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2010-02-26 01:53

MARKET FROZEN, AND THAT'S GREAT

This has been a tough week. It has been a draining week with the hearings, other shenanigans on Capitol Hill, and economic data that has been lousy (and that's being conservative). Even the rare beat was laced with questionable components. Today, the Chicago PMI report came in ahead of consensus with a reading of 62.6 versus consensus of 60.0. Overall it's good news, and a sign of expansion, though trends were uneven across the board. > New Orders: dipped to 62.6 from 66.4 month over month > Employment: plunged to a reading of 53.0 from 59.8 > Prices Paid: edged higher to 67.7 from 66.2 So the market was sideways although it initially plunged after the release of existing homes. I think that we are getting back to that silver lining thing where investors are willing to rationalize the market higher. Of course, for the moment, the market would enjoy a moral victory by just closing in the black. On that note, one stock that stands out is Mohawk (MHK), the flooring company. Management made the statement that it's strategically positioned for growth. It was also pointed out there are different types of demand around the world. * Mexico: Ceramic tiles * Russia: Laminates * Western Europe: Wood Floors January Existing Home Sales After a week full of different housing data, the latest existing home sales report was not particularly surprising, posting a 7.2% annually adjusted decline month to month in January. The poor sales results included declines of 10.9%, 6.9%, 7.4%, and 5.2% in the Northeast, Midwest, South, and West, respectively. Similar to the new home sales report, existing home sales seem to have hit a significant downtrend in recent months, despite the deadline, and subsequent revision, of the nationwide tax credit. Given the sustained drop in sales in both new and existing homes, we are beginning to suspect that most of the pent up demand was already squeezed out by the first tax credit deadline in November. There may now be limited demand to go on from this point, although we do expect a modest boost when the new deadline of April 30 approaches. The one semi-silver lining to the existing home sales report was inventory, which posted a slight 0.5% drop from December to January. It is vitally important that foreclosures do not overtake demand again and flood the market. The good news is that even though sales are weakening again, the market is keeping its head above water. We have to wonder though if sales can get any slower without inventory beginning to build up. In addition, there are still many potential hazards in place on the foreclosure side and all the data so far suggests the problem has not been resolved at all yet, even with the Obama Administration's $75.0 billion mortgage modification plan. Final Note Well, the market is frozen, and that's great, because it could easily be off 100 points on the DJIA and nobody would bat an eye.

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