Weekly Newsletter July 8th - July 14th

Current Events: Friday's abysmal downslide was enough to eliminate the positive days experienced earlier in the 4th of July holiday-shortened week. Unappealing reports from the U.S. Department of Labor, coupled with concerns over Spanish debt, turned a positive week quickly into a negative one across all major U.S. equity indexes.

What to Look for This Week

The aluminum marker, Alcoa is set to kick of the impending earnings season with household names such as Marriot, JP Morgan, and Wells Fargo set to follow suit later in the week. However, many analysts and investors are not hopefully when looking at this upcoming season of earnings as most are predicting lower-than-expected earnings to be released. The general consensus seems to be that corporate America's growth rate in slowing down. If this proves to be the case, continued negative pressure on the U.S. markets will likely ensue throughout the earnings season.

News Affecting the Markets

With Spanish bond yields rising this week to levels commonly viewed as unsustainable, U.S. and world markets negatively react once again to news coming out of Europe. Spain's 10-year debt has risen above 7%, a level that was considered the breaking point for Greece, Ireland and Portugal pushing those nations to request aid from euro-zone partners and the International Monetary Fund. The questions surrounding what Spain's next steps will be and the uncertainty of a definite safety net for the financially burden Mediterranean country looms over the financial markets around the world.

Smart Investing

How Bonds Operate: When considering bonds it is essential to have a firm understanding of the basics. First, consider the fact that the price of bonds and interest rates move in opposite directions. If interest rates decline, the price of a bond goes up, and if interest rates rise, the price of a bond declines. Second, bonds with longer maturities incur significantly higher interest rate risk than those with shorter maturities. That is a disadvantage if interest rates rise, but an advantage if interest rates decline. With these two key concepts in mind, we have the two faces of interest rate fluctuations: risk and opportunity. It may sound paradoxical, but a rising or strong bond market is one in which interest rates are declining because that causes bond prices to rise. You can sell a bond for more than you paid for it and make a profit. A weak bond market is one in which interest rates are raising and, as a result, prices are falling. If you have to sell your bonds, you have to do so at a loss. In either case, with bond investing, the changes in price are correlated to maturity length. Do simply jump into the bond market when looking to avoid the "risk" of the equity market. Without a proper understanding of how bonds operate, participating in the bond market can be just as, if not, more risky.

Earnings for the Week

Monday: Alcoa Inc (AA) {After the close}, Acuity Brands Inc (AYI), MAKO Surgical Corp (MAKO) {After the close}, PriceSmart Inc (PSMT)
Tuesday: OCZ Technology Group Inc (OCZ) {After the close}, Shaw Group Inc (SHAW), Wolverine World Wide Inc (WWW)
Wednesday: ADTRAN Inc (ADTN), Itron Inc (ITRI), Marriott International Inc (MAR) {After the close}, Texas Industries Inc (TXI) {After the close}
Thursday: Commerce Bancshares Inc (CBSH), Fastenal Co (FAST), Washington Federal Inc (WAFD)
Friday: JDA Software Group Inc (JDAS) {After the close}, JPMorgan Chase & Co (JPM), PDL BioPharma Inc (PDLI) {After the close}, Rosetta Genomics Ltd (ROSG), Webster Financial Corp (WBS), Wells Fargo & Co (WFC)

* Earnings dates and times are subject to change

Economic Data this Week

Monday
Consumer Credit @ 3:00 PM for May (Actual = $17.1B)
Tuesday
No major announcements scheduled.
Wednesday
MBA Mortgage Index @ 7:00 AM for 07/07 (Est. = n/a, Prior = -6.7%)
Wholesale Inventories @ 10:00 AM for 06/30 (Est. = 0.2% to 0.3%, Prior = 0.6%)
Crude Oil Inventories @ 10:30 AM for 07/07 (Est. = n/a, Prior = -4.270M)
FOMC Minutes @ 2:00 PM for 06/20
Thursday
Initial Claims @ 8:30 AM for 07/07 (Est. = 360K to 375K, Prior = 374K)
Continuing Claims @ 8:30 AM for 06/30 (Est. = 3300K, Prior = 3306K)
Friday
PPI @ 8:30 AM for June (Est. = -0.6% to -0.8%, Prior = -1.0%)
Core PPI @ 8:30 AM for June (Est. = 0.2%, Prior = 0.2%)
Michigan Sentiment @ 9:55 AM for July (Est. = 72.0 to 73.5, Prior = 73.2)