This Week’s Economic Data Should Reassure Investors

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Investors looking for encouraging signs can be heartened by several developments that have taken place in the past couple of days.

First, the U.S. Commerce Department reported yesterday that consumer spending in February rose at the fastest pace in four months. Second, private-sector employment increased by 201,000 from February to March on a seasonally adjusted basis, according to today’s ADP National Employment Report. That employment report was in line with consensus estimates and is considered a precursor to the government’s March nonfarm payrolls report due Friday. Those reports are not expected to give the Federal Reserve any compelling reason to raise U.S. interest rates in the immediate future. Stable U.S. interest rates would be good for stocks.

Indeed, U.S. equity markets advanced through noon EDT today. The Dow Jones Industrial Average, the S&P 500 and Nasdaq all have trended upward in the past week. As for your Global Stock Investor portfolio, seven of your 9 positions rose during the last week.

Further good news appeared on the newswires this morning with reports that oil prices declined in New York, amid signs of rising U.S. crude supplies. That development likely led oil futures to fall as much as 0.6%, after the industry-backed American Petroleum Institute announced that oil stockpiles rose 5.7 million barrels last week. It marked the fourth consecutive week of increased U.S. inventories. Indeed, the Energy Department today is expected to confirm that oil inventories are rising.

While that news may raise concerns that the Federal Reserve could consider rate hikes or an early departure from its quantitative easing, any such risk is lessened by the U.S. housing market’s renewed signs of weakness. Another dip in housing would affect state and local governments adversely that depend on property taxes for desperately needed revenue. The Census Bureau reported yesterday that property-tax revenue dropped during the last three months of 2010 at the fastest pace since home prices fell from their peak more than four years ago. The property-tax revenue drop may continue if housing prices decline further. Many localities already have cut staffing and other costs. The pressure to trim further appears to be rising.

On the Middle Eastern front, civil unrest keeps stirring in Syria, Bahrain and elsewhere. However, we still do not have any clarity about what is going to happen in Libya. Rebels there retreated in the last 24 hours under fire from government troops as U.S. President Barack Obama and U.K. Prime Minister David Cameron offered rhetoric about sending arms, in addition to having NATO enforce a no-fly zone, ostensibly to protect innocent civilians and to aid the opposition. U.S. government officials also expressed a willingness to let rebel-controlled parts of the country sell oil but Libya cannot be expected to remain a dependable source of oil for the foreseeable future.

As for Japan, those hoping that the country is on the verge of rebounding economically from the nuclear disaster that followed this month’s 9.0 magnitude earthquake and subsequent tsunami will need to wait longer. Japan’s government is reporting today that radiation levels in the ocean next to the Fukushima Daiichi nuclear power plant have climbed to record amounts. Earlier measurements showed that water from the No. 2 reactor is highly radioactive and may have come from partly melted fuel in the reactor’s core. The consolation now is that courageous workers at the plant seem to have avoided a full-blown meltdown.

Portfolio Update

The WisdomTree Dreyfus Chinese Yuan Fund (CYB) dipped .04% in the past week. Since it remains below its 50-day moving average, CYB is a HOLD.

WisdomTree Japan SmallCap Dividend Fund (DFJ) dipped 0.86% in its first week in the portfolio. Continued problems with the nuclear plant that I highlighted in my update about Japan, combined with manufacturing companies struggling to return to full production in the wake of the disasters there this month, contributed to this fund’s weak performance. As conditions in Japan improve, so should the price of DFJ. With a recovery of the Japanese market on the horizon, this ETF is a BUY.

Global X FTSE Nordic 30 ETF (GXF) ended the week 1.54% higher, as European markets rose along with those in the United States. This ETF is helped by Sweden’s economic growth and Norway’s role as a provider of oil. The fund is trading above its 50-day moving average and remains a BUY.

Market Vectors Indonesia ETF (IDX) keeps climbing now that it is back on our buy list. It rose 1.75% in the past week and continues to recover from its sell-off early this year. This stock was a top performer among emerging markets before its retreat, so I am confident in its upside for us. IDX is a BUY.

JinkoSolar Holding Co., Ltd. (JKS) rebounded to rise 4.34% in the past week, after dropping about 7% the previous week. Yes, JinkoSolar is volatile but its outlook is bullish. It is trading close to its 50-day moving average but still is slightly below it, so JKS remains a HOLD.

Market Vectors Russia ETF (RSX) rose 0.29% this past week and it remains on the upswing. Keep in mind that this fund is affected by the price of oil. Despite the Russian stock market making certain investors feel uneasy due to its past rises and falls, Russia remains the best-performing emerging market of 2011. RSX continues to trade above its 50-day moving average and still is a BUY.

Universal Display Corp. (PANL) is practically sizzling. It rose 9.73% last week after soaring more than 30% the week before. It also closed at a new 52-week high yesterday. PANL is trading well above its 50-day moving average and is a solid BUY.

Ultrashort Lehman 20+ Year Treasury (TBT) rose 3.21% during the past week. The positive economic data that I shared earlier in this write-up point to an eventual end to the Fed’s current policies of quantitative easing and rock-bottom interest rates, so the trend is in this pick’s favor. As I mentioned last week, the fundamental case against U.S Treasuries remains intact. With TBT still below its 50-day moving average, it remains a HOLD.

Vale S.A. (VALE) edged up 0.83% during the past week. The Folha de Sao Paulo newspaper reported today that a Brazilian banking group, Bradesco, will nominate Tito Botelho Martins to become Vale’s chief executive. The report explained that Brazilian government officials want to see current CEO Roger Agnelli replaced. Martins, who currently leads Vale’s Canadian operations, is credited with helping to settle a protracted labor dispute with Canadian miners, the newspaper reported. However, VALE continues to trade below its 50-day moving average, so it remains a HOLD.

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