This is The Wall Street Digest Hotline Update for Tuesday, August 19, 2008, at 6:00 p.m. EST.
The last of the short-term market cycles are bottoming today. Hopefully, the sun will come out tomorrow. At the closing bell, the Dow plunged almost 131 points, closing at 11,348, while the Nasdaq fell 32 points, closing at 2,384. The S&P 500 closed almost 12 points lower at 1,266. Oil closed $1.66 higher at $114.53 per barrel, and gold closed $11.10 higher at $816.80 an ounce.
Stock prices fell today after inflation exceeded forecasts. Producer prices climbed the most since 1981. U.S. home builders broke ground on the fewest homes in 17 years. Work began on 30 percent fewer homes. July building permits, a sign of future construction, were down 18 percent in comparison to July 2007 building permits.
I will be adding new positions to our portfolio as new market leadership evolves. Biotechnology, medical equipment, and medical delivery are the current leaders. I would continue to avoid the money center banks, the brokerage and financial sectors, and the commodity area.
With slowing economic growth, home prices will continue to fall. I don't see a housing bottom until late 2009, at the earliest. The Fed must supply greater liquidity to the banking system. And Congress, sooner or later, will pass a deep tax cut to accelerate economic growth.
Stay close to our Tuesday/Friday Hotline Updates. I will continue to adjust our portfolio as needed.
The next Hotline Update will be on Friday, August 22, 2008, at 6:00 p.m. EST.