Weekly Outlook

Click here for Wall St. Week Ahead by Reuters.

Click here for stocks in focus for Monday by MarketWatch.

There are a few economic reports of note and many significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – Leading Indicators

Tues. – Richmond Fed Manufacturing Index, Home Price Index, weekly retail sales

Wed. – Fed’s Beige Book, weekly MBA Mortgage Applications report, weekly EIA energy inventory report

Thur. – Initial Jobless Claims, Existing Home Sales

Fri. – Durable Goods Orders, Univ. of Mich. Consumer Confidence, New Home Sales

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – Hasbro Inc.(HAS), Bank of America(BAC), Merck & Co.(MRK), Schering-Plough(SGP), Texas Instruments(TXN), SanDisk(SNDK), Boston Scientific(BSX), Apple Inc.(AAPL), American Express(AXP), QLogic Corp.(QLGC)

Tues. – Baker Hughes(BHI), Quest Diagnostics(DGX), Freeport-McCoRan(FCX), Forest Labs(FRX), SunTrust Banks(STI), CME Group(CME), UnitedHealth Group(UNH), Biogen Idec(BIIB), Wachovia(WB), Caterpillar(CAT), Keycorp(KEY), United Parcel Service(UPS), Washington Mutual(WM), Cerner Corp.(CERN), VMware(VMW), Broadcom(BRCM), Norfolk Southern(NSC), Illumina(ILMN), Boston Properties(BXP), Panera Bread(PNRA), Intuitive Surgical(ISRG), BJ Services(BJS), Domino’s Pizza(DPZ), Lockheed Martin(LMT), Halliburton(HAL), Royal Caribbean(RCL), XTO Energy(XTO), Stanley Works(SWK), Omnicom Group(OMC), UAL Corp.(UAUA), Linear Technology(LLTC), Yahoo!(YHOO), Lexmark Intl.(LXK)

Wed. – Travelers(TRV), PepsiCo Inc.(PEP), McDonald’s(MCD), Whirlpool Corp.(WHR), WellPoint(WLP), Wyeth(WYE), Phillip Morris(PM), PF Chang’s(PFCB), Boeing(BA), AT&T(T), ConocoPhillips(COP), McKesson Corp.(MCK), Qualcomm Inc.(QCOM), Chipotle Mexican Grill(CMG), F5 Networks(FFIV), Robert Half(RHI), Allstate(ALL), Aflac(AFL), Ryland Group(RYL), Terex Corp.(TEX), Pulte Homes(PHM), General Motors(GM), EMC Corp.(EMC), Hershey(HSY), Genzyme(GENZ), Amazon.com(AMZN), MEMC Electronic Matericals(WFR), Varian Medical(VAR), General Dynamics(GD), Peabody Energy(BTU), Pfizer Inc.(PFE), Sybase(SY), Anheuser-Busch(BUD)

Thur. – Eli Lilly(LLY), L-3 Communications(LLL), Invitrogen(IVGN), Strayer Education(STRA), AmerisourceBergen(ABC), Starwood Hotels(HOT), Medco Health(MHS), 3M Co.(MMM), Dow Chemical(DOW), Raytheon(RTN), Zimmer Holdings(ZMH), Ford Motor(F), Burlington Norther(BNI), Cheesecake Factory(CAKE), Microchip Tech(MCHP), Chubb Corp.(CB), Cymer Inc.(CYMI), YRC Worldwide(YRCW), BMC Software(BMC), Western Digital(WDC), Juniper Networks(JNPR), Kimberly-Clark(KMB), Becton Dickinson(BDX), Newmont Mining(NEM), Celgene Corp.(CELG), Diamond Offshore(DO), ImClone Systems(IMCL), Southwest Airlines(LUV), Bristol-Myers(BMY), Wynn Resorts(WYNN)

Fri. – Federal Signal(FSS), Barnes Group(B), Fortune Brands(FO), ITT Corp.(ITT), Blockbuster Inc.(BBI), Black & Decker(BDK), Kenneth Cole(KCP), XM Satellite(XMSR)

Other events that have market-moving potential this week include:

Mon. – None of note

Tue. – The Fed’s Plosser speaking

Wed. – The Fed’s Mishkin speaking, Fed’s Kohn speaking

Thur. – (RPRX) analyst day, (MSFT) analyst meeting

Fri. – None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on less economic pessimism, bargain-hunting, less credit market fear, mostly positive earnings reports, lower energy prices, a firmer US dollar and short-covering. My trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,260.68 +1.71%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,260.68 +1.71%
DJIA 11,496.57 +3.57%
NASDAQ 2,282.78 +1.95%
Russell 2000 693.08 +2.69%
Wilshire 5000 12,790.72 +1.63%
Russell 1000 Growth 540.77 +.69%
Russell 1000 Value 668.59 +2.61%
Morgan Stanley Consumer 664.89 +1.91%
Morgan Stanley Cyclical 846.01 +4.10%
Morgan Stanley Technology 554.18 +2.64%
Transports 5,004.02 +4.76%
Utilities 493.40 -4.72%
MSCI Emerging Markets 129.33 -.46%

Sentiment/Internals
NYSE Cumulative A/D Line 41,375 +.51%
Bloomberg New Highs-Lows Index -400 +72.55%
Bloomberg Crude Oil % Bulls 32.0 -49.2%
CFTC Oil Large Speculative Longs 210,013 +.12%
Total Put/Call .92 -16.36%
OEX Put/Call 1.56 +43.12%
ISE Sentiment 90.0 +7.14%
NYSE Arms .84 -27.59%
Volatility(VIX) 24.05 -12.51%
G7 Currency Volatility (VXY) 10.06 +3.50%
Smart Money Flow Index 8,091.19 +3.55%
AAII % Bulls 25.0 +12.76%
AAII % Bears 58.14 +5.38%

Futures Spot Prices
Crude Oil 128.88 -10.75%
Reformulated Gasoline 317.09 -10.68%
Natural Gas 10.57 -10.57%
Heating Oil 369.15 -9.15%
Gold 958.0 -.41%
Base Metals 240.40 -4.75%
Copper 366.90 -1.90%
Agriculture 421.05 -7.37%

Economy
10-year US Treasury Yield 4.08% +13 basis points
10-year TIPS Spread 2.44% -3 basis points
TED Spread 1.34 +13 basis points
N. Amer. Investment Grade Credit Default Swap Index 137.17 -1.89%
Emerging Markets Credit Default Swap Index 247.62 -6.67%
Citi US Economic Surprise Index +30.90 +13.19%
Fed Fund Futures 7.2% chance of 25 hike, 92.8% chance of no move on 8/5
Iraqi 2028 Govt Bonds 74.75 +.21%
4-Wk MA of Jobless Claims 376,500 -1.2%
Average 30-year Mortgage Rate 6.26% -11 basis points
Weekly Mortgage Applications 522,200 +1.71%
Weekly Retail Sales +2.7%
Nationwide Gas $4.11/gallon +.01/gallon
US Cooling Demand Next 7 Days 10.0% above normal
ECRI Weekly Leading Economic Index 131.20 -.83%
US Dollar Index 72.19 +.13%
Baltic Dry Index 9,012 -2.36%
CRB Index 427.17 -7.43%

Best Performing Style
Small-cap Value +3.60%

Worst Performing Style
Large-cap Growth +.69%

Leading Sectors
Airlines +27.32%
Banks +14.83%
I-Banks +14.39%
Homebuilders +10.26%
Retail +7.71%

Lagging Sectors
Gold -2.23
Utilities -4.72%
Energy -6.10%
Steel -6.87%
Coal -17.99%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Finish Mixed as Gains in Oil Services, Energy, Computer Services Offset Losses in Internet, Software and Coal Shares

Evening Review
Market Summary
Top 20 Biz Stories
Today’s Movers
Market Performance Summary
WSJ Data Center
Sector Performance
ETF Performance
Style Performance
Commodity Movers
Market Wrap CNBC Video(bottom right)
S&P 500 Gallery View
Timely Economic Charts
GuruFocus.com
PM Market Call
After-hours Commentary
After-hours Movers
After-hours Real-Time Stock Bid/Ask
After-hours Stock Quote
After-hours Stock Chart
In Play

Stocks Mostly Lower into Final Hour on Earnings Jitters, Profit-Taking

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet longs, Biotech longs and Computer longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is mildly negative as the advance/decline line is slightly lower, sector performance is mixed and volume is heavy. Investor anxiety is slightly above-average. Today’s overall market action is neutral given recent gains. The VIX is falling 2.88% and is still above-average at 24.29. The ISE Sentiment Index is low at 112.0 and the total put/call is around average at .92. Finally, the NYSE Arms has been running about average most of the day and is currently 1.02. The Euro Financial Sector Credit Default Swap Index is falling 3.01% today to 84.61 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is -1.92% today to 137.26 basis points. The TED spread is falling 1.14% to 1.37. I am surprised that the financials aren’t giving back any of their recent gains and that oil is unable to even bounce from recent losses. The broad market is stronger today than the major averages suggest. The defense, alternative energy, networking, medical equipment, utility, energy, oil service, computer service, telecom, drug, hospital, hmo, restaurant, gaming and airline sectors are all flat-to-higher on the day. The 10-year yield is rising 8 basis points, which is a function of the recent decline in oil as it takes pressure off the economy, not rising inflation expectations. The 10-year TIPS spread, a good gauge of inflation expectations, has dropped 20 basis points in 9 days to 2.44%. I suspect we could see some further near-term weakness as stocks continue to consolidate recent gains before another surge higher later next week. I view the 9.8% drop in Google(GOOG) shares as way overdone. They only “missed” due to poor forecasting of interest income and their conservative comments are only prudent given the current macro backdrop. I plan to add to this long position on any further meaningful weakness from current levels as I anticipate a strong finish to the year for the stock. Nikkei futures indicate a +332 open in Japan and DAX futures indicate an +38 open in Germany on Monday. I expect US stocks to trade mixed into the close from current levels as short-covering, falling energy prices, diminishing credit market angst and less financial sector pessimism offsets profit-taking and earnings jitters.

Today's Headlines

Bloomberg:
- The California Public Employees' Retirement System, the largest U.S. public pension fund, said it lost 2.4 percent during the year ended June 30, as stock losses caused its worst performance in six years. In the past year, the fund's board agreed to invest in commodities for the first time, to let investment managers take short positions in U.S. stocks betting on their decline, to buy stocks in emerging markets such as China and India and to expand private-equity investments.
- Copper declined, heading for a second straight weekly drop, as supplies rose in China, the world's largest consumer of the metal. Stockpiles monitored by the Shanghai Futures Exchange gained 13 percent this week to 42,935 metric tons. That's the highest level since May 29. Chinese production in the six months through June rose 19 percent from a year earlier, the country's statistics bureau said today.
- Corn and soybeans fell for the fourth time this week on speculation that favorable weather in the U.S. Midwest will boost crop prospects. Rain may help crops from Nebraska to Illinois, Minneapolis- based DTN Meteorlogix LLC said in a report today. Before today, corn dropped 19 percent from a record in late June, and soybeans were down 8.5 percent from the all-time high on July 3 after hot weather dried fields flooded in Iowa and Illinois, the biggest growers of both crops.
- Citigroup Inc.(C) rose in New York trading after reporting a smaller-than-estimated loss on fewer mortgage-bond writedowns, lower borrowing costs and job cuts.
- Republican presidential candidate John McCain warned that al-Qaeda will step up terrorist attacks in Iraq leading up to the November election in the U.S.
- Teva Pharmaceutical Industries Ltd.(TEVA), the world's biggest maker of generic drugs, agreed to buy Barr Pharmaceuticals Inc.(BRL) for $7.46 billion to add markets in Eastern Europe and sales of the Plan B contraceptive pill.
- Israeli police said they arrested six Arabs on suspicion they formed a cell tied to al-Qaeda and planned to target a helicopter, possibly that of President George W. Bush during his January visit. The six were indicted today in Jerusalem District Court on terrorism charges, Israel's Shin Bet security service said in an e-mailed statement.
- Freddie Mac(FRE), the second-largest U.S. mortgage-finance provider, came a step closer to removing the biggest obstacle to selling common stock and increasing its holdings of mortgages and securities backed by home loans.
- Mexico's central bank raised its benchmark interest rate for the second straight month to curb the highest inflation rate in more than three years. The bank's five-member board, led by Governor Guillermo Ortiz, raised the key lending rate by a quarter percentage point to 8 percent today, the highest since December 2005.
- Schlumberger Ltd.(SLB), the world's largest oilfield-services provider, said second-quarter profit rose 13 percent as record crude prices prompted customers to boost exploration and production spending.
- China's stockpile of unsold new vehicles rose about 50 percent in the six months ended June, hitting a four-year high, as automakers expanded production and sales growth slowed. The backlog reached 170,000 vehicles from about 110,000 at the end of last year. The rising competition and slower economic growth caused average vehicle prices to fall about 3 percent in the first half from a year earlier, Cheng said. China's auto production capacity may increase 17 percent this year, according to an estimate by the China Association of Automobile Manufacturers.

Wall Street Journal:
- US Export Boom Fuels Factory Town’s Revival.
- Congress Relaxes New Rules on Lobbyist Disclosures. Congress has relaxed rules that would have required public disclosure of contributions and parties paid for by lobbyists, narrowing the scope of new ethics rules intended to draw back the veil on Washington's influence game.
- The nation's frantic search for crude-oil sources is leading to one of the oldest, richest and most-elusive prizes in the petroleum industry: oil shale. The U.S. has the largest known reserves of the coal-like rock, 80% of which lie beneath federal lands. By some estimates, U.S. oil-shale reserves could yield 800 billion barrels of oil, triple the current proven reserves of Saudi Arabia.
- JPMorgan Chase(JPM) may be a good investment if investors are willing to bet that the Wall Street bank will be able to reduce the amount set aside in a reserve that shields it against future losses. So-called loan-loss provisions are damaging banks’ earning statements now, yet when loan quality recovers, banks such as JPMorgan could get an earnings boost.
- Now that an executive-branch ban on offshore oil exploration has been lifted, the time has come for Democrats in Washington to lift their own ban on increased domestic supply. Americans are demanding that Congress do something about record-high gas prices. They recognize that prices will not go down unless supplies go up. And they also know that the only thing now standing in the way of more domestic supply is the Democratic refusal to allow it.
- Hedge-fund inflows tumbled 79% in the second quarter from a year earlier, hitting a 2 1/2-year low as investors shied away from putting new money into the investment vehicles.

USA Today:
- Roadside bombings in Iraq that are linked to Iran have plunged 70% in the last three months, the US military says. Experts say Iran has lost influence in Iraq after the Iraqi government had a run of successes against Shiite militia strongholds. Iran had funded the militias, but those groups abused their power and lost popular support.

San Francisco Chronicle:
- San Francisco residents will vote in November on whether to name a local sewage plant for President Bush, citing the volunteer group that crafted the measure.

TradeWinds:
- The OECD will develop a cost-escalation index to protect shipbuilders fro soaring steel prices, citing Reinhard Luken, head of the Community of European Shipyards Assoc.

Reuters:
- Iran said on Friday it did not expect an attack from Israel or the United States triggered by the long-running dispute over its nuclear program. Diplomats from Iran and world powers will meet in Geneva on Saturday to discuss the nuclear issue. Washington will attend the talks for the first time, a notable shift in policy which has raised hopes of progress.

Interfax:
- Russian oil production will not drop below 2007 levels this year, citing Energy Minister Sergei Shmatko. Output will “definitely” be greater in 2009 than this year, Shmatko said.

IrishTimes.com:
- THE EUROPEAN Central Bank (ECB) will not change the course of its monetary policy to assist those euro area members such as Ireland, Spain or Portugal that are currently experiencing economic difficulties, the president of the ECB, Jean-Claude Trichet, has told The Irish Times.