Market Resumes Trading, But in What Direction?

Let trading resume! It promises to be a fun filled day after an unplanned four day weekend for Wall Street. Hurricane Sandy made a mess of things in the Northeast and the entire coast as far as that goes. Travel will be clogged for weeks, and the clean up may take even longer. In the end the good news is it wasn’t worse. The bad news is all the talk about how to make money from the storm and estimated costs of the storm.

As the market resumes we are still looking for a follow through move on the upside from the broad markets. The good news relative to the last two days is there were no major events to disrupt the current sentiment towards stocks. We still have ugly economic data, dysfunctional earnings with revenue misses and plenty of questions about growth looking forward. We will start off where we ended on Friday… in search of buyers to keep the uptrend in play. All the major indexes tested support on Friday and closed off the lows. I am watching to see if they remember why they were buying on Friday? If not, expect more testing on the downside.

One stock to watch is Apple. They made changes with some key executive positions on Monday, but they still have to find their way post the Steve Jobs era, and remake themselves relevant in the world on technology, or watch their stock continue to fall in price. Two straight quarters of mixed earnings reports is enough, and there have to be changes, but they have to make a difference. Watch for investor approval or disapproval in the stock price as trading resumes on Wednesday.

Earnings catch up will take place the balance of the week for those earnings reports that were delayed due to the closure of the markets. I don’t expect any big surprises on this front, but the tally will continue of those companies beating and missing earnings.

The jobs report will be released on Friday as scheduled. There was plenty of speculation about a delay until after the election next week. There was confirmation on Tuesday that the release will remain on Friday. Keeping the data flow current and timely will be helpful in normal return to trading. There has been plenty of hard work to get everything prepared for the markets to open in an orderly fashion on Wednesday. Not having a major event during the closure of the markets has helped in the anticipation of an orderly open and day of trading.

Housing (XHB & ITB) continues to garner a positive outlook and talk about the bottom being established. This has been a positive sector to own relative the builders. Schiller was quoted as stating the bottom was in and the rebuilding will continue slowly. There are some questions about the hurricane impacting the sector short term. The impact will be more likely to help Home Depot and Lowe’s in the short term, but little impact to the construction of new homes.

Insurance (KIE) stocks are likely to trade lower based on exposure to the damage claims in the Northeast. The initial estimates are in the $50 billion range and that will have some short term impact. In time we will see the complete impact. Flooding is going to impact the Federal Government as they stand behind the insurance of flooding. Watch the sector to have an over reaction and thus creating an opportunity. Watch List time for the property and casualty companies as this plays out.

Transportation (IYT) stocks are in the direct path of impact from the storm as well. The 14,000 plus canceled flights will backlog flights going forward and have an impact on the bottom line to the airlines. Destruction to other forms of transportation are going to have an impact as well. The mass transportation system in New York and New Jersey will be sizable costs to repair and get running again. The impact to already struggling earnings will be real in time. These are temporary in nature and will create longer term buying opportunities as investors react to the news.

Our first concern is to the people impacted by the storm! From there we will find plenty of opportunities created in the markets overall as the impact unfolds. The bigger picture remains the same… slow growth without much change on the horizon.