The Dow and Nasdaq extended their biggest rally in six months as crude oil prices slipped below $47 per barrel. I have been predicting a pullback in oil for quite some time now, and oil has finally cracked the $50/bbl mark. So, what does this mean for oil stocks? You guessed it. A good opportunity to start buying.
Chevron (CVX) is a really good buy right now. If you combine the selloff that occurred when the merger with Unocal (UCL) was announced with the natural selloff in oil, CVX may be one of the best buys among the integrated oils. If the Fed announces a pause in the rate increases, oil prices and commodity prices will rebound in anticipation of continued growth in the economy.
Technology stocks continue to rally on short covering. I told you a few weeks ago that tech stocks were heavily shorted and a rally could be building in the sector. Motorola announced a $4 billion stock buyback program that will take place over the next 36 months. The approval of the share buyback program is MOT first-ever. Motorola (MOT)shares closed up 41 cents at 17.31.
I continue to view the recent economic releases with a high degree of skepticism. The CPI report that was released Wednesday said that their was no inflation, and I would expect the inflation data to continue to be favorable in light of the recent selloff in commodities and raw materials. The major threat to inflation continues to be the huge run up in real estate prices, and the ramped speculation taking place among investors. Greenspan has his crosshairs aimed at real estate.
I look for the Fed to raise rates 1, maybe 2 times before pausing. I think Greenspan will then try can cool the real estate market with Fed speak and threats, rather than continued rate increases. If the real estate market does not begin to cool, the Fed will resume its rate hikes.
