Blog : Penny Stock Week: Investors in Sweet Spot

by Ed Zwirn on November 4th, 2013

The stock market is apparently poised to open on the upside this morning, as investors in everything from penny stocks to blue chips bask in the knowledge of continued Fed stimulus and prepare to digest yet more bleak news about recent U.S. economic performance.

Many analysts are saying that the economy, for investors at any rate, is in a "sweet spot," with weak growth continuing at levels not likely to bring on any tapering of the central bank's $85 billion monthly bond buying program, and none of the news coming this week--including another jobs report--is expected to contradict this.

This follows a week which saw the Dow Jones Industrial Average squeak out its fourth consecutive winning week, hitting record levels and closing Friday at 15,615.55, up 0.3% from the prior week's 15,570.27. The blue chip index outperformed the broader market, with the NASDAQ Composite losing 0.5% and the penny stock-rich Russell 2000 down 2%.

Last week also saw the release of some dreary statistics on the U.S. economy:

--Monday morning's September industrial production update showed a better-than-expected 0.6% rise, up from August's 0.4%.

--On Tuesday, we found out that retail sales fell 0.1% as expected in September, after rising 0.2% in August.

--Tuesday's producer price index release showed a complete absence of inflation coming through the pipeline. The overall September PPI, which had been expected to show a 0.2% increase, actually fell 0.1%, following August's 0.3% rise, while the core figure, which excludes food and energy, rose 0.1% as expected after staying flat the prior month.

--Wednesday morning's consumer prices showed a higher-than-expected 0.2% September rise, versus August's 0.1%.

Looking ahead this week, the economic news releases are expected to be universally bad, confirming the already widespread perception that growth has slowed down reently:

--Monday morning's factory orders report is expected to show a 0.3% rise for August, following July's 2.4% decline. In addition, the report is also expected to show a 1.8% September increase.

--Thursday's GDP update is expected to show a 1.9% increase for Q3, a slowdown from Q2's 2.5%.

--On Friday, the market is expecting another dismal jobs report, with non-farm payrolls, impacted by the government shutdown, gaining only 85,000 in October, down from September's 148,000. Closely watched will be private payrolls, which are expected to weigh in with a 110,000 gain, down from September's 126,000. The unemployment rate is expected to tick up for the period, to 7.3% from 7.2%. Personal income is expected to have risen 0.2% for September, following August's 0.4%, while personal spending is expected to show a 0.2% rise, following August's 0.3% increase.