Weekly Stock Market Information Letter, May 19, 2008

Monday, May 19, 2008

Weekly Stock Market Information Letter, May 19, 2008

The Week Ahead: Optimism that earnings are poised to move higher are propelling stocks despite consumer sentiment at its lowest level since 1980, oil over $126, and housing inventories at an 11 month supply. Leading economic indicators on Monday may give further clues. Tuesday, the Producer Price Index is due while Wednesday the FOMC Minutes will be released. Housing data on Thursday and Friday include the Housing Price Index and the existing home sales for April respectively.

Stocks to Watch: First quarter earnings for Kohl's (KSS) came in lower than a year ago with a weak outlook given mainly do to high oil prices and slackening consumer demand. This sent the whole retail sector down but many are near support. Advanced Auto Parts (AAP) gapped up strongly from the mid 30's after beating estimates for 1st Q numbers, but 40 may be resistance. Meta Financial Group (CASH) reported a big turnaround in the 2nd Q after nearly being de-listed in April as revenues rose 74% and earnings quadrupled.

Special Note: Second half earnings projections in excess of 10% seems high as expectations for a fast recovery are built into stock prices. This may be setting up for disappointment later though for many reasons. One is the low quality of the recent GDP numbers and possible downside revisions to come. Two, domestic demand via a weak consumer. Three, a weak housing market getting worse with a new wave of ARM loan resets coming, and finally high oil and gasoline prices hurting both consumers and businesses.

Commentary provide by Barry Ward, Registered Principal, NobleTrading.com, Inc.

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