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Week in Review


Cut loose and shake it up!


Market Recap

After last week's soft economic data served as the catalyst for a rally on Wall Street, the markets were under pressure all week as the possibility of a "recession" loomed in the minds of investors. The soft PPI and CPI last week coupled with a sharp decline in home sales and durable goods orders raised fears that the economic "slowdown" could be more severe than originally thought. Bonds rallied and the yield on the 10-year note fell to 4.78%, its lowest level since March, as Fed rate hikes appear to be on hold.

The DJIA and the S&P500 remain the more constructive charts technically and could be setting up for a move higher after completing an inverted, doubled headed monster as mentioned in this week's Cup of Jo. A shift to defensive, large cap names have helped these sisters of late as global liquidity continues to tighten. The "tech laden" NDX and Russell were able to recoup their losses from the first of July, but failed to retrace their steep declines from April/May and have yet to follow along. Note they remain sitting under a great deal of resistance.

Last week's rally lacked conviction as volume was light which in part can be contributed to seasonality. However, market uncertainty continues to grip investors and perhaps this best delineates the recent action in the large cap issues. For the bulls to continue their run into the latter part of the year, large accumulation volume (institutional action) needs to occur with the NDX and Russell breaking to the topside of their four month downtrend.

Top Headlines

July durable goods orders dipped by a larger than expected amount led by a steep decline in civilian aircraft and automobile orders. (Thurs 24th)

The downturn in the housing market appears to have accelerated in the month of July. Existing home sales fell to their worst level in two and a half years and new home sales dipped below Wall Street's estimates. (Wed 23rd & Thurs 24th)

Drugstore chain Rite Aid (RAD) agreed to buy the U.S. Eckerd and Brooks operations of Canadian based Jean Coutu Group for $2.55 billion in cash and stock.

Iran's response to a United Nations resolution will likely be rejected because it makes no reference to stopping its uranium development. (Thurs 24th)

Apple (AAPL) voluntary recalled 1.8 million Sony-built notebook batteries on fears that the batteries could overheat and catch fire. Sony (SNE) was ordered by Japan's trade ministry to investigate the problem further. (Thurs 24th)

Government backed mortgage company Fannie Mae (FNM) announced it will not face charges for accounting irregularities. (Thurs 24th)

Japan's consumer price index (CPI) came in softer than expected which lowered the probability of near term rate hikes in Japan. The yen traded lower against the dollar and yields fell. (Fri 25th)

In an effort to boost revenue and expand, Big Blue (IBM) announced its intention to buy Internet Security Systems (ISSX) for $1.3billion in cash. (Wed 23rd)

All eyes will be on Tropical Depression 5 as it is expected to strengthen into a storm and enter into the Gulf of Mexico. (Fri 25th)

Earnings Snapshot

Home improvement retailer Lowe's (LOW) reported an 11% rise in quarterly profit, but warned about a possible slowdown in earnings because of a cooling housing market. (Mon 21st)

Luxury home builder Toll Brothers (TOL) reported a 19% dip in quarterly profit as the troubled housing market shows no signs of improvement. (Tue 22nd)

Investors frowned upon retailer Chico's FAS after the company provided guidance that failed to meet expectations. (Fri 25th)

Market Movers: Winners and Sinners

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No positions in stocks mentioned.

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