Skip to main content



) -- The sellers took a breather on Tuesday, leaving

nearly two-month old home price data

as the most plausible reason for what amounts to a piddling gain.

Fact is the major U.S. equity indices are stuck in the mud right now with the catalysts that drove the rebound earlier in June either undone or off the table. Canaccord Genuity equity strategist Tony Dwyer said early Tuesday he's expecting to see a slow bottoming out over the next few weeks.

His reasons include stocks still being "slightly overbought" in the near-term when compared to intraday lows in early June, the unpredictable news flow from Europe, the imminent Supreme Court decision on Obamacare, and the risks that predominate during the pre-announcement period ahead of second-quarter reporting season.

At the same, Dwyer is sticking to an uber-bullish year-end 2012 target of 1575 for the

S&P 500

, arguing that fundamentals points of his positive thesis for the year "all remain constructive" despite the recent softness in the economic data and Europe's uncertainty. Among the planks of his platform are the facts that both corporate earnings and the economy are still growing -- albeit at a slower pace than before -- and a belief that the

Federal Reserve

should be "extremely accommodative" through mid-2013.

"Our 2012 S&P 500 (SPX) target remains 1575, based on 15x $105 in operating EPS," he wrote. "Until this past year, periods of sub-3% core inflation suggested the equity market should trade at a minimum 15 multiple. The 2011 European Debt Crisis and subsequent drop in global equity markets continues to price in a recession that we continue to believe remains highly unlikely -- even with renewed European Sovereign Debt fear."

Dwyer favors "additional equity commitments" in the financial, information technology, and industrials sectors while this near-term bottoming out process continues.

"In our view, outside of a geopolitical shock, the risk in such a bullish fundamental outlook is a rapid and sustainable rise in interest rates," he said. "At this juncture, there appears to be very little evidence of that happening, especially with long-term interest rates reaching into new low territory."

TheStreet Recommends

Deutsche Bank was also out with commentary on what it's going to take to get stocks back on track and the firm put the onus squarely on the direction of the U.S. economy, calling a turn in the data "a necessary condition for a bottom in risk."


A rally in risk assets on policy moves alone would not be sustainable until data surprises bottomed," wrote analyst Binky Chadha. "The events of the last two weeks reinforce this view."

Chadha continued: "The latest policy response in Europe, the Spanish bank recap, saw a lukewarm market response. New Democracy won the Greek elections but equities failed to hold gains as risks remain. Spanish yields declined notably (good auction) but US equities sold off anyway. Equities rallied into the FOMC in anticipation of Fed action, but gave back all the gains last Thursday when the US data disappointed. European and EM data also disappointed (PMI, ZEW, China PMI), intensifying concerns about further global slowing."

For its part, UBS sees the events across the pond as taking precedence and the firm isn't optimistic that a concrete solution is forthcoming anytime soon.

"With Greek elections now in the rear-view mirror, further improvement in investor sentiment will require material progress in Europe's structural integration efforts, as well as a stabilization of the global growth outlook," the firm said Tuesday. "Unfortunately, neither is likely to emerge in the very near term. We continue to advocate tactically-defensive regional and sector allocations, with over-weights to the US & Japan among regions, and Technology, Healthcare, & Telecoms among sectors."

So while most on Wall Street don't see severe downside from here, there's isn't exactly any consensus on what's likely to be the buy signal beyond a fairly major shift on the macro front in the form of either a comprehensive plan to cure Europe's ills or a clear trend of improvement in domestic economic data. The problem is though that the latter is starting to look like a long shot until the former gets sorted.

As for Wednessday's scheduled news,

General Mills

(GIS) - Get General Mills, Inc. Report

is reporting its fiscal fourth-quarter results before Wednesday's opening bell, and the average estimate of analysts polled by

Thomson Reuters

is for a profit of 59 cents a share in the three months ended in May on revenue of $4.10 billion.

Shares of the Minneapolis-based food company, whose brands include Cheerios and Hamburger Helper, are down 5% so far in 2012. Since hitting a 52-week high of $41.06 in mid-January, the stock has lost 7% to close Tuesday at $38.15.

During Tuesday's session, General Mills announced an 8% increase to its quarterly dividend to 33 cents a share from 30.50 cents. The company noted that it's been paying dividends "without interruption or reduction" for the past 113 years, an impressive record to say the least. The higher payout gives the stock a forward annual yield of 3.5% at current levels.

The sell side is mostly bullish on General Mills ahead of the report with 12 of the 20 analysts covering the stock at either strong buy (4) or buy (8) and the 12-month median price target sitting at $43, implying potential upside of 12.7% from here.

UBS though is at neutral with a $39 price target. The firm is expecting an in-line performance for the quarter but it's leery longer-term, arguing that the company is losing favor first thing in the morning.

"We believe changing consumer behavior is hurting Mills' ability to drive volume and 'trade-up'during breakfast," UBS said. "High income consumers are shifting to Greek yogurt and moving away from home for breakfast due partly to changing coffee behavior. To some degree the wellness news of the day (fresh, protein, natural) seems to be working against many packaged food companies and helping the perimeter of the supermarket."

Check out TheStreet's quote page for General Mills for year-to-date share performance, analyst ratings, earnings estimates and much more.

Other companies reporting on Wednesday include

Herman Miller

(MLHR) - Get Herman Miller, Inc. Report


Lennar Corp.

(LEN) - Get Lennar Corporation Class A Report


McKormick & Co.

(MCK) - Get McKesson Corporation Report





Omnova Solutions

(OMN) - Get OMNOVA Solutions Inc. Report



(PAYX) - Get Paychex, Inc. Report

, and

Progress Software

(PRGS) - Get Progress Software Corporation Report


The economic calendar features the Mortgage Bankers Association's weekly application index at 7 a.m. ET; durable goods orders for May at 8:30 a.m. ET; pending home sales for May at 10 a.m. ET; and weekly crude inventories at 10:30 a.m. ET.

And finally,

Best Buy

(BBY) - Get Best Buy Co., Inc. Report

should be in focus on Wednesday following late reports that the struggling consumer electronics retailer could be a buyout candidate. According to

The Wall Street Journal

, founder Richard Schulze is

working with bankers

to possibly put together a deal to take the company private.

As of Tuesday's close at $19.37, Best Buy shares are down 17% so far in 2012, hitting a 52-week low of $17.53 on May 21. In the past 52 weeks, the stock has dropped more than 40% with company forced to close stores as it loses market share to online retailers like

(AMZN) - Get, Inc. Report


Best Buy shares ran as high as $21.59 during Tuesday's regular session as the report first surfaced late in the session. The stock was last quoted at $19.19, down less than 1%, on after-hours volume of roughly 200,000, according to


Other companies making headlines after the bell included

Bristol-Myers Squibb

(BMY) - Get Bristol-Myers Squibb Company Report

, which announced an additional $3 billion buyback authorization after the closing bell; and

H&R Block

(HRB) - Get H&R Block, Inc. Report

, which delivered earnings from continuing operations that topped its own expectations for its fiscal fourth quarter.


Written by Michael Baron in New York.

>To contact the writer of this article, click here:

Michael Baron


Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.