For the full August Market Strategy PDF, click
Another month has come and gone. It is time once again to
update our subscribers on the markets, the economy and stock
Zacks Editors' Fresh Year-End Call
The S&P 500 index traded above the 1700 level on August 1.
Zacks editors are collectedly forecasting a 2013 target of 1770
for the year-end S&P 500. That would be a forward earnings
yield of 6.5%. If we get towards the end of 2013 with U.S. GDP in
healthy shape and no U.S. recession on the horizon, a nice
stretch well above 1700 can feed on itself. Our collective low is
just under 1600. Pessimists will point to a dead-cat bounce in
Europe, a hard landing in China, or to a U.S. housing/mortgage
slowdown in 2H.
Fundamentals on the Sidelines as Valuations Rise
The jobs picture continued to brighten to the end of July, though
not strong enough to rid the markets, and the Fed, of all fears.
In the first half of 2013, in response, U.S. stock markets
rallied to levels not seen in six years. Global markets
have stagnated in the first half. Europe is looking up in
the second half.
Q2 GDP growth came in at a preliminary +1.7%, well above a +1.0%
consensus. The consumer added a +1.8% stock-stimulated response
to the Q2 story, but trade growth was also strong, business fixed
investment was strong, and state & local government spending
turned up slightly. All aggregate demand cylinders hitting
Q2 earnings for S&P 500 companies added up better than
pessimists had us thinking. Nonetheless, tepid U.S. large
cap earnings and revenue growth remains the worry. Look for Q3
earnings to modestly beat most estimates again. Q4 estimates are
going to come down.
Zacks Sector/Industry/Company Telescope for
(1) In the Consumer world, investor focus should be on Autos,
Tires, Trucks and the Home Furnishing-Appliance industries within
Discretionary spending. Buying a new car, or fresh parts for an
old one, and refurbishing a home remain attractive. Other
Consumer Discretionary industries, notably the Consumer
Electronics one, have also seen a large upgrade from the last
report. Consumer Staples industries are all in the tank now.
Stay away from the Packaged Food, Tobacco and Beverage
), a Zacks Rank #1.
This Germany-based global maker of autos can access the
strength of the U.S. market and stands to benefit from a rebound
in the second half in Europe.
(2) The Financial sector has three strong industries: Banks &
Thrifts, Finance and Insurance lead, in that order. The
broad-based strength across a diverse set of finance activities
speaks well of a modest U.S. growth story remaining in place in
the second half of 2013.
PNC Financial Services Group
), a Zacks Rank #2.
PNC is one of the nation's largest diversified financial
services organizations, providing regional banking, corporate
banking, real estate finance, asset-based lending, wealth
management, asset management and global fund services.
(3) In the Health Care sector, Medical Care is now very
attractive. Drugs and Medical Products are attractive. This is an
upgrade on Obamacare's coming expansion of individual coverage.
), a Zacks Rank #2.
CNC provides managed care programs and related services to
individuals receiving benefits under Medicaid, including
Supplemental Security Income and the State Children's Health
(4) The IT sector has strength in Semi-conductors. This speaks to
a growing use of small niche devices and components. Hardware and
Software companies are lagging and are now unattractive or very
In the Telco sector, Telco Services is at market. The small
device world is not supporting an improved outlook anymore.
(6) The Industrials sector has pockets of strength, Aerospace
& Defense, Business Services and Conglomerates are the
highest ranked, in that order.
However, six industries are showing weakness. The home
construction boom is keeping parts of the sector aloft.
Industrial industries exposed to global growth conditions are
lagging. Caterpillar is a good example.
), a Zacks Rank #1.
iRobot Corp. designs robots that perform dull, dirty or dangerous
missions in a better way. The company's proprietary technology,
iRobot AWARE, Robot Intelligence Systems, incorporates advanced
concepts in navigation, mobility, manipulation and artificial
intelligence. This proprietary system enables iRobot to build
behavior-based robots, including its family of consumer and
(5) In the Energy sector, Oil Drilling now looks attractive.
Focus on domestic production in the Bakken and Marcellus shale.
They are worth further investigation.
The Alternate Energy and Coal industries turned up a bit. Now at
(7) Utilities overall are poor. Nat Gas Distribution Utilities
are at Market.
(8) No Materials sector industry is above a Market Perform.
Global growth worries really hits this sector hard. It is to be
avoided until a turn is noted, and that turn did not happen this
For the full August Market Strategy Report,
CENTENE CORP (CNC): Free Stock Analysis
IROBOT CORP (IRBT): Free Stock Analysis
PNC FINL SVC CP (PNC): Free Stock Analysis
VOLKSWAGEN-ADR (VLKAY): Get Free Report
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