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Stock market update/economic update for the week ending July 10, 2009

Earnings season 'officially' kicked off with Alcoa (ticker 'AA') reported earnings on Wednesday afternoon.  While Alcoa surpassed expectations, the stock market struggled once again, making this the fourth week in a row of negative returns.  While the markets still seems in a poor mood, the selling looks over-done.  Talk of the economy still struggling seems mis-directed.  While the economy definitely is not roaring, we have made improvements over the first quarter and fourth quarter of last year.  We have the ISM Manufacturing Index up, the ISM Services Index up, Initial Claims were down to the lowest level since January.

These next several weeks will move into the heart of earnings season.  This period will determine the direction for the next quarter.  With the estimates of $73.53 for the S&P 500 in 2010, this puts the market at about 12x next years earnings for 28% growth.  This wouldn't seem expensive and the estimates continue to move higher.  With this back drop, I would expect that any decent improvement over the analysts' expectation will push the markets significantly higher.

Economic Highlights:

July 10:  Trade Deficit decreases to $26 billion in May as a result of increased exports.

July 9:  Initial Claims down to 565,000, lowest level since January of 2009.

July 6:  ISM Services Index increased to 47 in June, exceeding expectations.

For additional Data and Charts, click the link below:

Upcoming Economic Releases:

Treasury Budget (07/13 at 2pm EST)
Retail Sales (07/14 at 8:30 EST)
Producer Price Index (07/14 at 8:30 EST)
Consumer Price Index (07/15 at 8:30 EST)