This is The Wall Street Digest Hotline Update for Friday, January 26, 2007, at 6:00 p.m. EST.
A last-hour rally lifted stock prices from the lows of the day. At the close, the Dow dropped 16 points, closing at 12,487; the Nasdaq added 1 point, to close at 2,435; oil closed up $1.19 to $55.42 per barrel; and gold closed down $3.40 at $644.70 an ounce.
Historically, numerous corporations try to raise prices during the month of January in order to improve margins. Consequently, prices tend to rise--even spike up--in January. However, many of these January price increases are rolled back in February or March when they meet resistance from customers or when market share declines. Consequently, inflation is always a problem every January. No one tells investors that inflation and the Consumer Price Index (CPI) are moderate in February and March.
While the Fed governors "worry about inflation," Fed Chairman Bernanke has quietly accelerated the pace of money creation to push GDP growth up to the 3.0 percent to 3.5 percent range, thus creating faster economic growth to support the dollar. Yet many global/international markets, especially the emerging markets, will still outperform the U.S. stock market this year.
Market volatility over fourth-quarter earnings will subside on/or about February 15, 2007, after which the market should move still higher.
Another great boom and bull market is unfolding now. This stock market is still undervalued by 28 percent. You should be fully invested. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, January 30, 2007, at 6:00 p.m. EST.