Tuesday, May 22, 2012
A rating downgrade of Japan and growth warning for Europe
provide the backdrop for today's action, likely forestalling
carry-over of Monday's positive momentum. We should keep in mind
though that Monday's bounce followed almost two weeks of
persistence negative performance and is not by any means reflective
of a trend reversal. The issues that have been weighing on the
market lately are still very much with us and not going away any
time soon.
The OECD's growth warning for Europe, released as part of the
organization's twice-yearly global economic outlook, hardly
qualifies as fresh news. The region's fiscal problems have
remained, and likely will remain, a drag on global growth for a
while. If anything, the OECD's forecast of negative 0.1% growth in
the Euro-zone in 2012 and positive 0.9% growth in 2013 may be on
the more optimistic side. It is at least more optimistic than the
corresponding forecast for the region from the IMF.
European leaders are getting together on Wednesday to take
another look at their approach to region's problems and likely
incorporate a so-called pro-growth element to their existing policy
framework advocated by France's newly elected president. Greece
remains the biggest question mark on the group's future as that
country goes through another unsettling election next month.
Contagion risk from the potential Greek exit from the currency
union is a major cloud over the region's financial system, which
will no doubt have a negative impact on its growth prospects.
On the home front, we have the April Existing Home sales numbers
coming out a little later, with the annualized monthly sales pace
increasing from the March level to 4.6 million. Housing data has
been steadily improving lately, though it still has some way to go
before it can be counted on to start contributing to economic
growth. The expected April sales pace of 4.6 million will be up
from the 2011 total of 4.26 million and 2010's 4.19 million. But
for context, keep in mind that at its peak in 2005, existing home
sales were north of 7 million.
In corporate news, we got better than expected results from
Best Buy
(
BBY
) this morning. The electronics retail giant is looking for new
leadership as battles doubts over its 'big-box' business model in
the face of stiff competition from online players such
Amazon
(
AMZN
). We also have a positive earnings surprise and dividend raise
from
Ralph Lauren
(
RL
) this morning.
Sheraz Mian
Director of Research
AMAZON.COM INC (AMZN): Free Stock Analysis
Report
BEST BUY (BBY): Free Stock Analysis Report
RALPH LAUREN CP (RL): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research
Want the latest recommendations from Zacks
Investment Research? Today, you can download 7 Best Stocks for the
Next 30 Days. Click to get this free report