Wall Street Greek: Not So Super Tuesday

(Stocks in this article: NYSE: SPY, NYSE: DIA, Nasdaq: QQQQ, NYSE: WHR, NYSE: TMA, NYSE: BP, NYSE: DUK, NYSE: CME, NYSE: NYX, NYSE: BSX, NYSE: TM, NYSE: TYC, Nasdaq: YHOO, Nasdaq: AAPL, AMEX: SDS, AMEX: QID)

An unsettling start to the trading day was precipitated by an awkward early release of the ISM Nonmanufacturing Survey for January. Due to a security breach, the data had leaked ahead of the scheduled 10:00 a.m. reporting time. So, ISM released the news in disconcerting fashion pre-market. The combination of the form of release and the weakness of the report got stocks off on a bad foot today.

Even though we expected economic data to eventually kill this bear market rally, the end looks to be arriving sooner than we thought it would. We anticipated a month's worth of rise, but without much positive catalyst in view, and considering the degree of weakness in recent data, retest may be imminent. One potential positive catalyst remains, and that's the speed of passage of fiscal stimulus and the expedited delivery of checks to Americans. We continue to expect, and certainly hope, Treasury Secretary Paulson does not relax at this critical point. The work he's done thus far, after initially playing cheerleader last summer, has been very positive and helpful. This is not the time to relax though. Hank must find a way to speed the delivery of those checks.

Greek's Current Strategy

In any event, we expect Thursday's ECB announcement, if it keeps rates steady, to weigh on U.S. equities, and we look for continued outflows of capital from equity funds to force stocks to readopt a negative bias. So, after a little more than a week of rally, we advise investors to take some profits off the table and once again insure against risk with stop loss orders and put purchases and to reduce beta with short investment and long positions in short biased ETFs like the AMEX: SDS and AMEX: QID. Also, energy once again looks poised for decline, and those solar plays we told you to close, might once again offer further downside for the nimble if you're clear of company specific catalysts.

Market Favors Romney

With the primary elections taking a defining turn after today's vast elections, the market should increasingly weigh in on its view of the leading candidates. We expect a McCain victory would be a let down for Wall Street, while the financial experience of Romney should offer a boost. Wall Street will start betting on the possibility of a Democrat winning office as well, and we suspect it will not be as supportive of Hillary as it might have been of Bill. Obama has shown a willingness to study and learn, and despite what we view as his early detrimental economic stances, the market might favor him. His intelligence and open mind are assets. In our very unscientific opinion on this subject, we believe it's important to the market that Romney overcome McCain today. Romney is certain to be market and economy friendly, in our view. Each of the other candidates offers some level of uncertainty.

ISM Nonmanufacturing Report

The service sector makes up 80+% of the American economy, and so weakness in services is more distressing than that within manufacturing. Today's survey for January showed the Business Activity Index measured 41.9, which was well off the economist consensus expectation for 53.0. A measure below 50 depicts business contraction, and the magnitude of this decline specifically raises concern as it showed the fastest rate of decline since the last recession. It also showed the lowest absolute measure since October of 2001, a period we recall was far from hopping.

ICSC-UBS Weekly Same-Store Sales

The International Council of Shopping Centers weekly report offered a mild positive, as it indicated a year-over-year sales increase of 1.6% in the week ended February 2nd. With no holiday this year or last during the period, this offers a perhaps pure view of the current situation. Of course, weather may have helped lift or held back the result, as it varied from year to year. The week before figure covering the period ended January 26th included this year's Martin Luther King holiday and showed only a 1.3% rise in sales. In 2006, MLK Day fell on the 15th.

It's not clear whether holiday sales benefit from an extra off day, and sales pricing, as you might imagine, or suffer because of parents having the kids home another day. We invite any retail analyst with further insight to comment to the article. What is clear is that we are solidly entrenched in the 1-2% growth range thus far this year, and this represents a clear dip from 2007's 2-3% level. The year before offered 4%+ growth. There's no arguing with this clear indication of softening consumer spending.