The Week: Tepid Numbers and Oil's Comeback
For the first time in a long time, it looked as if oil was going to stay out of the market headlines. No such luck.
After drifting lower for much of the week on mixed economic data, stocks rallied powerfully on Thursday, but ended the week with a plunge that was even more abrupt.
CNBC guests, as usual, were hardly reluctant to provide suggestions on how to play the news.
The ISM manufacturing index fell in May, for the fourth month in a row. Construction spending lost ground in April for the sixth time in seven months. Oil slipped below $125 a barrel. Ken Thompson was forced out as CEO of Wachovia.
Thomas Winmill of the Midas Fund said he likes commodities and commodity-related stocks. He urged investors to look at shares of platinum and gold producers: Freeport McMoRan, Kinross Gold, and Lihir Gold.
Citi auto and auto-parts analyst Itay Michaeli pointed to fuel economy and emissions control (another reason for a platinum play, since platinum is used in all catalytic converters) as top trends in the industry. He picked Borg Warner, American Axle, and Goodyear Tire & Rubber.
General Motors said it will close four North American truck plants. Factory orders posted a surprising April gain. Lehman Brothers prepared to report the first quarterly loss in its 158-year history. Car sales figures for May were dismal, but thanks to the railroads, the Dow Jones Transportation Index continued to ride high.
Jim Awad of WP Stewart Asset Management encouraged investors to look at American multinationals active in the BRIC (Brazil, Russia, India, China) countries, even General Motors. His other ideas? CNBC.com parent General Electric, United Technologies, Automatic Data Processing, and Fastenal.
Kevin Kirkeby of Standard & Poor's and Longbow Research's Lee Klaskow recommended railroads. Both men liked Norfolk Southern, but while Kirkeby's second selection was troubled Canadian National, Klaskow went with Burlington Northern Santa Fe.
ADP's monthly report showed a May gain of 40,000 private-sector jobs. First-quarter productivity increased more than expected, although unit labor costs also outran expectations. May's ISM services index reading was mixed.
Bernie McGinn of McGinn Investment Management was ready to tiptoe back into financials with AIG and Bank of America, and he added Home Depot and Ford.
John Buckingham of Al Frank Asset Management picked Crocs, saying the trendy footwear maker has been beaten down much too far, and he also recommended Disney.
United and Continental Airlines said they are reducing the size of their fleets. First-time jobless claims were lower. The dollar's rebound against the euro ended on some tough talk about inflation from European Central Bank President Jean-Claude Trichet.
Doug Cliggott of Dover Management told investors to play "both extreme ends of the food chain," with Wal-Mart and Costco at one "extreme end," and John Deere at the other.
The faltering dollar, a Morgan Stanley analyst's prediction of $150 oil by the Fourth of July, and harsh words about Iran from a hopeful successor to Israel's prime minister powered a historic surge in oil prices. May's unemployment rate jumped to 5.5 percent, much higher than expected. The Dow lost 394.64 points.
"Stagflation!" said Christopher Zook of CAZ Investments, as he recommended Applied Materials because of its involvement in solar-energy technology; Genentech, because of encouraging new reports on its drugs, and Procter & Gamble, because of its "consistent performance in an uncertain environment."
"Infrastructure!" was the rallying cry of John Derrick of US Global Investments, who picked US Steel, Manitowoc, and Foster Wheeler.