Blog : Penny Stock Week: Market Ends on a Bearish Note

by Ed Zwirn on June 3rd, 2013

The market for everything from penny stocks to blue chips ended on a sour note last week, with the Dow Jones Industrial Average losing over 200 points on Friday to close at 15,115.57, off 1.2% from the prior week's 15,303.10. The index, which suffered its second consecutive weekly fall last week, is still up 15.3% so far this year.

The economic news that came in revealed a mixed outlook for penny stocks, with real estate showing further signs of a recovery while personal income and consumer spending languished: 

--Tuesday morning's Case-Schiller 20-city real estate index showed a higher-than-expected 10.9% price rise for March, up from February's 9.3%, while Thursday's pending home sales report showed a 0.3% increase for April, lower than the consensus 1.5%, a slowdown from the prior month's 1.5%.

--Friday revealed a lackluster consumer situation, with personal income staying flat in April, following a 0.2% increase, and personal spending actually falling 0.2% after rising 0.2% in March.

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

--Monday morning's construction spending report is expected to show a 1.1% increase for April, following a 1.7% March decrease.

--Monday afternoon's May auto and sales report will be closely watched for any change from April's 5.1 million level, as will truck sales, which came in at 6.8 million for April.

--On Wednesday, factory orders for April are expected to show a 1.5% increase, following an adjusted 4.9% March drop.

--Wednesday's release of the Fed's June beige book should provide a snapshot of economic conditions throughout the U.S.

--On Friday morning, the market is expecting to hear that 164,000 non-farm payroll jobs were added in May, following April's 165,000. The unemployment rate is expected to hold steady at 7.5%.

Looking farther ahead, penny stock investors weighing stocks to buy and sell should watch for key updates on employment and inflation that should be of interest to Fed watchers and possibly impact your penny stock portfolio:

--The next FOMC update on June 12 should provide penny stock investors with their next clues as to the monetary policy of the U.S. Federal Reserve Bank going forward.

--The June 14 producer price index report and the June 18 consumer price index will be the next indication of whether inflation shows any sign of reappearing. The last time around, the PPI for April actually fell 0.7% and the CPI dropped 0.4%.