MW: U.S. stock market investors may want to follow stimulus
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- As the U.S. stock market on Thursday rode a wave largely dictated by the latest quarterly earnings, some equities analysts say investors would be wise to focus on sectors where the government is also investing, namely manufacturing and residential real estate.
"The government is not only the lender but the spender of last resort," said Doug Roberts, chief investment strategist for Channel Capital Research.
"Bill Gross of Pimco says he's directing his portfolio to where government is buying," said Roberts, referring to the manager of fixed-income giant Pacific Investment Management Co.
"And, 80% of the stimulus hasn't actually been spent yet," Roberts added.
On Thursday, U.S. stocks mostly marched higher, with earnings reports from multiple components on the Dow Jones Industrial Average (INDU 10,002, +52.29, +0.53%) boosting sentiment and the blue chips, lately up 56.07 points at 10,005.43. The S&P 500 Index (SPX 1,082, +0.59, +0.06%) holding a fractional gain at 1,081.86, while the Nasdaq Composite (COMP 2,142, -8.37, -0.39%) fell 8.44 points to 2,142.29.
Among the leaders on the Dow industrials were shares of 3M Co. (MMM 78.42, +2.09, +2.74%) , up 3%, after the St. Paul, Minn.-based diversified industrial giant lifted its 2009 guidance. See full story.
Elsewhere, the shares of homebuilders were mostly higher, with both Lennar (LEN 13.92, +0.24, +1.72%) and Pulte Homes (PHM 9.99, +0.19, +1.94%) up 2%.
Pointing to Wednesday's release of the Federal Reserve's summary of current economic conditions, commonly known as the Beige Book, Roberts notes "the bright spots were residential real estate and manufacturing." Read The Fed.
"Not surprisingly, the two sectors the book highlights as 'leading the more positive sector reports among districts' were real estate and manufacturing, among the hardest hit sectors of the economy and the two benefiting the most from government support," said Dan Greenhaus, chief economic strategist at Miller Tabak & Co.
The Beige Book "supports the notion that the U.S. economy is experiencing a slow recovery, with significant aid from government stimulus programs such as the first-time homebuyer credit and the recently expired cash for clunkers," said Nicholas Colas, ConvergEx chief market strategist.
"The report reads like a blueprint for an economy that continues to require both low interest rates and continued extraordinary monetary stimulus," Colas added.
