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Week in Review

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A look back at the week that was...

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Market Recap

The latest two month bull run eased this week as investors took profits after dismal retail sales numbers for the month of April. Thursday's sell-off could have been expected after the "Four Sisters" reached overbought, short-term levels. The markets quickly rebounded Friday after a benign PPI report which showed core inflation has moderated at the wholesale level. Given the FOMC statement this week, inflation still remains the Fed's main concern despite recent evidence of a contained pricing environment.

On a technical front, Thursday's sell-off brought the SPX below 1500 on a closing basis. As we head into the close today, it will be important to see if the SPX can retake this level. The banks and broker/dealers still remain underwater and we believe for this market to undertake another sustained advance, the financial complex must confirm this move higher by taking out their old highs.


The Four Sisters Performance




ETF Watch




Top Headlines

Overall April retail sales showed a 1.8% decrease in same-store sales with 85% of those missing expectations. (5/10)

The Federal Reserve voted to keep interest rates at 5.25% saying future decisions were data dependent with the key focus being inflation. (5/9)

The Labor Department reported a 0.7% rise in April PPI, but core inflation was mild once again. Food prices rose 0.4%, the lowest price gain in five months. (5/11)

Tony Blair announced he will step down after 10 years as Britain's prime minister this June. Gordon Brown will most likely be his successor. (5/11)


Earnings Snapshot

Insurance giant American International Group (AIG) reported strong quarterly earnings fueled by growth in underwriting and investment income. (5/10)

Cisco (CSCO) reported net income of $1.9 billion compared with $1.4 billion a year ago; however, fourth-quarter sales forecasts were unchanged and gross margins fell slightly. (5/9)

Disappointing sales revenue from its studio entertainment division tempered Disney's (DIS) top line estimates. (5/9)

Toyota (TM) reported strong and European sales, offsetting disappointing domestic results, and helping the automaker to a 9% rise in quarterly profits despite slowing sales and profit growth projections. (5/9)

Stricter lending standards hurt affordability at lower price points for Toll Brothers (TOL) as the company announced home-building revenue fell 19% and net-contracts signed dropped 25% in the recent quarter. (5/9)


Market Movers: Winners and Sinners

No positions in stocks mentioned.

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