Weekly Recap - Week ending 07-Aug-09The stock market continued its weekly winning streak, advancing 2.3% as better-than-expected economic data related to two areas of concern -- housing and employment -- stimulated more buying interest.  There was also a large number of earnings reports, but the majority were from less widely-held names, and as a result economic reports had the main impact on trade.

Seven of the ten sectors gained on the week, led by cyclicals. Financials surged 10.4%, followed by industrials (+5.1%) and consumer discretionary (+4.9%).  Defensive sectors underperformed, with telecom (-2.7%), utilities (-0.4%), healthcare (-0.9%) and consumer staples (-1.0%) all falling.

With regard to the economic data, the positive tone was set early in the week. The ISM Manufacturing Index made its seventh straight increase, coming in at 48.9 for July. While the sub-50 reading still connotes contraction in the manufacturing sector, the number was still better than the 46.5 that had been forecast by economists. Separately, construction spending data for June made a surprise 0.3% increase. It was expected to fall 0.5%.

In the latest string in positive housing data, the National Association of Realtors reported that Pending Home Sales rose 3.6% in June, better than the expected increase of 0.7%. Low prices, low mortgage rates, and the first-time buyer tax credit continue to be attractive inducements for prospective buyers.

Smaller-than-expected weekly initial jobless claims tallied 550,000. Though continuing claims were more than expected at 6.31 million, up from the previous week, the overall reaction to the data was moderately positive. This report did not have an impact on the widely-anticipated employment report that was released Friday.

The employment report was better than expected, although employers did shed jobs for the 19th consecutive month. There were 247,000 jobs lost in July compared to expected losses of 325,000. The amount of job losses fell to the lowest level in nearly one year and the unemployment rate eased back to 9.4% from 9.5%.

Though the data is encouraging, its important to recognize the continued difficulty in finding a new job is best reflected in the extension of the average duration of unemployment to 25.1 weeks from 24.5 weeks. This is the highest since records began in 1948. More alarmingly perhaps is that 1 out of every 3 unemployed workers has been unemployed for 27 weeks or longer.

Overall, the week's economic data were supportive of an argument of an economic recovery, but concerns remain on how strong the recovery will ultimately be.

In corporate news, auto companies reflected the improving ISM manufacturing readings, with Ford (F) reporting a 2.3% monthly increase in vehicle sales -- the first increase since 2007 and better than the expected decline of 5.0%.  Sales received a boost from the government's "cash for clunkers" program.  The program saw so much demand that the original $1 billion in financing was quickly used up.  In turn, congress passed and Obama signed into law a $2 billion extension in financing.

In earnings news, AIG (AIG) reported its first quarterly profit since Q3 2007, earning $2.59 per share in Q2, excluding nonrecurring items, versus the $1.67 consensus.  Shares surged 107% on the week.

Cisco (CSCO) reported a 18% year-over-year drop in revenue in fiscal Q4, matching expectations, with earnings slightly beating estimates due to the company's cost cutting measures.

On a related note, cost controls helped Procter & Gamble (PG) top quarterly EPS estimates.  But its revenue of $18.66 billion disappointed investors as it was well short of the $19.32 bln consensus.  PG slid 6.3% on the week.

Retailers released their July same-store sales, which once again were overwhelmingly negative on a year-over-year basis.  Of the 27 retailers on Briefing.com's same-store sales calendar, 15 reported worse-than-expected sales.

This week's gains sent the S&P 500 above the 1000 point psychological level -- its highest since November.  The S&P 500 is now up 51.5% from its March 6 low, gaining for the fourth consecutive week.

Index	Started Week	Ended Week	Change	% Change	YTD %
DJIA	9171.61	9370.07	198.46	2.2	6.8
Nasdaq	1978.50	2000.25	21.75	1.1	26.8
S&P 500	987.48	1010.48	23.00	2.3	11.9
Russell 2000	556.71	572.40	15.69	2.8	14.6