August 1, 2010
Though Friday’s session was choppy, July came to a close with stocks enjoying their best monthly run in a year. The Dow Jones Industrial Average and the S&P 500 each added close to 7% during July—given impetus by generally favorable earnings reports from a host of major US companies. Three-fourths of the 300 companies in the S&P 500 that reported earnings in July surpassed analysts’ projections; Chevron and Merck are the latest to issue extremely positive numbers. Yet anxiety over stagnant job growth in the US remains poised to derail market performance as investors fear that a “jobless recovery” will eventually work to shrink company profits.
YTD Stock Market Performance
Performance on Friday was mixed, with investors pondering somewhat contradictory data on the US economy, consumer confidence and regional manufacturing. The Dow fell just over a single point as a result, finishing the day at 10,465.94 (-0.01%); the S&P moved marginally upward, to 1,101.60 (+0.01%), and the NASDAQ composite added 3 points to close at 2254.70 (+0.13%). The overall rebound is clearly heartening given the downward drift of stocks in recent months—largely in the face of Europe’s debt crisis and underwhelming US economic data. On Thursday, stocks lost value on news that a regional Federal Reserve president had expressed caution about the strength of the economic recovery, and skepticism was reinforced by ambiguous data. US GDP rose at an annual rate of 2.4% in the second quarter, down from 3.7%–upwardly revised–in the first quarter. Though a majority of analysts had expected a second quarter rise of 2.5%, the figure represented the fourth straight quarter of positive economic growth. Consumer spending, however, remained tepid, while measures of consumer confidence painted a portrait of a still-dubious US populace. At the same time, regional manufacturing activity increased markedly, with the Chicago PMI reporting a figure of 62.3 in July—up from 59.1 in June.
European markets ended Friday mixed. The CAC 40 in France dropped 0.2%, while Germany’s DAX added 0.2%. The FTSE 100 finished 1% lower.
All Asian markets were down at Friday’s close. The Shanghai Composite was off 0.4%, the Hang Seng dropped 0.3%, and Japan’s Nikkei in Japan was down 1.6%.
The dollar rose against the euro, but fell against both the British pound and the Japanese yen. Gold added $12.70 to close at $1,183.90 per ounce, US light crude rose 59 cents to $78.95 per barrel, and the yield on the US Treasury’s 10-year note dropped to 2.91%.
On the whole, consumer sentiment continues to lag far behind hard economic data, which suggest that the recession has been over, technically speaking, for almost a year. Only sharply rising employment—unlikely, at this point–is likely to mitigate negative sentiment and reassure wary investors.
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The ARTS Team
About: Absolute Return Trading Systems (ARTS), Inc. www.absolutereturnsystems.com
Absolute Return Trading Systems (ARTS) Inc. delivers market timing instructions to its subscribers from its proprietary algorithmic market timing software. The system, designed by a team of researchers over more than a decade, is designed to produce positive returns in both up and down markets. ARTS provides performance and risk information on 43 exchange traded funds (ETFs) and 21 stock market indices and has consistently been a top-ranked market timing service as measured by the leading third-party performance verification service, TimerTrac.
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