Blog : Penny Stock Week: Get Set for a Bumpy Ride

by Ed Zwirn on September 3rd, 2013

The stock market opened on the upside this morning, as key market players returned from a long holiday weekend, with the Dow Jones Industrial Average up 0.14% Tuesday morning. Broader indices are doing slightly better than the Dow so far this morning, with the NASDAQ up 0.77% and the penny stock-rich Russell 2000 up 0.84%.

This follows a week which saw the DJIA continuing its recent slide, closing Friday at 14,810.31, down 1.3% from the prior week's 15,010.51.

The more speculative end of the stock market, including penny stocks, did worse than the 30 DJIA blue chip stocks last week, with the NASDAQ down nearly 1.9%% and the penny stock-rich Russell 2000 losing 2.6%.

Last week's news releases included Monday's report of a disastrous 7.3% decline of durable orders, its largest fall since August 2012's 12.9% plummet, came as a surprise, driven chiefly by weaker aircraft orders.

--Thursday's latest estimate of Q2 GDP, which had been expected to show a 2.1% rise, following the initial 1.7% estimate, actually came in better than expected at 2.5%.

--On Friday, the numbers showed a 0.1% rise in personal spending for July, in line with expectations, a slowdown from June's 0.3% rate of increase. Personal spending, on the other hand, came in worse than expected, rising 0.1%, down from June's 0.5%.

The economic news so far this week has been positive, with the headline report Tuesday morning showing a 0.6% rise in construction spending for July, slightly better than the consensus expectation and a rise from June's upwardly revised (from -0.6%) flat reading.

Also worth watching this week:

--Wednesday afternoon's report on August auto sales will be scrutinized for any change from July's 5.6 million reading, as will the report on truck sales, which weighed in at 6.8 million for July.

--The scene stealer is likely to come on Friday, with the release of the latest jobs numbers. The market is expecting to see a 177,000 rise in nonfarm payrolls for July, up from June's 162,000. The unemployment rate is expected to hold dismally steady at 7.4%.

That being said, the coming week promises to be a volatile one for investors, particularly as uncertainty continues over possible U.S. military action against Syria and soul searching continues over the content of the Federal Reserve announcement on July 18. Volumes are also expected to be patchy this week and next, with the Jewish high holidays taking many key players off the table.

No sooner will Congress decide the fate of this possible action when it reassembles on Sept. 9 than it will have to turn back to budget wrangling, with the government having until the end of the fiscal year on Sept. 30 to secure yet another short-term spending bill and until mid-October to get the debt ceiling raised.