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Friday, July 24, 2009

No Job = No Confidence

“At these levels in the market, there’s not a lot of room for error. Anything that deviates brings about a reevaluation by the market.” -Mark Freeman, Westwood Management Corp.

FN: Jobs are all that really matter now. Parabolic stock markets fueled by short squeezes don't do a whole heck of a lot for Joe Sixpack. They may briefly inspire some hope, but when the paychecks shrink or stop altogether, it really doesn't matter that stocks had another green day.

If the consumer is not going to be the leader of the recovery, what will? Bear in mind, overcapacity is rampant. EVERYWHERE and in EVERYTHING.

U.S. Economy: Consumer Sentiment Falls on Concern Over Jobs: "Confidence among U.S. consumers fell in July for the first time in five months as mounting unemployment and stagnant wages shook households.

The Reuters/University of Michigan final index of consumer sentiment decreased to 66, in line with forecasts, from 70.8 in June. A preliminary report for July showed a reading of 64.6.

The biggest employment slump of any recession in the last eight decades is making Americans less secure, which is likely to restrain spending and lift savings. Inc. cut prices last quarter to boost sales and American Express Co. said more cardholders fell behind on payments, resulting in lower- than-anticipated earnings that hurt stocks today.

The consumer isn’t going to be a leader in this recovery,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, who accurately forecast the drop in sentiment. “Consumers are aware that the labor market is still pretty bleak. Any recovery in consumer spending will be very, very modest.”"

While companies are reporting bottom line beats, the real story are the top line misses. Revenues continue to drop... and rapidly. The earnings beats are all the result of massive cost cutting measures such as head count cuts, salary reductions and bonus eliminations. Obviously this does not help the consumer at all... which also means the economy be able to rebound. The consumer is still over leveraged and the debt burden has not yet been worked off.

U.S. Stocks Drop as Microsoft, American Express, Amazon Retreat: "U.S. stocks fell from the highest levels of the year as Microsoft Corp., American Express Co. and Inc. posted disappointing quarterly results and consumer confidence fell for the first time in five months.

Microsoft declined 9.4 percent, the most since January, on lower profit and sales than analysts estimated. American Express slipped 1.6 percent after saying earnings decreased as the recession made it harder for cardholders to keep up with payments. slumped 7.7 percent following price cuts that caused the online retailer’s revenue to miss projections."

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