Tug of war continues for Bulls and Bears by Ken Mahoney
About one-third of the S&P 500 companies have reported second-quarter results, and the numbers have been good for stocks so far. By and large, companies are beating estimates and showing growth over last year. Earnings are currently on track to have risen almost 34% from a year ago, and revenues have jumped 9.5% according to Thomson Reuters.
Stocks also got a boost from the fact that European banks largely passed a round of government stress tests aimed at clearing up market fears about how the debt crisis is affecting the region’s banking system. Only 7 out of 91 banks failed the tests. Although some analysts are scoffing at the tests and questioning their credibility, most investors viewed this as another milestone passed and shifted their focus back onto fundamentals.
All three major indexes logged strong gains for the week. The S&P 500 rose past the psychologically significant number of 1,100 for the first time this month, and eventually ended at 1,102.66, up 3.6%. The Nasdaq climbed 4.2%, bringing it into positive territory for the year (albeit barely). The Dow ended up 3.2%, and with only one week remaining, is on track for its best month since July 2009 and is trending toward erasing its losses for the year.
It’s still early in the earnings season, and with 157 of the biggest companies in the country set to report next week, the tug-of-war between stronger earnings and lukewarm economic indicators will likely continue.
Highlighting this, Treasury Secretary Timothy Geithner who appeared on NBC’s “Meet the Press” on Sunday morning, and said, “You're seeing private investment expand again, job growth starting to come back. And that's very encouraging." Interestingly, Geithner’s comments came only days after stocks slumped in reaction to Federal Reserve Board Chairman Ben Bernanke's statement that the outlook for the U.S. economy is "unusually uncertain". In light of so much mixed sentiment, it’s not surprising that most investors are taking a wait-and-see attitude.
Key things to watch this week:
Monday – New Home Sales
Tuesday – Consumer Confidence
Wednesday – Durable Goods Orders
Thursday – Jobless Claims
Friday – GDP, Employment Cost Index, Chicago PMI, Consumer Sentiment
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HEADLINES:
Even during the darkest days of the financial crisis, nearly twenty financial firms managed to shell out an estimated $1.6 billion in "ill-advised" payments to their executives, according to a federal report issued Friday. In his latest review of compensation practices at companies that were bailed out by American taxpayers, White House pay czar Kenneth Feinberg condemned those companies for how they rewarded employees between late 2008 and early 2009.
In the latest sign of renewed turbulence in the housing market, an industry group said Thursday that sales of existing homes fell 5.1% in June. The National Association of Realtors reported that existing home sales fell last month to a seasonally adjusted annual rate of 5.37 million units, down from 5.66 million in May. Sales year-over-year were up 9.8%.
Ships were getting back in place Sunday at the Gulf of Mexico site of BP's leaky oil well as crews raced to resume work on plugging the gusher before another big storm stops work again. Now that Tropical Storm Bonnie has fizzled on Louisiana's coast, engineers are hoping clear weather lasts long enough for them to finish their work on relief wells. But as peak hurricane season approaches, the potential for another storm-related delay is high.
President Barack Obama signed into law Wednesday an overhaul of banking and Wall Street regulations that he says will end many of the practices that sent the U.S. economy into the worst recession since the 1930s. The law, pushed through mainly by Democrats in Washington's deeply partisan environment, comes almost two years after the near financial meltdown in 2008 in the United States that was felt around the globe. The legislation gives the government new powers to break up companies that threaten the economy, puts more light on the financial markets that escaped the oversight of regulators and creates a new agency to guard consumers in their financial transactions.
Barrons
CNN Money
http://money.cnn.com/2010/07/23/news/companies/compensation_report/index.htm
http://www.msnbc.msn.com/id/38340258/ns/business-consumer_news/
http://money.cnn.com/2010/07/22/real_estate/existing_home_sales/index.htm
http://www.usatoday.com/money/topstories/2010-07-25-463110359_x.htm
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