nonfarm Payrolls: 8:30am

Within the report, private sector jobs matter most to me. Goldman Sachs, which I believe has the most accurate forecasting economic team, is expecting a headline figure around 500,000 and private sector jobs creation @150,00. GS also expects the unemployment rate to move from 9.9% to 9.7% -  the capital markets will be the most "at risk" on a miss.


Source: Bloomberg

 

 

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.