Better than expected earnings propelled the Dow Jones Industrial Average and the S&P 500 index to new all-time highs last week and will dominate the headlines this week.

The Big Picture 

Financials set the pace last week with major money center banks reporting stellar earnings.  From the worst performing sector in 2011, financials reversed course to close out 2012 on top. That momentum continues in 2013 with Bank of America, Citibank, JP Morgan Chase, Morgan Stanley and Wells Fargo all reporting strong revenues and profits as loan delinquencies decline. 

This week 157 companies included in the S&P 500 index are scheduled to report, including one-third of major technology companies.  Google and Microsoft disappointed investors last week.  Apple is on tap this week, along with telecom giant AT&T and materials concerns DuPont and United Technologies, to name a few. 

The economic release calendar is rather sparse this week.  Home sales data could be affected by rising interest rates, but keep in mind that mortgage rates remain at historically low levels.  June new home sales are out this Wednesday followed by unemployment claims and June durable goods orders on Thursday.  July consumer sentiment readings close out this week. 

Next week gets a bit more exciting.  Monday’s pending home sales for June and Tuesday’s July consumer confidence numbers from the Conference Board will take a back seat to the first look at second quarter GDP figures, employment cost index and Federal Open Market Committee statement on Wednesday.  Thursday brings us the start of August and the weekly jobless claims numbers, along with June construction spending, July manufacturing activity and auto sales. 

The July Employment Situation Report on Friday is joined by June personal income and consumption data and June factory orders.  The economy is expected to have created 190,000 jobs in July, with the unemployment rate expected to slip to 7.5%. 

I, Investor

Barring any negative surprises, U.S equities should continue on the path of least resistance.  With both the Dow and S&P in record territory, former highs will now act as support (for the Dow 15,350 is first support, for the S&P its 1650) along with the 50-day moving averages (15,020 and 1638 respectively).  The NASDAQ hits resistance at 3624 up to 4000, with support building from the gap at 3552-3522 down to its 50-day moving average of 3465 and recent low of 3294. 

Bonds remain on the defensive as investors continue to look for higher yields.  The ten year Treasury looks to be in a 50 basis point trading range from 2.75% to 2.25%.  More hints of the Fed tapering its bond-buying program will continue weigh on bonds. 

Rising crude oil prices are acting as a tax on consumers, with pump prices heading toward $4/gal.  The massive heat wave blanketing most of the states will also mean higher home energy bills.  Coupled with sequestration cuts, households could cut back or hold off on back-to-school spending, keeping economic growth in check.  

Stay cool and calm as we head into the dog days of summer.

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