Not a very auspicious start to September — historically, the toughest month of the year for the Dow. Stocks spiked in the early going, after the monthly purchasing managers’ number hit the wires at 10 a.m. At 50.6, the ISM (one of the more telling economic releases in the cycle) implies that the nation’s factory floors were a little busier in August than the consensus had feared. But the euphoria lasted about 60 seconds, then down we went.
It’s now obvious that the S&P 500 faces some pretty serious overhead resistance at 1,230. That’s where sellers swooped in to cut off the rally Wednesday and Thursday. I’m glad I sold Philips (NYSE:PHG) on Wednesday. The shares fell an ugly 2.8% in yesterday’s trading.
The bulls have one last chance to mount a comeback today, depending on how the market chooses to interpret the government’s August jobs report. However, I expect any bounce to be short-lived.
Hedgers, you can buy the double-bear ProShares UltraShort S&P 500 ETF (NYSE:SDS) if the price dips to $22.50 or less today. Set a stop at $20.80, which roughly corresponds to 1,250 on the S&P 500 index.
For the rest of us, it’s a time to be patient and wait for lower prices before feeding more money into equities. Many stocks look cheap at current levels. They’re likely to become cheaper, though, as the month wears on.
Among the companies we’re following, AT&T (NYSE:T) received a jolt Wednesday when the Justice Department filed an antitrust suit to block T’s proposed acquisition of T-Mobile’s U.S. properties. In the end, I suspect that Ma Bell and the government will work out some kind of accommodation that allows the deal to go forward. Otherwise, Verizon’s (NYSE:VZ) grip on the wireless market will only grow stronger — something the Obama administration presumably wants to avoid.
But the negotiations will probably be drawn out over three to six months, at least. So there’s no hurry to buy T, even though the stock is below my official buy price of $30.60. Once the S&P dips back to 1150 or less, you might take a bite.
Ditto for Bank of New York Mellon (NYSE:BK), a member of our main model portfolio. On Wednesday, the bank’s directors sacked CEO Bob Kelly, apparently because of his irksome management style. Kelly is said to have had a habit of blaming the bank’s shortcomings on his subordinates — a real morale killer in a big organization.
Kelly’s successor, Gerald Hassell, has 38 years of experience with the bank, most recently as president. So the transition should prove seamless. Again, I think the stock is undervalued here, but I would rather buy it on a deeper market pullback. My official buy limit is $27.
P.S. On Wednesday, I stated that Weitz Short-Intermediate Income Fund (MUTF:WEFIX) had a $2,500 minimum to open an account. In August, the fund began offering two classes of shares. The Institutional Class, which carries the original WEFIX ticker, features an initial minimum of $25,000.
The Investor Class shares, with a ticker symbol of (NASDAQ:WSHNX), retain the $2,500 minimum. As is usually the case with such two-tiered funds, however, the shares with the lower minimum incur higher annual operating costs: 84 cents per $100 invested for WSHNX, versus 65 cents for WEFIX.
WSHNX continues to be available on a fee-free basis through leading discount brokers. If you already have a WEFIX account, you can add to it without meeting the higher minimum for new accounts.