Pros Say: This Market Rally is 'Justified'
Stocks opened lower Wednesday after a report showed a much sharper drop in durable-goods orders than expected. And a sharp selloff in China dragged on oil prices, which also weighed on the market. Mortgage applications also fell for the first time in four weeks. Read and listen to what the pros had to say...
‘Dramatic’ V-Shaped Recovery
"It's a dramatic V-shaped recovery," said Michael Browne from Sofaer Global Research. This is the first recession where we've had the technological facilities to take down inventory in manufacturing quickly “so that we can act aggressively,” he said.
Recovery Will Be Slow
There’s plenty of money sloshing around and you can see that lending hasn’t picked up. There is a recovery coming, but it will be slow, said Anton Schutz of Mendon Capital Advisors. "The market is starting to look forward [but] the consumer is still hiding. They're not spending—they're saving," he said.
Rally is Justified: Short-Term Bull
The rally is justified as we had a selloff just before earnings season and earnings expectations were reset very low—and most have beat expectations, said Richard Winsor of Threadneedle Asset Management. “There’s so much stimulus that’s been thrown at this market, and further news that can come from this market, that it can be extremelydangerous being offside cyclicals,” he said.
When to Be Risky, When to Be Defensive
The charts are “well-supported” overall, said Geoff Wilkinson from Mint Equities. “We saw the reversal 10 days ago and we’ve continued to build from there.” Investors do want to buy the market, but they're getting "a little bit cagey about their bets," so they are moving away from the high-beta stocks and moving back into defensives, he said.
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Has the Housing Crisis Hit Bottom?
We’ve made a lot of progress in terms of the housing market and judging by how much the crisis has arrested, it plays very strongly into the recovery story, said Michael Darda of Ravengate Partners. “We’re seeing accumulation of data that speaks directly to a bottom of housing—whether it’s new home sales, housing starts, record affordability and most recently, the recent action in home prices,” he said.
California Crisis Continues
David Crane, special adviser to Governor Arnold Schwarzenegger, said the dysfunctional tax and budgeting crisis in California was “inevitable.”“Long-term, the solution will only come from the resolution of those two systems,” he said. “The budget settlement that the governor and the legislature agreed to this week gets us through this year, but it doesn’t solve the long-term problem.”
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