Weekly Newsletter May 27th - June 2nd

Current Events: The old adage, "sell in May, and go away" has proven to be true once again as the U.S. markets attempt to limp away with only relatively minor losses for the month. The announcement of the unemployment rate on Friday will kick start the month of June and will certainly catch the eyes of many investors looking to determine if the selling onslaught witnessed in May will spill over into June.

What to Look for This Week

With Greek polls signaling a commitment to the euro currency, the chances of more global stimulus in Greece increases. Political polls in Greece show that the conservative New Democracy party is ahead of the anti-bailout, left-wing Syriza. Answers will undoubtedly soon come on whether Greece will stay committed to austerity measures and remain in the euro zone, as the debt-laden nation will hold an election June 17.

News Affecting the Markets

Spain nationalized Bankia (its third-largest bank) will have to find a new path to recapitalize after European Central Bank rejects a proposal to use government debt. Under a proposal, Spain planned sink billions of euros in its bonds into the ailing bank with an eye to swapping them out for cash at the European Central Bank’s three-month refinancing window. Such a plan would have allowed the country to sidestep having to raise the money in the bond markets.

Smart Investing

Look Deeper than a P/E Ratio: Price-to-Earnings (P/E) ratios are a very handy snapshot to gauge whether a stock is cheap or expensive. But they do not tell the whole story, and on occasion can be misleading. If you take a few more steps, you can truly assess a stock's value relative to the profits being generated. This would be free cash flow. Understanding this concept can help you avoid bad investments and target good ones. The P/E ratio came into fashion in the late 1920s as investors had no idea how to value the stocks they were buying. We've come a long way since then, yet the EPS and the P/E ratio still dominate the headlines. Take the extra step and calculate the free cash flow ratio and the free cash flow yield. Stocks that look attractive by these measures will help your portfolio to hold its own in bear markets and appreciate in bull markets.

Earnings for the Week

Monday: No major earnings announcements.

Tuesday: DryShips Inc (DRYS) {After the close}, Perfect World Co Ltd (PWRD) {After the close}

Wednesday: Cosan Limited (CZZ) {After the close}, Lions Gate Entertainment Corp (LGF) {After the close}, Quiksilver Inc (ZQK), TiVo Inc (TIVO) {After the close}

Thursday: Ciena Corp (CIEN), Joy Global Inc (JOY), Vera Bradley Inc (VRA) {After the close}

Friday: Charming Shoppes Inc (CHRS)

* Earnings dates and times are subject to change

Economic Data this Week

Monday
No announcements scheduled.

Tuesday
Consumer Confidence @ 10:00 AM for May (Actual = 64.9)

Wednesday
MBA Mortgage Index @ 7:00 AM for 05/26 (Est. = N/A, Prior = 3.8%)
Pending Home Sales @ 10:00 AM for April (Est. = 0.6% to 2.0%, Prior = 4.1%)

Thursday
Initial Claims @ 8:30 AM for 05/26 (Est. = 365K to 368K, Prior = 370K)
Continuing Claims @ 8:30 AM for 05/19 (Est. = 3,250K, Prior = 3,260K)
Chicago PMI @ 9:45 AM for April (Est. = 55.0 to 57.0, Prior = 56.2)
Crude Oil Inventories @ 11:00 AM for 05/26 (Est. = N/A, Prior = 0.883M)

Friday
Unemployment Rate @ 9:55 AM for May (Est. = 8.0% to 8.1%, Prior = 8.1%)
ISM Index @ 9:55 AM for May (Est. = 53.0 to 54.0, Prior = 54.8)
Construction Spending @ 9:55 AM for May (Est. = 0.0% to 0.5%, Prior = 0.1%)
Auto Sales @ 2:00 PM for May (Prior = 5.0M)
Truck Sales @ 2:00 PM for May (Prior = 6.0M)