Market Week Outlook: Focus On Earnings

After the sharp advance the first few weeks of this rally, we've turned to a slow grind up in the past week and a half. Markets shrugged off an earnings disappointment from McDonald's (MCD) yesterday, to inch up 0.2% for the S&P 500 and 0.36% for the NASDAQ. Economic data was light with existing home sales the main figure:

Existing home sales in June slipped 1.2 percent in June to an annual rate of 5.08 million, according to the National Association of Realtors, missing expectations for a reading of 5.25 million units. Still, the reading was still the second-highest level of sales since November 2009.

The focus this week will be on earning reports with the Fed finally sidelined for a week and economic data very light. Many of the big wig names like Apple (AAPL), Caterpillar (CAT), Amazon (AMZN), Facebook (FB), etc will hit this week.

The S&P 500 broke out of that bull flag last week and unlike the NASDAQ has been able to hold it.

It's been more choppy up here for the NASDAQ due to the tech wreck late last week.

The volatility index continues to suffer as people believe in the "Bernanke Put" again (he has our back, what can go wrong?)

Of course individual stories can always go wrong as we saw yesterday with Dow component McDonald's. There was some damage but we can see why the stock bottomed were it did yesterday - a very clear trendline. However if that breaks, there could be some significant downside.

The world's biggest hamburger chain reported a second-quarter profit that rose 4 percent but fell short of Wall Street expectations. It also said July sales are expected to be relatively flat and warned of a tough year ahead, given the heightened competition and rough economic conditions around the world. The company, which has more than 34,000 locations worldwide, says global sales edged up 1 percent at restaurants open at least a year. The company said sales were down 0.1 percent in Europe.


Yahoo (YHOO) sold off as one of it's major shareholders, hedge fund titan Dan Loeb announced he is selling much of his stake and taking 3 directors with him. The market did not like that but the stock was very extended and just fell back to its 10 day moving average, plus held the highs from May.

Yahoo said it will buy 40 million of its shares owned by activist hedge fund trader Daniel Loeb's Third Point for $29.11 a share, Friday's closing price, and that he and two other Yahoo directors nominated by Third Point have resigned. Third Point, which settled a bitter proxy battle with Yahoo last year after months of criticism of the company, will still own about 20 million shares, less than 2 percent of the Internet media company's common stock.


After the close, Netflix (NFLX) reported and investors were not pleased as the stock was down in the $240s in after hours (marked in blue below). It appears the number of subscriber additions is the issue. The stock was clearly extended, sitting on its 10 day moving average and even this substantial drop would only push it to near its 20 day moving average.

Netflix earned $29.5 million, or 49 cents a share, up from $6 million, or 11 cents, last year. Revenue was up 20% at $1.07 billion. The company added 630,000 U.S. subscribers in the quarter, and it brought the company’s subscriber base up to about 30 million. But investor predictions had the numbers anywhere from 700,000-800,000.

Last, for the precious metal crowd a nice move yesterday in both silver and gold. Maybe... just maybe... a corner is being turned. This is the first touch of the 50 day moving average for gold since early in the year. Too soon to tell but if these metals can get back over that moving average it would mark a change in recent history.


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