The market clocked a third straight week of gains last week, though measly by comparison to the prior two weeks, as companies continued to report better-than-expected earnings, and economic data signaled that the recession is easing. Last week capped the best month for the Dow since 1989, rising 8.4% for the month of July. For the week ended July 31:
- Dow: Up 0.86% to 9,171.61
- S&P 500: Up 0.84% to 987.48
- Nasdaq: Up 0.64% to 1978.50
While second-quarter earnings were in focus last week, economic data was also a main driver. We saw signs of stabilization in the housing sector as new-home sales shot up 11% in June, marking the third straight monthly increase. Also, home prices in major U.S. cities increased sequentially in May for the first time in almost three years, according to the S&P Case-Shiller home price index.
Although prices and sales remain down from year-ago levels, the signs of stabilization are important for recovery prospects. Speaking of which, the economy contracted by a mild 1% in the second quarter, signaling that the recession is easing. This compares with steep declines of 6.4% and 5.4% in the first and fourth quarters, respectively.
Earnings reports serve as tea leaves for economy
As earnings reports continued to flow in, many companies said they are seeing signs of stabilization if not a bottoming in the economy. However, most companies have yet to post revenue growth, leaning on cost cutting (i.e. laying off workers) to boost bottom lines
In a sign that the steel market has bottomed, U.S. Steel called back 800 workers and has plans to restart an idle plant in Minnesota next month. The steel producer clocked a second-quarter loss and expects an operating loss in the third quarter on lower operating rates and prices. The company said prices are stabilizing in the U.S. and Europe, and says it thinks shipments and rates will increase in the third quarter.
The king of energy, ExxonMobil
Tech titans Microsoft
Second-quarter earnings continue to roll out, though lighter than the past two weeks, with companies from Pulte Homes to Kraft Foods to Toyota reporting.
Investors will continue to look for hints the recession is easing. Let's see if less bad data, which has been considered good in the market's view, will keep the market's positive momentum going.
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Fool contributor Jennifer Schonberger owns shares of Microsoft, but does not own shares of any of the other companies mentioned in this article. Google is a Motley Fool Rule Breakers pick and Microsoft is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.