May Auto Sales Strong, But Payrolls, Greece Loom for Stocks

NEW YORK (TheStreet) -- Auto sales for the month of May have come in better than expected, with all top four automakers reporting results ahead of expectations. Notably, pickup sales were strong, and average transaction prices -- particularly for General Motors (GM) -- were impressive as well.

"It's very bullish for the economy" to see light truck sales come in so strong, Jim Lebenthal, president of Lebenthal Asset Management, said on CNBC's "Fast Money Halftime Report." Strong sales of light trucks could suggest that there is an increase in construction, which is good for the economy, he added.

In Lebenthal's opinion, General Motors is a better pick than Ford (F) at the moment, because it has more favorable overseas exposure.

General Motors is a "slam dunk," added Josh Brown, CEO and co-founder of Ritholtz Wealth Management. The stock is now trading well and looks likely to climb above $40 in the short-term. Ford is "okay," but GM has more potential at the moment, he said.

"GM has the most upside," according to Pete Najarian, co-founder of optionmonster.com and trademonster.com. He also likes Goodyear Tire & Rubber (GT), which should benefit from a strong auto market, while the stock valuation is low given its earnings growth.

While auto sales were strong, there are concerns for the rest of the market, especially with the Greek deadline looming and ahead of May's nonfarm payrolls report, which the U.S. Labor Department releases on Friday.

In particular, Meb Faber, CIO and portfolio manager at Cambria Investment Management, said he remains pessimistic on the U.S. stock market, saying equities are entering the late stages of the bull market.

He pointed to several indicators -- record M&A deals in May, record buybacks in April, an increase in unprofitable IPOs, and margin debt levels -- to suggest the market will only return 2% per year over the next 10 years.

Because U.S. stock valuations are so high, forward returns will be diminished, he said.

Instead, investors should consider low-valuation countries and regions, such as Europe, Russia, and Brazil, which can churn out double-digit returns over the next five to ten years. However, investors need to be patient in order to realize the gains of deep-value investments, he said.

For investors who do not feel comfortable buying foreign markets, they can instead look to buy the cheapest U.S. sectors, which at the moment include financials and energy. Buying the two or three cheapest sectors of the market "cream" the average return of the S&P 500 over the long-term, Faber said. Conversely, the three most expensive sectors at the moment are consumer discretionary, technology and health care.

Looking to the recent price action of Chinese stocks, Lebenthal said the declines are a "red flag." While a pullback in Chinese stocks won't directly hurt U.S. stocks, it could weigh on investor sentiment. The Chinese market has become very volatile, after the Shanghai Composite soared more than 130% in the past year, a sign that investors are becoming complacent, he said.

Finally, Ambrish Srivastava, an analyst at BMO, touched on Intel's (INTCplans to acquire Altera (ALTR) for nearly $17 billion. He says the company is overpaying for Altera, which is a business with negative growth rates.

He doesn't like the deal and doesn't believe it adds value to Intel. As a result, he downgraded the stock to market perform and lowered his price target from $40 down to $33. Shares of Intel are down 1.6% as a result.

Najarian defended Intel, saying "I've liked this name for a long time," adding that the Altera deal helps Intel propel itself into a new market. Buying Altera could help spur growth at the tech company over the next five to ten years, he said.

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