Blog : Penny Stock Week: Just Watch Somebody Screw it Up (continued...)

by Ed Zwirn on September 30th, 2013

The stock market opened sharply on the downside Monday morning, as investors reacted to the likely advent of a government shutdown Tuesday. As of this writing, there appears to be little prospect that U.S. political leaders will reach any kind of deal before midnight to extend the government's ability to spend money beyond the end of its fiscal year on Sept. 30.

This follows a week which saw the market for everything from penny stocks to blue chips break its three-week winning streak, with the Dow Jones Industrial Average managed closing Friday at 15,258.24, down 1.1% from the prior week's 15,451.09.

The more speculative end of the stock market, including penny stocks, actually held its own, outperforming the 30 DJIA stocks, with the NASDAQ rising 0.2% and the penny stock-rich Russell 2000 up 0.1%.

Last week's news releases were indicative of a mixed bag for the U.S. economy:

-- Wednesday morning's durable goods orders report was a train wreck. While the market had been expecting this indicator to have risen 0.5% in August, following the 7.4% drop recorded in July, not only did this number come in at a disappointing 0.1%, it turns out July was even worse than the earlier estimate, with the downturn weighing in at 8.1%.

-- Later that morning, the report on new homes sales for August came in at a higher-than expected 421,000, up from July's downwardly revised 390,000.

-- Friday's personal income and personal spending figures provided evidence of slight growth. August income rose by a better-than-expected 0.4%, up from July's upwardly revised 0.2%, while spending rose 0.2%, following July's upwardly revised 0.2%%.

Looking ahead this week, penny stock investors should pay close attention to:

-- Tuesday's construction spending report, which is expected to show a 0.4% increase, down from July's 0.6% rise.

-- Later that day, the figure for September auto sales will be closely watched for any change from the prior month's 5.6 million, as will September truck sales, which came to 7 million in July.

-- On Wednesday, the consensus calls for a 0.3% increase for August factory orders, an improvement over the 2.4% drop recorded for July.

-- Probably the most closely watched economic update this week will come in the form of the August jobs report, which is expected to show that 183,000 new jobs had been added to non-farm payrolls that month, up from July's 169,000. The unemployment rate is expected to hold steady at 7.3%, while the consensus calls for hourly earnings to hold to the 0.2% rate of increase seen in July, and the average workweek to stay flat at 34.5 hours.