Are investors tired of the market rally? After last week’s run-up in equities and a so-so earnings and economic data picture today, only tech stocks see much action, which suggests investors may be a little weary. The volume of shares traded is noticeably down to less than 4 billion, compared to almost 5 billion posted each day last week.
Investors seek bargains amongst tech stocks, which were battered for much of the first nine months of the year. The hunt for undervalued techs gives the Nasdaq some lift, though this is less than half the decline posted last Friday.
There seems to be continued rotation out of energy into techs and discretionaries, fuelled by a steep decline in the oil price and renewed forecasts of milder winter weather this quarter. Well have any weather forecasters been to the Northeast lately? It doesn’t feel like a mild winter in New York at the moment!
Regardless of a milder winter, the bottom is unlikely to come out of oil prices as long as OPEC acts. Oil peaked in July not on the back of fundamentals but on sentiment – primarily geopolitical worries and expectations of another “Katrina”. So oil may give up the odd gain but OPEC action and colder weather will continue to prevent a repeat of the collapse in price from July to September.
PG, the bellwether for consumer staples, reports fiscal 2007 first quarter results tomorrow morning before the opening bell. I expect the results to be good partly because Kimberly-Clark, a PG competitor, posted good results last week. The savings from the integration of Gillette should also continue to filter to the bottom line.
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