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Good Earnings Lead to Better Economic Numbers

July 26, 2010 – 5:14 pm

The market continued its strong run from last week in the morning session on the backs of strong sales of new homes and a rise in the profit outlook from FedEx. While last week’s strength was due mostly to robust corporate earnings, today’s action is due to hope that the housing market will not fall off a cliff, but at least muddle along slowly and not hurt bank balance sheets much further. The economic outlook also received a boost of confidence this morning as FedEx raised its profit outlook for the quarter and stated they would reinstate their employee 401(k) match. Companies like UPS and FedEx are seen as having a strong sense of economic activity as their finger is on the pulse of goods shipped throughout the US.

The rest of the week is filled with economic data along with a slew of earnings due tomorrow. Consumer confidence is reported tomorrow along with durable goods orders on Wednesday. Friday will be the most crucial however, as second quarter GDP will be reported along with the Chicago Purchasing Managers Index. Those figures will give a much clearer picture of the chances of a double dip recession. My gut says that they will surprise to the upside, but in this market you should expect volatile action until the economic picture become less fuzzy.

Good Trading
Steve Peasley

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