It’s Still Not Time To Be Overly Aggressive In The Stock Market

The U.S. shed just 539,000 jobs last month, the fewest since last October. Unemployment continued to rise, however, reaching 8.9%.

The nonfarm payroll drop was well below even better than most of the more optimistic forecasts, thought the ADP survey did signal that a positive surprise could occur. More importantly, it is another sign that the pace of economic deterioration is slowing.

Not all was encouraging, however. The unemployment rate is at its highest level since September 1983. Furthermore, the March job loss number was revised upwards to 699,000, from the previous estimate of 633,000.

The government hired 72,000 workers. Conversely, the manufacturing sector shed 149,000 jobs and the service sector cut 269,000 jobs.

Though the recession will get worse before it gets better, the eye of the economic storm appears to have passed. Today’s numbers were the latest in a series of improving data points and follow yesterday’s encouraging numbers from the retailers and optimistic comments made earlier in the week from the CEOs of MGM Mirage (MGM) and Cisco Systems (CSCO).

Investors now need to balance increased exposure to stocks, while still using a high level of selectivity. Business conditions do appear to improving for companies such as Intel (INTC). On the other hand, the recent run in shares of Regions Financial (RF) and Ford Motor (F) seem to ignore the ongoing challenges. At the same time, more stable companies such as Johnson & Johnson (JNJ) continue to thrive, but have stocks prices that reflect attractive valuations.

It’s still not time to be overly aggressive, however. Stocks have had a strong run over the past 2 months and are now overbought. Additionally, volume has been falling since March. Therefore, a short-term pullback seems likely. If a pullback does occur, it would be a buying opportunity.

In the meantime, give consideration to using a dollar-cost averaging strategy to get back into the stock market.

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