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Poised for a Recovery
by Jim Cramer • June 11, 2009
The market has recovered this morning after weekly jobless claims improved more than expected and the government released solid retail sales numbers. Weekly claims fell to 601,000, better than the 615,000 estimate, but continuing claims rose to a record high of 6.81 million from 6.76 million. Retail sales had its biggest increase in four months, confirming recent trends that consumers are feeling confident enough to make purchases. This is on the heels of Home Depot's (HD:NYSE) comments from yesterday that demand has indeed increased.
Also helping is the fact that the International Energy Agency, or IEA, increased its forecast of global oil demand for the first time in 10 months, giving investors hope that the recent rise in oil prices might not just be dollar-related but an actual recovery in demand. No one thinks there is improving demand yet (other than in China), and it would be a big surprise if that were the case.
In other news, another sell-side analyst upgraded Bank of America (BAC:NYSE), and estimates were raised again at Goldman Sachs (GS:NYSE), and Morgan Stanley (MS:NYSE) due to improved capital markets activity. Finally, Qualcomm (QCOM:NYSE) just raised its estimates for revenue and operating income well ahead of the Street consensus. Qualcomm increased its third-quarter revenue guidance to between $2.67 billion and $2.77 billion vs. $2.54 billion consensus and above its prior guidance of between $2.40 billion and $2.60 billion. Operating income was bumped higher to a range of $1.06 billion to $1.11 billion from prior guidance of $800 million to $900 million. Mobile and Device shipments were raised as well; the company cited better demand for more data-capable chipsets and better licensing revenues due to an increase in 3G network upgrades. This isn't entirely a surprise, especially after recent commentary from Taiwan Semiconductor (TSM:NYSE) and Texas Instruments (TXN:NYSE), but it is yet another data point that things are getting better.
I have positioned the fund to benefit from the gradual economic recovery, with an overweight in financials, tech, energy and materials; Goldman Sachs and Qualcomm are two of my largest bets in the fund and will remain so. I believe these sectors will continue to outperform the market, and I will add on pullbacks. balance still remains important, however, and I won't give up on some of the underperforming groups like health care and staples, but I will remain underweight in both groups.
The market has recovered this morning after weekly jobless claims improved more than expected and the government released solid retail sales numbers. Weekly claims fell to 601,000, better than the 615,000 estimate, but continuing claims rose to a record high of 6.81 million from 6.76 million. Retail sales had its biggest increase in four months, confirming recent trends that consumers are feeling confident enough to make purchases. This is on the heels of Home Depot's (HD:NYSE) comments from yesterday that demand has indeed increased.
Also helping is the fact that the International Energy Agency, or IEA, increased its forecast of global oil demand for the first time in 10 months, giving investors hope that the recent rise in oil prices might not just be dollar-related but an actual recovery in demand. No one thinks there is improving demand yet (other than in China), and it would be a big surprise if that were the case.
In other news, another sell-side analyst upgraded Bank of America (BAC:NYSE), and estimates were raised again at Goldman Sachs (GS:NYSE), and Morgan Stanley (MS:NYSE) due to improved capital markets activity. Finally, Qualcomm (QCOM:NYSE) just raised its estimates for revenue and operating income well ahead of the Street consensus. Qualcomm increased its third-quarter revenue guidance to between $2.67 billion and $2.77 billion vs. $2.54 billion consensus and above its prior guidance of between $2.40 billion and $2.60 billion. Operating income was bumped higher to a range of $1.06 billion to $1.11 billion from prior guidance of $800 million to $900 million. Mobile and Device shipments were raised as well; the company cited better demand for more data-capable chipsets and better licensing revenues due to an increase in 3G network upgrades. This isn't entirely a surprise, especially after recent commentary from Taiwan Semiconductor (TSM:NYSE) and Texas Instruments (TXN:NYSE), but it is yet another data point that things are getting better.
I have positioned the fund to benefit from the gradual economic recovery, with an overweight in financials, tech, energy and materials; Goldman Sachs and Qualcomm are two of my largest bets in the fund and will remain so. I believe these sectors will continue to outperform the market, and I will add on pullbacks. balance still remains important, however, and I won't give up on some of the underperforming groups like health care and staples, but I will remain underweight in both groups.
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