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Saturday, October 23, 2010

Are you ahead for the stock market ? Stocks to Watch

A Day Trader's Little Instruction Book: Wit and Wisdom for the Online InvestorMaybe not as robust as September's giddy rebound from the doldrums of August, but decent nonetheless.

by C.  Blaine

How does that feed into next week? Plenty.

There will be several reports on home sales and prices. There's a big report due Thursday on gross domestic product in the third quarter. GDP is a snapshot of economic activity.
Whats ahead for the stock market?

The market will go up.

Interest will go up.

Prices will go up.

Cost of living will go up.

Taxes will go up.

Then it will all come down like a ton of bricks. Again.


StockScouter: 10 hot picks to watch

And it is one of the biggest weeks of the third-quarter earnings season, with seven members of the Dow Jones Industrial Average ($INDU) reporting, including DuPont (DD), Procter & Gamble (PG) and Microsoft (MSFT). A third of the companies in the Standard & Poor's 500 ($INX) will report. (Microsoft publishes MSN Money.

Big Oil weighs in with ConocoPhillips (COP), Exxon Mobil (XOM), Chevron (CVX) and Royal Dutch Shell (RDS.A).

And there are interesting consumer companies that will help us fill out the economic picture: Lithia Motors (LAD), Panera Bread (PNRA), Whirlpool (WHR) and Ruth's Hospitality Group (RUTH), parent of the Ruth's Chris steakhouse chain.

Corporate earnings have been better than expected and helped stocks like Google (GOOG), Monsanto (MON), Delta Air Lines (DAL), Ford Motor (F) and Dell (DELL) move 10% or more.

The economic data have been better, with the rather large exceptions of housing and jobs.

See what a better broker can do for you

But there was even a touch of good news for the construction industry. The Architecture Billing Index, a measure of activity in the architectural profession, crossed 50 in September -- above 50 means expansion -- for the first time in two years.

Airlines have been reporting rebounding business travel.

At the end of the week, the Dow was up 3.2% for the month, with the S&P 500 up 3.7% and the Nasdaq Composite Index ($COMPX) up 4.7%.

Markets for the week



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YTD chg.

Dow industrials





S&P 500










Russell 2000





Crude oil





(per barrel)

U.S. Dollar Index





10-yr. Treasury










(per troy ounce)

Here's what to look for:

Housing will dominate the economic headlines

Five reports on housing will come in during the coming week, and they're not likely to offer much cheer.

Start Monday with the National Association of Realtors' September existing-home sales report. Nomura Securities is forecasting an annualized rate of 4.35 million units, up 5% from August and 13% from their recent lows.

On Tuesday, two important reports on price trends are due: the S&P/Case Shiller index for August and the Federal Housing Finance Agency's Home Price Index. Case Shiller measures prices in 20 markets. Nomura sees prices up 2.1% from a year earlier. That would feed into the theme that the economy slowed this summer.

The FHFA looks at prices nationally.

There are some who believe the Case Shiller report will paint too rosy a picture. Clear Capital, a research firm that watches real-estate trends, says prices nationally fell nearly 6% in the last two months and could be headed lower.

On Wednesday, the Commerce Department will report new-home sales for September. The consensus is for sales to come in at an annualized 300,000 rate. That's still flirting with record lows.

Elsewhere in the economy

The big report comes Friday when the Commerce Department reports on GDP in the third quarter.

Most analysts see GDP rising at maybe an annualized 1.7% as the economic recovery slowed markedly during the quarter. That's no better than the second quarter and is a reason why there's been so little job growth.

Also due in the week ahead:

Consumer Confidence Index, due Tuesday from The Conference Board. Nomura Securities sees the index rising to 51. IHS Global Insight sees it only reaching 46, with high joblessness and fear of job losses coloring confidence.

Durable-goods orders, due Wednesday from the Commerce Department. This should rise, thanks to new orders for Boeing (BA). The company booked 257 new airliner orders in the last three months, the most since April 2008. Not all of those orders have been included in the orders report.

Initial jobless claims, due Thursday from the Labor Department. These will probably come in at around 450,000, frustratingly high but still off 40% from peaks reached in early 2009.

Chicago Purchasing Managers Index, due Friday from the Chicago chapter of the Institute for Supply Management. Nomura sees the index declining from 60 to 58. That still means expansion, however. Look for higher prices.

An enormous week for earnings

In all, 177 S&P 500 companies will report earnings, one of the heaviest weeks of the current earnings season.

About 83% of S&P 500 companies that issued reports through Thursday had beaten analysts' earnings estimates. About 64% had been revenue estimates.

The big question is whether the results will continue to be strong.

Here's a rundown:

Monday: Amgen (AMGN), Lorillard (LO) and Texas Instruments (TXN). The latter is the key report, offering a glimpse on growth in the mobile phone industry.

Tuesday: Bristol-Myers Squibb (BMY), Cummins (CMI), DuPont, U.S. Steel (X) and Waddell & Reed Financial (WDR).

Watch the results of Cummins, DuPont and U.S. Steel for clues on how Smokestack America is faring. Waddell & Reed may discuss how its trading may or may not have affected the May flash crash.

DuPont is the top Dow performer in 2010, up 39%. It has raised its earnings guidance three times this year.

Wednesday: Allstate (ALL), auto-parts maker Borg-Warner (BWA), cable operator Comcast (CWCSA), ConocoPhillips, Panera Bread, Martha Stewart Living Omnimedia (MSO), Procter & Gamble and Whirlpool.

Panera Bread, Martha Stewart Living Omnimedia and Whirlpool will all offer a sense of consumer confidence.

P&G has been struggling with price pressures as stores push their own store brands on many consumer products. Nonetheless, it is sporting a 3% dividend yield, which is higher than the 10-year Treasury yield. Shares are up 5% this year.

ConocoPhillips starts the big oil reports. Shares are up 20% in 2010, despite flat oil prices and falling natural-gas prices.

Thursday: 3M (MMM), Blackstone Group (BX), Dow Chemical (DOW), Lithia Motors, Exxon Mobil and Microsoft. Blackstone is up 250% since bottoming in March 2009. But it's still 61% below $35.06, its closing price on its first day as a publicly held company.

Watch Lithia Motors to gauge the strength of auto sales.

As the world's largest oil company, Exxon will offer a feel for the global energy market. Microsoft's challenge is to show that it is rebounding from the lows of 2009.

Friday: Chevron (CVX), Merck (MRK), Estee Lauder (EL), Ruth's Hospitality Group. Merck will be closely watched for what it says about growth and its drug pipeline. Chevron will sketch in the global energy market.

Ruth's Hospitality is the parent of the Ruth's Chris chain of steakhouses, which have always been popular among the expense-account crowd. The question is whether it is starting to see a rebound from the worst of the recession.

TJX (TJX, news, msgs) has prospered and grown in tough economic times as consumers shop its stores for name-brand apparel and housewares at discounted prices.

The stock hit an all-time high of $48.50 in April, but the run-up stalled as investors pondered whether the operator of the T.J. Maxx, Marshalls and HomeGoods chains would continue to take market share from full-price rivals as the economy improved.

See what's ahead for the stock market

TJX appears on a daily list created using StockScouter, an MSN Money tool that identifies stocks with strong growth prospects in the near term. All stocks with Scouter ratings of 8, 9 or 10 are considered for the list, which is then shortened to exclude any stock with a trading volume below 50,000 shares a day. The remaining stocks are ranked on the basis of market capitalization, sector membership and whether they are growth or value stocks.

Like other off-price clothing purveyors, TJX has benefited from recession-induced inventory surpluses at department stores and other full-price retailers. Manufacturers have been forced to unload excess merchandise at deep discounts, and TJX passes along a portion of those savings to shoppers.

How to pick stocks

The company, headquartered in Framingham, Mass., operates more than 900 T.J. Maxx and more than 800 Marshalls stores in the United States, where it also has about 320 HomeGoods and 150 A.J. Wright stores. It operates more than 200 Winners and about 80 HomeSense stores in Canada, as well as about 260 T.J. Maxx and 14 HomeSense stores in Europe.

TJX raised its full-year guidance in August as it reported a 17% increase in second-quarter income. Comparable-store sales rose 3%. In its fiscal year ended Jan. 30, TJX posted same-store sales growth of 6%.

Analyst Brian Tunick at JPMorgan Chase forecasts same-store sales growth slowing to between 2% and 3% this year.

Company insiders, including CEO Carol Meyrowitz and Chief Financial Officer Jeffrey Naylor, have sold a significant number of TJX shares this year as the stock price has climbed. The executives sold 175,460 shares, or $7.8 million worth of stock, earlier this month. In addition, Naylor in February exercised options and sold 300,000 shares for more than $12 million in gross proceeds, the largest sale ever recorded by a TJX insider, The Wall Street Journal reported. Meyrowitz previously sold more than 100,000 shares.

Stock Market Trading Success Subliminal CDOf 16 analysts covering TJX, eight rate the stock a "strong buy," one has a "moderate buy" rating, six rate it a "hold," and one has a "moderate sell" rating.

The company has a StockScouter rating of 10, meaning the stock is expected to significantly outperform the market over the next six months with less-than-average risk.

StockScouter top 10 Company Sector Friday's close YTD (%) Scouter score

Xilinx (XLNX, news, msgs)

Integrated circuits




Qwest Communications International (Q, news, msgs)





Focus Media (FMCN, news, msgs)





Altera (ALTR, news, msgs)





Apple (AAPL, news, msgs)

Personal computing




ConocoPhillips (COP, news, msgs)

Oil and natural gas




DuPont (DD, news, msgs)





EMC (EMC, news, msgs)

Data storage




Juniper Networks (JNPR, news, msgs)

Networking equipment




TJX (TJX, news, msgs)

Discount retail



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