Market Commentary: Wednesday 12.02.09

The major averages ended mixed but in the lower half of their intra day range as investors digested the latest round of economic data. Volume, an important indicator of institutional sponsorship, was lighter than Tuesday’s levels on both major exchanges which helped offset the weak close. Advancers led decliners by almost a 2-to-1 ratio on the NYSE and by a 17-to-11 ratio on the Nasdaq exchange. There were 46 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, one more than the total of 45 issues that appeared on the prior session. Leadership among high-ranked growth stocks had dried up in recent weeks, so the expansion in new highs was a welcome improvement.  New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Economic Data Mixed:

Before Wednesday’s opening bell futures fell after ADP Employer Services, the country’s largest private payrolls company,  said US employers slashed -169,000 jobs last month which topped the –150,000 expected by Wall Street. Investors use the ADP private report as a proxy for the government’s official jobs report which is slated to be released on Friday. Analysts expect that US employers slashed -100,000 jobs last month while the unemployment rate held steady at 10.2%.

At 2pm EST, the Fed released its Beige Book which summarizes the current state of the economy. As expected, the report showed that the economy continues to recover which was largely expected by Wall Street. The Fed said “economic conditions have generally improved modestly since the last report.” The report also showed that eight districts indicated some pickup in activity or improvement in general economic conditions, while the remaining four: Philadelphia, Cleveland, Richmond, and Atlanta said economic conditions stayed the same and/or were slightly mixed.

Price & Volume:

So far, the benchmark S&P 500 index has surged a whopping +64% since its March low. As a result valuations jumped to about 22 times its companies reported earnings which is the highest level since 2002. While on the topic of earnings, the latest estimates call for 2009 earnings to fall -11% before jumping +22% in 2010. Of course, these are only estimates and they will change as we make our way through the holiday shopping season. For the most part, the major averages are acting healthy as they remain perched just below resistance (their 2009 highs) while they consolidate their recent gains. A move above resistance will probably lead to another leg higher.