Recap: Week Ending July 19, 2013

July 21, 2013

New Undergraduate trading courses at the GTF

Narrow ranges and light volume, summertime trade is in full force. This past week marks the tightest range on the Dow Jones Industrial Average traders have seen in over 6 weeks. Even though both the Dow Jones and S&P 500 both made new highs and closed positive on the week, the NASDAQ 100 closed negative. This is following poor earnings from its components. This is a case of extreme divergence. If this divergent activity continues between the major indexes, tightened ranges can be expected to continue. The tightened range comes interestingly enough at the start of earnings season. This may be a sign of many investors repositioning themselves or simply just waiting on corporate earnings. This past week the Dow component Coke report earnings of $0.59 a share compared to a prior reading of $0.61 per share. Coke blamed the poor result on the strengthening US Dollar, estimating that it will cut upwards of 4% off its profits this year. Another reason according to Coke for the poor performance was the wet and cooler weather conditions. Because of this, demand for Coke weakened this past quarter. This is an interesting statement to make as the weather conditions across the globe were not the same. Further more this may be a hint at a possible peak for Cokes performance. Many investors are wondering if Coke has not made the transfer fully to a healthier eating consumer yet. As the world moves towards eating leaner, companies like Coca-Cola must fall suit in offering diet friendly products if they want to compete.

This past week we also saw earnings from another Dow component, Microsoft. Microsoft or MSFT reported earnings of 66 per share with expectations of a report of 75 cents per share. With such a weak earnings report, it is evident that MSFT still is not able to adapt to the new computing platforms, including their somewhat lackluster Surface Tablet. Despite all this, MSFT’s server business grew by over 9% over the past quarter. Such results are good, but once again come short of Wall St’s 12% quarterly growth estimates. As PC sales continue to fall, Microsoft, like Coke, has to determine a way to possibly re-image themselves to the consumer, or face the consequences.

The upcoming week ahead is extremely quite with economic data. In Canada, the only number that will be released will be Retails sales, which is expected to come in at 0.3% for the month of May. Meanwhile in the US the Chicago Fed National Activity Index for June is schedule for Monday with a prior reading of -0.3. Further more the only other economic figure out of the US to watch for is the Durable Goods Orders out on Thursday with a consensus of 0.5%. Also on Thursday the British Government will report Gross Domestic Product for this past quarter, there is no consensus as of yet; however, prior readings came in at 0.3%.