The Quant View: Stock Market Hindered by Global Ills

We enter a new month this week mired in a persistent global malaise.  The weekend increase in Israeli-Palestinian tension doesn’t help, nor does the continued inability of BP to deal with the largest oil spill in history.  Economic news this morning was positive but without sufficient importance to do much more than soften the opening gap down.

Weakness in the Euro continues to weigh upon all markets, and the domestic market (as represented by the S&P500), while slightly positive last week, remained below its 200 day moving average on modest volume.  Small caps did a bit better than other caps, but all were positive (although muted).  Wall Street and banking reform hang over the Financials sector, while unemployment and staggering government debt continues to worry business and consumers alike.  Quite simply, there is nothing to get investors excited.

SECTORS. Sector behavior was much as we anticipated last week as Materials led the way caused in part by the dollar demonstrating little to slightly negative (weakening) movement.  Energy and Technology strengthened a bit. Financials weakened while Consumer Discretionary surprisingly improved.

Click here to see the Market Stats.

Looking ahead, Sabrient’s broad SectorCast model (comprising all stocks in our database, as opposed to any specific index or ETF) once again favors Materials – with the usual caveat that a strengthening dollar can hurt Materials.  Financials rises to second after last week’s dismal performance, which further improved projected valuations. Energy and Health Care round out the top projected sectors while Consumer Discretionary despite a bevy of raised earnings estimates brings up the rear.  Unfavorable valuations are particularly hurting Consumer Discretionary and Technology issues.  Utilities joins Consumer Discretionary and Tech at the bottom.

I continue to recommend cautious bargain hunting in the stronger sectors and hedging where feasible.

4 Stock Ideas for This Market

This week, I’m returning to the more conservative stock picks by starting with the Undervalued Large Cap Growth preset search on MyStockFinder (http://MyStockFinder.com/). Then I added Mid Caps to the search parameters, and slightly upweighted Technicals. Here are 4 new stock ideas that look interesting to me:

Newmont Mining (NYSE: NEM) – Materials (Mining)
Lubrizol (NYSE: LZ) – Materials (Chemicals)
Aflac (NYSE: AFL) – Financials
Endo Pharmaceuticals (Nasdaq: ENDP) – Healthcare