Blog : Penny Stock Week: Great Week for Capitalists

by Ed Zwirn on July 15th, 2013

It's been a great time to be a capitalist lately, with everybody from blue chip tycoons to penny stock company trailblazers making gains.

And this is ongoing. Markets have opened modestly on the plus side Monday morning, following a week which saw the Dow Jones Industrial Average closing Friday at 15,464.13, up a respectable 2.2% over the prior week's 15,135.14 to score its third consecutive weekly gain.

Moreover, it appears that penny stocks and other small-caps are leading the way, as investors seek riskier venues in search of yield. The Russell 2000 index stands at an all-time high of 1,040.13 as of this writing, after outpacing the Dow last week with a 3.1% increase.

Penny stock investors were treated last week to more evidence of "Goldilocks" U.S. economic growth:

--Monday's consumer credit report showed a higher-than-expected $19.6 billion increase for May, up from April's adjusted $10.9 billion.

--On Friday, the producer price index release showed higher-than-expected increases for June, with the overall number rising 0.8%, up from May's 0.5% increase. The closely watched "core" figure rose 0.2%, versus May's 0.1%.

Economic releases worthy of a penny stock picker's attention this week include:

Already Out:
--Monday morning's retail sales report showed that spending increased 0.4% in June, following a 0.5% May rise, driven by auto sales, without which the number would have remained flat.

Still to Come:
--Tuesday morning's consumer price index release will be pounced on by the market for any indication of whether inflation may come back at some point and spook the Federal Reserve.

The consensus calls for a 0.3% June consumer price rise, up from May's 0.1%, with the "core" figure, which excludes food and energy, rising 0.2%.

--That afternoon, the industrial production report for June is expected to show a 0.3% increase, following May's flat reading. June's capacity utilization report is supposed to weigh in at 77.7%, up from 77.6%.

--Wednesday morning will see the release of two key real estate indicators: Housing starts are expected to hit 958,000, up from May's 914,000, while building permits are expected to hit the million mark, up from May's 974,000.

Taking a much longer view, today's release by China that its GDP rose "only" 7.5% in Q2, in line with forecasts but slower than Q1's 7.7%, could prove to be a market risk, especially if evidence continues of a slowdown to this economy. Depending upon where your penny stock portfolio is positioned, there could be some good news hidden even if this happens, especially if the penny stock in question stands to benefit from lower commodity prices.