Blog : Penny Stock Week: Data Barrage to Propel Stocks

by Ed Zwirn on October 28th, 2013

Penny stock investors will have a lot of information to digest this week, as the government releases key real estate and inflation reports ahead of Wednesday afternoon's Federal Reserve policy statement.

Given last week's disastrous jobs report, and assuming the latest inflation news proves to be as tame as expected, there is no chance that the Fed will announce any scaleback of its $85 billion monthly bond buying program this time around, or indeed any time soon.

The Fed policy announcement, however, could prove to be the basis for some short-term trades, as analysts parse the document for changes to adjectives assessing overall economic activity and labor market conditions. According to the Sept. 18 statement, the U.S. economy had been expanding at a "moderate" pace at that point, while "some indicators of labor market conditions have shown further improvement in recent months." Any lessening of these assessments ought to prompt a positive market reaction.

This follows on the heels of a week which saw the Dow Jones Industrial Average close Friday at 15,570.27, up 1.1% from the prior week's 15,399.65. The NASDAQ Composite, which rose 0.7%, and the penny stock-rich Russell 2000, which gained 0.3% on the week, are both still at or near all-time highs.

Last week also saw the release of some dreary statistics on the U.S. economy:

--Monday morning's existing homes sales release came in pretty much as expected, totaling 5.29 million for September, versus August's downwardly revised 5.39 million tally.

--Tuesday morning's non-farm payroll report showed continuing dismal news on the jobs front. While the unemployment rate itself beat expectations by dropping in September to 7.2%, from 7.3%, the good news ended there, with a much lower-than-expected 148,000 jobs opening up, down from August's upwardly revised 193,000. Hourly earnings rose by a modest 0.1%, down from 0.3%.

--We also found out on Tuesday that construction spending for August rose by a better-than expected 0.6%, down from July's upwardly revised 1.4% rise.

--Friday's durable orders report actually came in somewhat better than expected, rising 3.7% in September, driven by aircraft purchases, up from August's upwardly revised 0.2% increase.

Looking ahead this week, although it will be a crowded stage, the U.S. Federal Reserve will take center stage Wednesday afternoon. Reports coming out ahead of the Fed announcement include:

--Monday will see a September industrial production update expected to show a 0.3% rise, down from August's 0.4%.

--On Tuesday, the market is expecting to find out that retail sales fell 0.1% in September, after rising 0.2% in August.

--Tuesday's producer price index release will give investors their first official update on the inflation front in some time. The overall September PPI is expected to show a 0.2% increase, a slowdown from August's 0.3% rise, while the core figure, which excludes food and energy, is expected to rise 0.1% after staying flat the prior month.

--Consumer prices will be updated on Wednesday morning and are expected to show a 0.1% September rise, the same as August's. Going forward, this report, marred by the unavailability of furloughed federal workers to collect price information during much of October, will be subject to inaccuracy over the next few months.

The lone straggler to come out after the Fed announcement, but just in time for Halloween leftovers, will be Friday's update on motor vehicle sales, with October figures watched for any change from September's 5.4 million figure for autos and 6.5 million for trucks.