The broad market trade pretty much flat on Friday as there wasn’t much going on in the news cycle.  We didn’t have an economic release, the debt ceiling talks were pretty much nonexistent and there was no official word on the latest EU bailout plan – during the Thursday press conference EU leaders mentioned that they release specifics on Friday, but apparently they figured since everyone responded so positively, then why bother.   The NASDAQ did gain some good ground as tech stocks finally outperformed after several days of weak results even as great earnings reports were rolling in.

Beyond tech, consumer discretionary and energy also outperformed the broad market.  Industrials, telecoms and utilities were the main laggards.  Overall, seven of the 10 major industry groups fell for the session.  For the week, the S&P 500 recovered all of the prior week’s losses.

The CRB Index gained ground for the first session in three to close higher for the week.  On Friday, 15 of its 19 components posted higher prices – crude is back to $100/bbl.

The debt-ceiling saga continues as talks blew up again late Friday afternoon.  As I stated on a couple of occasions, Washington will get the ceiling raised by the August 2 deadline, but it will be absent any budgetary substance.  Beyond that we have the question of whether the rating is cut below the sacred AAA (since any deal is unlikely to have any substance at this point).  Since the ratings agencies are a colossal joke, one has to believe that they won’t reduce the rating simply because of the ramifications of losing AAA status, but we’ll see how that one plays out.

Market Activity for July 23, 2011

Sector Activity for July 23, 2011

This Week

We didn’t have an economic release on Friday so nothing to report on the front.

The big numbers this week will be the CaseShiller HPI, consumer confidence, durable goods, jobless claims of course, and the first look at Q2 GDP.

On CaseShiller, we expect to see prices for May (which is actually a three-month average) come in flat or rise slightly – the index has posted 10-straight months of decline that pushed the index to a new low.  We should see a little bounce for the next few month before the measure begins to slide again.

The most-watched and longest running consumer confidence measure (the Conference Board’s look) will probably show another decline, particularly after the reading from the University of Michigan posted its worst number since March 2009.  We won’t see the same level of deterioration via the Conference Board’s reading (simply because it hasn’t overstated things as the UofM measure has, and thus won’t have as far to fall) but it is stuck at a depressing level.

Durable goods will need to post a good ex-transportation reading, the main number out of this report, after it’s shown weakness over the previous two months.  I personally have no idea what it’s going to print; the market expects a slight increase.

Jobless claims need to fall below the 400K mark, where it’s been hanging at for 15-straight weeks now, but there is no evidence that it will.

GDP is expected to come in at a 1.7% real annual rate for the second quarter, and my guess is about the same.  Inventories will probably keep the number from s sub-1.0% reading, although trade will help a bit.  Personal consumption (largest component of GDP) will post one of the worst results since the recession, business spending will be weak and government spending will weigh again.  We need a number above 3.5% to get the labor market fired up, instead we’re stuck below 2.0% -- pathetic.

Overseas, we’ll watch for that Chinese PMI number (gauge of manufacturing activity).  This number has been weakening for several months and may just deteriorate to contraction territory for the first time since the financial crisis was raging back in February 2009.

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Have a great day!

Brent Vondera, Senior Analyst

Phone: 636-449-4900