Blog : Penny Stocks Continue to Beat Burger

by Ed Zwirn on July 22nd, 2013

The market for everything from penny stocks to blue chips opened on a bullish note Monday morning, with most of the major stock indices in record territory. This follows last week's positive showing, which saw the Dow Jones Industrial Average closing Friday at 15,543.74, up 0.5% from the prior week's 15,464.13, to score its fourth consecutive weekly gain.

Penny stocks and other small-caps continue to lead the way in this yield-hungry environment. The Russell 2000 index stands at an all-time high of 1,053.93 as of this writing, after outpacing the Dow last week with a 1.3% increase.

Penny stock investors were treated last week to more mixed evidence on the performance of the U.S. economy:

--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.

--Tuesday morning's consumer price index release was a mixed bag, showing a higher-than-expected 0.5% June consumer price rise, up from May's 0.1%, while the "core" figure, which excludes food and energy, rose by only 0.2%.

--Wednesday morning saw the release of two key real estate indicators: Housing starts, which had been expected to hit 958,000, came in at 836,000, down from May's adjusted 928,000, while building permits, which had been expected to hit the million mark, were reported at 911,000, down from May's adjusted 985,000.

This week's market movements are likely to be a reaction to a string of second quarter earnings releases due out this week. Although the headliners in this case will not be penny stocks, penny stock portfolios can expect market movement based on these numbers.

The results announced so far have been tepid. MacDonald's, the world's largest hamburger chain, reported a profit that fell short of expectations, hitting its share price. Similarly, toymaker Hasbro saw its Q2 sales fall.

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

--Monday morning has seen the release of a report showing a lower-than-expected 5.08 million existing home sales for June, off slightly from the adjusted 5.14 million posted for May.

--Wednesday's new home sales release is expected to weigh in at 483,000 for June, a pickup from May's 476,000.

--On Thursday, the consensus calls for a 1.8% rise in durable goods orders for May, driven by transportation, down from an adjusted 3.7% may increase. Backing out transportation, the report is expected to show a 0.3% June rise, down from 0.5%.