Week in Review
A look back at the week that was...
The bears gained the upper hand this week as credit turmoil took center stage despite decent earnings and an optimistic GDP report Friday. Investors were left scratching their heads wondering if the "easy" money still exists after bond deals were yanked and hedge funds reported troubles. Volatility spiked to its highest levels since last summer as a flight to quality sent bond yields south. Crude oil was under pressure on concerns of a slowdown in the U.S., but rebounded after Friday's upbeat GDP report.
The SPX sliced through its June lows on massive volume before finding initial support at its 150 day moving average of 1467. Converging long-term support lurks right below at 1450 which coincides with the 200 day moving average and horizontal support dating back to the February highs. It is important to note that Thursday's breakdown represents the 9th time in this bull market prior lows were undercut before ultimately going higher. Nonetheless, with the credit market on edge, the bulls are on the proverbial one-yard line going into the weekend.
The Four Sisters Performance
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- Existing home sales dropped to 3.8% during June to a five-year low. Inventory levels dropped 4.2% but remain at a 15-year high. (7/25)
- The Federal Reserve's Beige Book showed that while the country is enjoying moderate growth there are several districts showing signs of softening. (7/25)
- The Commerce Department reported that new home sales fell 6.6% to 834,000 during June. This represents the lowest level since 2002. Sales are down 22.3% compared to June 2006. (7/26)
- Capital spending weakening during June as durable-goods orders rose just 1.4% with demand for aircraft coming in strong. Economists were expecting a rise 2.5%. (7/26)
- U.S. second quarter GDP rose 3.4% representing the fastest pace since the first quarter of 2006. Consumer spending slowed from the first quarter but the report showed strong growth and falling inflation. (7/27)
- Concerns over the debt market and the ability for companies to finance share buybacks and takeovers fueled Thursday`s sell-off, the second largest of the year. (7/27)
AT&T (T) reported second-quarter up 61% over last year following the acquisition of BellSouth. Excluding acquisition related costs earnings per share came in at 70 cents a share versus expectations of 67 cents a share. (7/24)
UPS (UPS) reported first-quarter net income fell 14% on charges relating to the retirement of aircraft and employee buyouts. Earnings of 96 cents a share before adjustments were inline with expectations. (7/25)
Apple (APPL) reported earnings of 92 cents a share versus expectations of 72 cents a share. Mac computers and iPod sales were both strong in addition to the 270,000 iPhones sold during 2 days of the quarter.
Exxon Mobil (XOM) reported second quarter earnings of $1.83 a share versus expectations of $1.96 a share. The quarter represented the first time in more than a year that Exxon has missed earnings expectations. (7/26)
Market Movers: Winners & Sinners
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