Blog : Penny Stock Week: Small Stocks Beat Tough Market

by Ed Zwirn on October 7th, 2013

The stock market continued its schizophrenic performance last week, with shares in large companies faring poorly in the face of concern over the U.S. budget and debt while the broader market, including penny stocks, continues to reap gains.

On the one hand, the 30 Dow Jones Industrial Average blue chip stocks closed Friday at 15,072.58, down 1.2% from the prior week's 15,258.24.

But the more speculative end of the stock market, including penny stocks, actually held its own, outperforming the 30 DJIA stocks, with the NASDAQ rising 0.7% and the penny stock-rich Russell 2000 up 0.4%.

Last week's news releases (or the ones that came out, anyway) were indicative of a tough slog for the U.S. economy:

-- September auto sales came in at 5.4 million, down from the prior month's 5.6 million. Truck sales, which came to 7 million in July, totaled 6.5 million in September.

Of course, much data that should have been produced last week was blacked out due to the government shutdown which started Tuesday.

-- The first of these missed updates was Tuesday's construction spending report, which had been expected to show a 0.4% increase, down from July's 0.6% rise.
-- On Wednesday, the consensus had called for a 0.3% increase for August factory orders, an improvement over the 2.4% drop recorded for July.

-- Friday's jobs report had expected to show that 183,000 new jobs had been added to non-farm payrolls in August, up from July's 169,000. The unemployment rate had been expected to hold steady at 7.3%.

But the evidence, such as it is, seems to show a languishing jobs market. Wednesday morning's privately produced ADP Employment Change report shows a disappointing 166,000 new jobs for September. This can only be weakened as some 800,000 federal furloughs begin to effect in October.

Looking ahead this week, investors may possibly be treated to the following economic updates if the government shutdown ends by Friday:

-- Retail sales for September is expected to show a 0.2% decrease, following August's 0.2% increase.

-- The September producer price index is expected to show a 0.2% increase, versus the prior month's 0.3% rise.

Don't count on getting any of this information this week. Not only have politicians on both sides of the aisle placed a greater urgency on resolution of the debt ceiling issue, which is currently expected to become critical on Oct. 17, than the appropriations needed to reopen the government, these same politicians, by approving a bill promising to pay federal employees (for doing no work) retroactively once the government returns, have made a government shutdown more politically palatable.

These federal employees (and companies doing business with Uncle Sam) are expected to get by for the time being, but the money they should be receiving won't be forthcoming until the government reopens.