Blog : Stocks Poised to Gain as Market Soars

by Ed Zwirn on May 13th, 2013

For those of you in the penny stock world who may not have been paying attention: The stock market scored yet another resounding performance last week, with the Dow Jones Industrial Average closing at a record 15,118.49, up nearly 1% from the prior week's 14,973.96 and up 15.3% so far this year.

This occurred against the backdrop of lackluster economic reports released last week, including:

* Tuesday's consumer credit report, which showed an $8 billion growth for consumer borrowing in March, much lower than the $16.3 billion consensus forecast and down from February's $18.1 billion. This is the first time that this indicator has weighed in at less than $10 billion since September.

* A Thursday release showing a 0.4% rise in wholesale inventories for March, greater than the 0.3% increase priced into the market. This follows a 0.3% drop in February.

This morning saw the release of a retail sales report which exceeded expectations. In April, retail sales, driven by auto purchases, rose by 0.1%, better than the 0.3% drop expected by the market and an improvement from February's adjusted 0.5% drop.

Looking ahead this week, the most market relevant news for penny stocks is likely to come Wednesday and Thursday, when we will see further updates on the inflation/deflation trend. These should be closely watched by penny stock pickers for any news that might derail or curtail current Federal Reserve easy money policies:

* Wednesday's Producer Price Index report is expected to show a decrease in producer prices for April, following a March drop of 0.6%. The "core" PPI, which excludes food and fuel, is expected to show a 0.1% rise for April, after a March 0.2% increase.

* Look for a Thursday consumer price index release to show a 0.2% overall drop in overall consumer prices, following a 0.2% fall in March. The core CPI is expected to rise 0.2%, following a 0.1% March rise.

As long as all these numbers keep coming in well below the Fed's inflation targets, the prospect is for a continuing stream of money to chase investments, benefiting penny stocks investors and anybody deciding which stocks to buy.

Other economic releases worthy of a penny stock picker's attention this week include:

* Wednesday's industrial production update, which is expected to register a 0.2% April fall, following a 0.4% March increase.

* On Thursday, April housing starts are expected to come to 970,000, down from March's 1.036 million, while building permits, a more leading indicator, is being pegged by the market at 950,000, a rise from March's 902,000.