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Weekly Review | Jul 19 to Jul 23

Market Indices

Index	Jul 19, 2010	Jul 23, 2010	Change	Percent
DJIA	10098.12	10424.62	326.5	+3.23
Nasdaq	2185.81	2269.47	83.66	+3.83
S&P500	1066.85	1102.66	35.81	+3.36
Russell 2000	612.26	650.65	38.39	+6.27
Russell 1000	474.18	493.52	19.34	+4.08

Equity Review

Strong earnings gave help to the Dow and S&P 500 which closed up for the week. The Dow Jones Industrial Average closed at 10,424.62 up 3.24% for the week ending July 23, 2010. The S&P 500 closed at 1102.66, its first close over 1100 this month. The major market index posted a weekly gain of 3.55%. International Business Machines Corporation reported quarterly results with revenue lower than analysts predicted. IBM, the world’s largest computer services company saw declines in revenue due to the devaluation of the euro. Sales were down by $500 million as software and services became more expensive to customers in Europe which accounts for approximately one-third of the company’s revenue. However, earnings per share came in at $2.61 per share over an estimated $2.58 per share. Whirlpool reported a strong second quarter as demand for products is picking up due to federal rebates on energy-efficient appliances. The world’s largest appliance maker announced earnings of $205 million or $2.64 per share beating analysts’ estimates of $2.17 per share. The company also raised its 2010 guidance for the entire year to $9.00 to $9.50 eps, from the previous range of $8.00 to $8.50. UnitedHealth Group Inc. reported second quarter net income of $1.12 billion or $0.99 per share over the $0.75 per share estimated by analysts. The health insurer raised the 2010 full year earnings guidance to $3.40 to $3.60 per share. Ford Motor Company beat earnings estimated at $0.41 per share with an impressive $0.68 per share and second quarter net income of $2.6 billion, which makes this quarter part of Ford’s most profitable first half in over ten years. The auto maker has been upgrading cars such as the Taurus and Fusion with heated leather seats and voice activated electronics allowing for more revenue as buyers are paying more for these re-designed models. The company believes that U.S. auto sales in 2010 will be $11.5 million to $12 million which is down from the previous forecast of $11.5 million to $12.5 million. However, Chief Financial Officer Lewis Booth stated they are optimistic that the remainder of 2010 will be great and 2011 will be even better. Caterpillar reported a profit of $707 million or $1.09 earnings per share. The world’s largest manufacturer of construction machinery raised its full year earnings guidance to a range of $3.15 to $3.85 from the range of $2.50 to $3.25 per share. The quarter ending June 30, 2010 saw profit rise 91% due to high demand in developing countries. Although it is still early in the earnings season reporting phase, 157 companies are scheduled to announced earnings results this week. Some of the big companies we will hear from include Boeing, DuPont and Merck. BP will bring big news as they also report second quarter results not to mention the likely departure of CEO Tony Hayward.

Economic Indicators

Economic Review

Construction was started on 549,000 houses in June, which was less than predicted by economists. Builders are cutting back as a result of the home-buyers tax incentive expiration. A housing market index based on sentiment of builders looking at current and future sales as well as foot traffic reported a number of 14 in July. A reading under 50 is a “poor” rating indicating that the absence of government support signals difficulty for the housing industry to sustain recovery. Economist Russell Price stated, “We pulled sales forward with the credit, so it’s a matter of time as we allow demand to catch up. Jobs are the key.” As economists say the economy is expanding, jobless claims remain elevated. Initial jobless claims increased to 464,000 for the week ending July 17, 2010. With the decrease in the number of jobs available, consumer spending is negatively affected, and indicates slow growth for the remainder of 2010. Federal Reserve Chairman Ben Bernanke said Wednesday in a statement to Congress, “It will probably take a significant amount of time to restore the 8.5 million jobs lost in 2008 and 2009.” Bernanke also spoke before the House Financial Services Committee of Congress and pleaded for more government stimulus spending to strengthen the economic recovery and boost employment. Economist Brian Bethune feels that “businesses are being too conservative in hiring. With sales figures low, employers don’t want to become overextended.” The forecast for new jobless claims was 445,000. The index of U.S. leading indicators declined 0.2% for the month of June. A New York based private research group, The Conference Board reported that the drop indicates the U.S. economic recovery is likely to weaken, blamed on a weak housing sector, poor consumer spending and high unemployment.