Market Report – March 26, 2012

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In The Rear View Mirror: Stocks moved higher on Friday, but those gains were not enough to erase weekly losses for the S&P 500 and the Dow Jones Industrial Average. The S&P 500 endured its worst week of 2012 after rallying in 10 of 11 weeks, but the Nasdaq did move higher, good enough for the tech-heavy index’s sixth consecutive weekly gain. A large part of the Nasdaq’s positivity for the week can be attributed to news of Apple (Nasdaq: AAPL) finally declaring a dividend.

By the time the closing bell sounded on Friday, analysts and investors were left thinking U.S. stocks might be poised for a breather. Arguably, the breather has already started and that’s not surprising. On a historical basis, the month of March, as far as stocks are concerned, starts off like a lion and finishes with a whimper (out like a lamb).

Along those lines, it’s important to note that since October 2011, the S&P 500 has surged 27%. About $3.5 trillion has been restored to American equity values as a result, according to Bloomberg.

One thing to consider: Energy and industrial names led the market lower last week.

That trend cannot continue if the bulls are hoping to drive the broader market higher. Something else to consider: Next week is the last week of the month and fund managers usually do some end-of-month window dressing during a month’s last week to assuage clients.

The Markets @ 3/23/2012
Index Close Weekly % Change YTD Change YTD%
DJIA 13080.73 -151.89 -1.15% 863.17 7.06%
NASDAQ 3067.92 12.66 0.41% 462.77 17.76%
S&P 500 1397.11 -7.06 -0.50% 139.51 11.09%
NYSE Comp 8180.06 -90.35 -1.09% 703.03 9.40%
NYSE Amex 2407.11 -16.77 -0.69% 128.77 5.65%
RUS 2000 830.03 -0.15 -0.02% 89.11 12.03%
VANG INTL 14.6 -0.22 -1.48% 1.54 11.79%
USX CHINA 5054.19 -101.91 -1.98% 524.39 11.58%
EMERG MKTS 6832.56 -177.41 -2.53% 827.25 13.78%


Market Report

The biggest issues stocks had to contend with in the just completed week were some “sort of disappointing” housing data and legitimately concerning economic data out of China. We say “sort of disappointing” regarding the housing data because these data points have been quite bullish for several months and the numbers reported last week were not alarmingly bad. Here’s a brief recap.

On Tuesday, the Commerce Department said new building permits jumped 5.1% to a seasonally adjusted annual rate of 717,000 units in February. That topped the reading of 690,000 units economists were expecting. On Wednesday, the National Association of Realtors said existing home sales fell 0.9% in February to a seasonally adjusted annual rate of 4.59 million. Economists expected a February reading of 4.6 million.

And to end the week, the Commerce Department said new home sales fell 1.6% in February to a seasonally adjusted 313,000-unit annual rate, good for the lowest reading since October 2011. Economists expected a 325,000-unit rate in February.

The real pain in the neck was the preliminary March reading for China PMI of 48.1. That’s down from 49.6 last month and good for the fifth month of declines. Remember, readings below 50 are considered negative.

NASDAQ Up…everyone else DOWN

The Dow gave back 152 points this week (-1.15%) but still closed above the 13,000 level at 13,080.73. Up 863.17 and +7.06% YTD.

The Nasdaq inched up 12.66 points which was a whopping 0.41% but still increased the YTD gains to 17.76%. The S&P 500 gave back a half a point but is still showing double digit gains for 2012.

The Russell 2000, our bench mark small cap index was essentially flat for the week…down only 0.02%, preserving a 12% gain YTD.

The Internationals and Emerging Markets both moved in the same direction…DOWN… minus1.48% and minus 2.53% respectively. The USX China Index lost 177.41 points (-1.98%), closing at 5054.19; still up an impressive 11.58% YTD.

Mixed Weekly Results

Gold showed a little strength this week, closing Friday at $1.662.30…up $6.80. WTI Crude Oil … was down $0.19 for the week…closing at $106.87.

The dollar lost 0.0053, closing at 0.7537 Euros; the 10-year bond reversed its trend and closed up $0.563 at $97.938, pushing the yield down to 2.25% and the 30-year bond gained $1.844 to close the week at $96.594 also moving the yield down to 3.31%. Less than stellar economic data seemed to have brought buyers back to treasuries this past week.

The Bottom Line for Stocks:

Looking toward next week, it’s pivotal that high beta fare such as energy names start to perk up again because the tech sector cannot lead the rally alone forever.

Chinese Microcaps Looking Attractive

Chinese stocks are beginning to look oversold and their valuations are now quite attractive relative to other emerging markets, so those could be catalysts to stoke some buying too.

One China microcap that looks to be seriously oversold is China Global Media, Inc. (OTCBB: CGLO) at $0.25, which as recently as 1/19 traded above $2.00 and was cursing along in the $1.50 range until a wave of selling in the last six weeks knocked it down over 80%.

On 02/06/12, China Global Media announced its financial performance goals for fiscal years 2012 and 2013. Based on the strong financial performance achieved in fiscal year 2011, CGLO said it will attempt to achieve annual turnover of US $80 Million and annual profit of $15 Million in fiscal year 2012… and achieve annual turnover of US $150 Million and annual profit of $30 Million in fiscal year 2013. Assuming the current cap structure of 47.5 million shares, that would be over $0.30 per share earnings this year and $0.60 in 2013. AND…this stock is trading at less than a 1 Forward P/E.

Click here to read the full release:

With end-of-the-month window dressing on tap, a modest uptick could be in the cards and that could mean now is the time to consider which micro-caps might capture some large percentage gains in a somewhat lethargic market environment.

Research and Editorial Staff
MicroCap MarkePlace