Weekly Market Review 07-16-2004

Market flirts with moving averages
By Rick Paler


The market closed lower for the third week in a row, as the major indices flirted with their 50 day and 200 day moving averages. Traders are looking at the moving averages to determine if the markets are heading lower. If the market breaks through its moving average on the down side, some traders will interpit this as a bearish sign.

Intel (INTC) helped drive the market lower after offering a disappointing second quarter report. The company announced second quarter earnings of $0.27 per share matching Wall Streets estimates. The company warned that its gross margins peaked for the cycle and lowered its gross margin forecast for the year from 62% to 60%. The company also announced that their inventory level had risen to a 10 year high.

Qualcomm (QCOM) announced a 2-for-1 stock split and said that they would be increasing their dividend to $0.07 per share from $0.05.

PepsiCo (PEP) second quarter earnings increased 12% over last year posting $0.61 per share matching analyst estimates. But some questioned the numbers posted by the company’s Frito-Lay unit. The popularity of the high protein low carb diets had effected the unit’s growth.

Pfizer (PFE) was in the news after the Chinese government overturned its local patent for Viagra. The company’s CEO Henry McKinnell said that the decision could affect the company’s desire to invest further in China. The company also announced this week that they were trimming their 2004 full year sales forecast to $52.5 - $53.0 billion from $54.0 billion.

Johnson & Johnson (JNJ) reported earnings of $0.82 per share topping the Streets estimates of $0.79 per share. Sales jumped 11% to $11.5 billion. The company also announced that they were raising their full-year profit guidance to $3.03 per share from $3.00.

In economic news, reports indicated that inflation might be slowing and the economy continues to expand. The closely watched Producer Price Index for June unexpectedly fell and the core Consumer Price Index, which excludes food and energy rose only 0.1%. Economist had expected an increase of 0.2%. The index, which measures inflation, indicates that the Federal Reserve might not have to raise interest rates in August.

The Philadelphia Fed’s Business Activity Index came in much higher than expected. The index which measures manufacturing came in at 36.1; economist had expected a reading of only 25.0.

Not all of the reports were rosy, the June Retail Sales, Industrial Production, Capacity Utilization and Consumer Confidence all missed their estimates.

In fixed income news the 5 year Treasury note closed yielding 3.67% up from last weeks 3.62%. The 10 year note yielded 4.48% and the 30 year bond yield ended at 5.21%.

Next week companies that will be releasing earnings are Plum Creek Timber (PCL), US Bancorp (USB), Leggett & Platt (LEG), SouthTrust Corp. (SOTR), Cerner Corp. (CERN), Colgate-Palmolive (CL), Symantec (SYMC), Synovus Financial Corp. (SNV), Pfizer (PFE), Sherwin-Williams (SHW), Bright Horizons Family Solutions (BFAM), Coca-Cola (KO) and Fortune Brands (FO).