By Clyde Noel
Investors looking for good reasons to buy stocks again
Investors are looking for excuses to put some of the reserves they have been accumulating over the past several months back into the market again. Clear signs of improvement in business conditions are making a positive impact on the market.
Investors were pleased by three positive economic reports last Friday. The Labor Department said its producer price index fell in June, the Commerce Department reported retail sales rose 0.2 percent in June and the consumer sentiment for July is reportedly showing an increase.
Last week the Nasdaq composite index was up four percent, but down 15.6 percent, year to date. The Dow industrial index was up 2.8 percent for the week but down 2.3 percent, year to date.
The Town Crier index of 50 stocks was up 1.55 percent for the week, but down 13.5 percent since January 1. Gainers led losing issues five to one. It was the first week since March that all three indices were on the positive side.
Last week, investors set aside their worries and opened their wallets. Apple Computer rose 12.8 percent, as did Cisco Systems, 11.61 percent; Harmonic, 21.48 percent; Sun Microsystems, 14.33 percent; and 3Com Corp., 7.1 percent.
Intel Corp. was up 6.19 percent for the week and is beginning to look interesting to investors. It’s the leader in the PC side of technology and semiconductors are usually the first to rebound after a lengthy negative period.
Intel announces its earnings this week and that’s a big key to consider when investing in the stock. P/Es are still in fashion.
If the fundamental reason for buying a stock changes, then consider selling. If the underlying fundaments remain the same, then stay in the stock.
Also consider companies whose management has been through tough times and knows what to do when the going gets tough. Intel appears to be a company in this class.
Investors are discriminating and will look for significant tech gains before investing. They’re still buying into large high-profile tech companies like Microsoft and IBM, rather than start-ups with no history of profit. They want to see earnings and that’s what moves the Nasdaq.
Last week, three closely watched companies, Microsoft, Yahoo! and Motorola, reported second-quarter earnings that were slightly better than analysts predicted and each had a respective move upward.
This week, more earnings announcements will begin to pour in AND positive results will increase the market’s feeling for investment. A lot of investors feel we are at the bottom and recovery is upon us.
Noel, a seasoned investor, covers the stock market for the Town Crier.
