Let's get ready to rumble

(4 Feb) Earnings reports on stocks in the Dow Jones Index have been pretty underwhelming. Disney and Kraft Foods were two of the major culprits on Wednesday. Also, weakness in GE and Bank of America continuing to set new lows all dragged the numbers lower. The NASDAQ fared better due to the performance of the tech issues.

The ISM non-manufacturing index data for January were released Wednesday morning. It showed an increase for the second straight month, beating the consensus which had expected a drop. Although there is still plenty of negative data on the economy reflecting the events of 2008, today’s report adds to a number of releases coming in better than expected.

These include the ISM manufacturing index for January - that was up to 35.6 versus the expected 32.5 - and the pending existing home sales in December - a big jump up of 6.3% versus an expected 0.0%. These indicators, along with rising yields on Treasury certificates, show that the investor fear experienced during the last few months of 2008 is finally dialing down.

The US car companies announced Tuesday that total cars and light trucks were sold at a 9.6 million annual rate in January. That's 38% below a year ago and the slowest pace since 1982 - and we only had about 1/3 as many cars on the road at that time. The replacement rate for cars - that's how long it would take to replace all the cars now on the road at this current pace of sales - is now at 25 years. This compares with the long-term average of about 13 years. It was 16.3 years at the worst of the 1981-82 recession.

In American, that means that a 25 year replacement rate is not really representative of what it should be. So, car sales should improve in the months ahead - even without the tax scam the Michigan politicians are trying to add to the "stimulus" bill.

As more and more reports such as these are coming out, it says to me that all it's going to take is just some positive spark and this market is going to be off and running. I'm not the only believer, either.

The market strategist at Deutsche Bank today said that with valuations in the market as they are, he estimates that the Dow should be at 10,300 by year-end. It's about 8000 now. That would be about a 30% jump.

I'm with him.