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Housing vs. Earnings

July 19, 2010 – 5:33 pm

The market started to recover this morning from Friday’s large sell off with positive news on earnings that seems to point to a very good earnings season. Most companies have beaten their estimates thus far. That theme will likely continue for the remainder of the season.

A business survey out this morning suggested that companies are mildly adding employees and cautiously optimistic about the future. I think that being cautious and mild can be used as terms to describe everyone’s feelings about our economy.

The only significant economic report that will be out this week is June’s housing numbers for both new and existing homes. The expectation is for the numbers to be weaker than the month before as housing is now on its own without any government interference.

IBM, Apple, Cisco and other big companies will be reporting this week and they will be struggling for attention against the housing numbers. Expect the market swing between the two, the classic struggle of Bull versus Bear.

The summer is going to have both its good days and bad. Stepping back, the stock prices themselves are undervalued and as time passes, with slow economic growth and outsized profits, stocks are becoming cheaper.

Good Trading
Steve Peasley

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