The stock market started the week materially in the red, but bulls gathered strength throughout Monday’s session, and stocks managed to finish the day near the unch line.
There were no specific catalysts behind either the early weakness or the late bounce, though it looks as if investors are concerned that the agreement announced late last week to pretend and extend Greece’s loans amounted to very little in the grand scheme of things.
Several media reports are saying that the Greek proposal lacked “sufficient detail.” Plus, the stability of the Athens government has also come into question, as internal conflict within the Syriza party has increased following last week’s negotiations. Look for this soap opera to drag on and on.
Meanwhile, over in the Ukraine, you may be shocked to learn that the excitement over a cease-fire there was premature. It appears that eastern Ukraine saw a geographic expansion of violence on Sunday as a bomb exploded in Kharkiv, the second-largest town in the country, which is located 125 miles from territory held by pro-Russian separatists.
And back in this country, the U.S. economic data du jour came in way below expectations. Existing home sales fell to the lowest level in nine months, and that was the case in every quadrant of the country. To be specific, January existing home sales came in at a 4.82 million seasonally-adjusted annual rate, versus consensus at 4.95 million and the last-month figure of 5.07 million. Looks like higher interest rates might be taking a bite out of affordability.
There was one tiny little positive in the data: The Chicago Fed Index shows that economic growth picked up slightly in January. The index’s three-month average was essentially flat, which means that growth in economic activity remains above its historical trend and that inflationary pressure from next year’s economic activity should be modest.
Of course, the good news from the U.S. economic news hamster wheel was that the weaker recovery postpones the date that inflation will be seen on the horizon. Naturally, you will always have hawkish Fed officials who claim to see inflation on the horizon — but those are probably also the same ones who believe in UFOs and the survival of Elvis, and who claim to know where the Malaysia airline went down (and that Jimmy Hoffa had a hand in it).
Summing it all up, it was kind of a blah day for news, which resulted in a blah day for the stock market. That makes sense when you consider that the break-out to new highs was so sensational, it deserved at least one consolidation day, if not a whole week. Very little ground was lost…so, as they say in baseball, a tie goes to the runner.
Monday’s dip provides an opportunity to buy Vulcan Materials Company (NYSE:VMC) on a pullback to its 30-day average, before its recent momentum resumes.
VMC mines and produces gravel and other rocks used in the construction of roads, buildings and infrastructure. It rose as high as $110 in early 2007 before rolling over and falling to $30. It’s been on the comeback trail since 2012, rising steadily in sync with the renewed recovery. One of its units was one of my favorite stocks of all time, until it was merged out of existence: Florida Rock.
Buy VMC at $80.60 limit, good till canceled, for target $86.30. Set a protective stop at $77.10 limit, good till canceled.
Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments.
