So far, June’s a LOSER TOO

By David B. Armstrong, CFA | Jun 06, 2011 | Weekly Market Commentary

Along with all 4 weeks of May ending up as losers for the Standard & Poor’s 500 and the Dow Jones Industrial Average (DJIA), we can now log the first week of June into the bad news column as well…along with the biggest one day drop since August of 2010.  However, the market did not close at its low of the day by the end of trading on Friday.

While the well known index for manufacturing from the Institute for Supply Management (ISM) came in well below expectations, it is still positive and the index for services beat expectations. There is some other good news mixed in with all the negativity as well.

The equity markets we track were all losers last week.  The Dow Jones Industrial Average (DJIA) lost -2.33% to finish at 12,151, the S&P 500 Index lost -2.32% to finish at 1,300 and the Nasdaq Composite Index lost -2.29% to finish at 2,733.  The Russell 2000 index, which tracks the performance of small capitalization stocks, lost -3.36% to finish at 808.

The bad news is well known to all by this time.  The markets are down about 4% from the April high on the news of manufacturing slowing, Greece, unemployment and the possibility of Moody’s downgrading the U.S.

There was some positive economic news too.  Last week, Ward’s released the third quarter (3Q) vehicle production schedules, which shows a huge increase.  Production is planned to move up from 8.1m vehicles to 9.6m vehicles – that’s a lot of extra production, about a 19% surge.  The importance of this statistic should not go un-noticed, as cars and houses really impact the economy since there is so much that feeds off of those two things.  We will probably end up seeing this good news pulled into future economic releases.

Additionally, there was better news out of Japan.  The Bank of Japan’s Governor said that the supply constraints from the disaster(s) are “easing much earlier than expected” and Toyota expects to resume production to 90% in June and match last year’s output for the full year.

U.S. average hourly earnings (year over year) are holding steady, according to Ed Hyman at ISI Group, growing just below 2.0%.  This presents a firewall for inflation.

Finally – while we refrain from political discussions in general, it is noteworthy that President Obama is coming (and will continue to come) under more pressure to do something about the economy.  In a strange way, that can be looked at as a positive.  Saturday’s Washington Post cover story said this, “Behind the numbers in Friday’s jobs report are scared small-business owners, slashed state budgets, dried-up federal stimulus funds and lingering uncertainty that has taken hold from corporate boardrooms to factory floors around the country.”

That’s from the Washington Post!

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**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.

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David B. Armstrong, CFA

President & Co-Founder

Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....

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