First of the Month is Strong

In market news today, the SOX, the Philadelphia Semiconductor index, exploded for more the 4% pushing the NASDAQ up in the process.  This type of move generally carries some event and on Wednesday morning the event was semiconductor stock analysts.  The big story, and this happens every year, is the second half of the year when analysts expect a major push on capital spending which translates to companies refreshing their technology.  

We could speak about the possibility or impossibility of that event today like the analysts did but none of us can predict the second half of the year.  We try to say that the consumer is at the end of the financial rope and needs to slow down their credit expansion which Should mean companies would actually pull down their cap ex spending.  

In that regard, Wednesday morning’s news on personal income and spending does dispute that statement as personal income rose 0.7% and spending rose 0.9%.  These numbers combine to let us know that people are spending more than their increase in salary.  Indeed, 2005 was the first year in a long time that the national savings rate was negative, meaning that people spent more than they earned.  

January construction spending was up a modest 0.1% with the consensus being up 1.0%.  This is generally in line with new home sales from earlier in the week, or should we say weak.  

In the mean time the stock market is generating a lot of turbulence but not going any where fast.  Wednesday, being the first of the month of March, didn’t really surprise us when there was a substantial rally but what do the bulls do for an encore?  We have seen a back a forth movement for a few weeks now and that tune is named “Turn”.  We fully expect that the market will drop and we say that for several reasons but one of the strong reasons has to do with the market.  Mr. Market doesn’t usually let people in if a bull market is afoot.  

Be extremely careful out there…

Dow Industrials:  11,053.53  +60.12
RYVNX:  18.35
RYAIX:  21.82
TLT:  90.48  (32 cent xdiv)
BEGBX:  13.08