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WESTFALIA INVESTMENTS
TECHNICAL COMMENTS
The not too hot, not too cold U.S. economy continues with evidence of a significant slowdown from the previous quarter.
The NAPM index fell from 57.7% to 57.1% in May. The price index fell for the third consecutive month to 48.1%. Construction spending fell 1.8 percent and car sales were weaker. As we see it, economic growth in the third quarter will be modest with little signs of higher inflation!
EQUITIES: Continued strong economic conditions with low inflation sent the stock market soaring in the second quarter. The Dow Jones rose over 1000 points in a three-month period as strong corporate profits and the influx of moneys into mutual funds continued strong. The sixty four thousand dollar question now facing the stock market is will stocks continue to outperform in the third quarter? To begin with, we see the stock market holding most of its gains with intra-day swings on the rise and short-term corrections not exceeding 6%. We believe the stock market will move higher as good economic conditions prevail with low inflation and steady interest rates. We look for third quarter profits to stay strong, but not exceeding net gains of the first and second quarters. In conclusion, we think the stock market will remain strong and not outperform the second quarter, in other words, we look for a more restricted trading range!
GOLD: Major support level broken, stand aside short-term market oversold!
BONDS: Supply factor beginning to ease. Look for LT rates to move lower!
DOLLAR: No change, aggressively overbought against the German Mark!
July 2, 1997Peter Cardillo, Director of Research
Westfalia Investments, Inc.
90 West Street, New York, New York
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