Downbeat Data Drives Retest

It’s sure been a rough week for the market. There’s a lot of news out there right now that’s weighing down on sentiment, and I want to spend some time deciphering the headlines so you have a better idea of what’s been going on.

After three straight down days, U.S. stocks struggled to find a course in early morning trading on Thursday as the market tried to absorb rising unemployment claims and a reduced outlook from retail-giant Wal-Mart (WMT). By midday, the S&P 500 broke below its October 10th low of 839.80.

The Labor Department said that new jobless claims increased to a seven-year high last week, and the number could breeze past 500,000 in the upcoming weeks. The government also reported that the number of laid-off workers seeking unemployment benefits rose by 32,000 to 516,000.

In trade news, the deficit shrank by $2.6 billion to $56.5 billion in September from a month earlier, mostly due to lower prices for crude imports. In September, imports fell by 5.6%, while exports fell by nearly 6%. The strong U.S. dollar has impeded our export boom.

Meanwhile, Wal-Mart reported a 10% increase in third-quarter profit but reduced its profit outlook, which further upset investors. This news comes a day after electronics retailer Best Buy (BBY) lowered its forecast on the basis that consumers will further rein in spending before the holiday shopping season.

What I need you to take away from all of this is that we’re just witnessing another retest, and I remain confident we will see the market bounce up again.

This retest was to be expected—there are still a lot of challenges facing the U.S. economy. And remember, another thing investors have working for them right now is a season bounce. As President-Elect Obama builds his transition team and kicks his economic policies into high gear, I’m confident a lot of the volatility will evaporate and the market will build a more stable base.

And as I’ve told you repeatedly over the last month, we’re about to enter the seasonably strongest time of year for the markets, which is why now more than ever you must stick to a disciplined investing strategy. Selective stock-picking habits will pay off in spades over the next six months. By Thanksgiving, I expect my Buy Lists to start capitalizing on this seasonal strength!