After a tepid June, July produced fireworks for stocks and set up what could be a strong second half of 2013.

The Big Picture 

Here’s the score-card for June, the second quarter and the first half of 2013: 

INDEX               JUNE                   2Q2013                1H2013                  


DOW                   -1.36%                +2.27%               +13.78%


NASDAQ           -1.85%                +4.15%               +12.71% _________________________________________________

S&P500              -1.50%                +2.82%               +12.63% 

The first week of July saw the bullish momentum return despite thin holiday trading.  Vehicle sales at the nation’s three automakers are now back to pre-recession levels, led by pick-up trucks, as owners replace older models.  Home sales continue to gain strength, with pending home sales at the highest level in six years.  The labor market recovery is encouraging more unemployed to seek work with the economy producing 195,000 new jobs in June. 

The economy appears to be capable of growing without Federal Reserve bond-buying support; hence the spike in 10-year Treasury yields.  From a low of 1.65% at the start of May, the ten-year yield closed Friday at 2.57%.  As yields rise, prices fall – and that drop was reflected in bond mutual funds and ETFs, which experienced the largest outflow of money since 2007.  The much talked about great rotation out of bonds and into stocks seems to be at hand. 

Investors continue to rotate out of gold, down 27.63% year-to date after a bruising plunge of nearly $40/oz on Friday.  Not even the unrest in Egypt could restore the luster to the yellow metal.  Noted gold bug Howard Ruff has ended his forty-year “Ruff Times” newsletter just as gold failed to live up to the hype.  Famed investor Jim Rogers thinks gold needs to fall to $900/oz before finding support.  

Crude oil, however, is another story.  Supply and demand factors, coupled with the unrest in Egypt, pushed prices 7% higher just last week for the biggest weekly gain in a year.  Soon that jump will be reflected in prices at the gas pump – not good news for drivers.    

I, Investor 

Traders should come back from the 4th of July holiday weekend refreshed and ready to go.  The economic calendar is rather light with minutes from the last FOMC meeting due out Wednesday, along with comments from Chairman Bernanke and wholesale trade numbers.  Thursday sees the usual weekly jobless claims along with June export/import prices and June Treasury budget data.  Friday sees June producer prices, a measure of wholesale inflation, and consumer sentiment readings for mid-July. 

This week starts the second quarter earnings parade, led by Dow component Alcoa.  Considered by many as a bellwether indicator of global demand and predictive of trends in automotive and aerospace industries, Alcoa’s numbers could set up more gains for the second half, as expectations are low and estimates could easily be beat. 

Financial powerhouse JP Morgan Chase is also scheduled to release earnings at the end of the week and could show the impact of a recovering housing/mortgage market on the entire financial sector, due to report in earnest the week of July 15th.

Technically, the S&P 500 index closed above its 50-day moving average.  If prices can take out Friday’s high of 1632, look for a move into resistance at 1639-54, but don’t rule out more volatility.  Support builds from 1614 to 1560.     

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