Stocks are trading modestly higher on Monday despite weak housing data for
the month of May. Sales fell, inventories rose, and housing prices slipped for
the tenth month in a row. But investors were relieved that the data wasn't even
worse. The bullish reaction proves once again that expectations are what counts
on Wall Street.
Stocks are also getting a boost from lower bond yields and
oil prices, setting the stage for a strong bounce on Monday after Friday's
selloff. The Dow Jones Industrial Average fell 1.4% on Friday on concerns that
weakness in housing and mortgages will hurt the economy. Once again the culprit
was Bear Stearns (BSC | news | PowerRating | PR Charts ), which dragged
down the entire Investment Brokerage Industry on Friday.
On Friday the National Investment Brokerage industry fell
4.6%, making it Friday's biggest industry loser. The group has a PowerRating
(for Industries) of 5, and on Monday it was down another 0.2% in mid-day
trading. Recent weakness reflects ongoing hedge-fund problems at Bear Stearns.
The stock is near a three-month low because the firm has been losing money in
two of its hedge funds that are heavily invested in mortgage securities. These funds are
under pressure from the meltdown in subprime lending, which is experiencing
record levels of defaults. Shares of Bear Stearns have been struggling for
the last few trading days, and are off another 1.5% on Monday to $141.67. This
is hurting the entire brokerage group, a theme I originally discussed on
Thursday.
Bear Stearns stock has a PowerRating (for Investors) of 7 and a market
capitalization of $20 billion.
Every day we highlight industry leaders and laggards, with
a focus on groups with high PowerRatings (for Industries).
Our quantitative data from 1995 through 2006 have done a good job of
identifying industries that have
risen on an annualized basis. Investors who seek growth and
safety should consider our list of
Top Rated
Industries. One such group is Oil and Gas Equipment and Services, which rose
0.9% on Friday. The group has a PowerRating (for Industries) of 9, and it has
risen about 25% over the last year due to strength in oil and gas prices. On
Monday the group is in retreat as oil prices ease: the Oil and Gas Equipment and
Services industry is down 1.6% in mid-day trading on Monday.
Investors should also note our
Industries to Avoid (groups that have low PowerRatings for Industries). The
results of our
simulated trading show that industries rated 1
have lost money on an annualized basis. On Monday there were three lagging
groups that have a PowerRating (for Industries) of 2: Drug Manufacturers were
down 4.1%, Gold was down 1.1%, and Recreational Vehicles were down 0.7%.
Rob Martorana is Director of Content for PowerRatings.net.
Rob was most recently at TheStreet.com as the Director of Content for
Professional Products. Robert has spent 22 years on Wall Street, and was a
portfolio manager and head of U.S. equity research at Barclays Private Bank.
Robert also managed small-cap stocks at Schroder Capital Management
International, was an equity analyst at Vontobel USA, and was an editor and
senior industry analyst for The Value Line Investment Survey.
