This is The Wall Street Digest Hotline Update for Tuesday, April 15, 2008, at 6:00 p.m. EST.
The 60-day cycle should have bottomed today and removed downward pressure on stock prices. At the close, the Dow gained 60 points, closing at 12,362, while the Nasdaq added 10 points, closing at 2,286. Oil closed $2.03 higher at $113.79 per barrel, and gold closed up $3.30 at $932.00 an ounce.
Producer prices were up almost twice as much as expected last month. Food costs are rising at the fastest pace in 17 years. On the plus side, the New York Manufacturing Index grew unexpectedly last month, reducing the odds that the Fed will cut the Fed Funds rate by more than a quarter point at the next FOMC meeting.
New York Stock Exchange cash levels are at the highest levels ever, while hedge fund cash levels are at the highest levels since the market bottom in the fall of 2003.
The Fed continues to create new M3 money every week. Monetary policy is extremely loose because the Fed is more concerned about the economy and the housing sector than inflation or the dollar. The yield curve is steep and has never failed to end a recession at these levels. Stay fully invested for the coming rally.
Let's continue to avoid the housing sector, as well as the banking and financial sectors. I would not purchase residential nor commercial real estate. I do not expect the housing market to bottom in 2008.
Stay close to our Tuesday/Friday Hotline Updates. I will be adjusting our portfolio of recommendations to capture maximum profits from a stock market rally that will surprise everyone, but you.
The next Hotline Update will be on Friday, April 18, 2008, at 6:00 p.m. EST.