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The “Heat Map”

July 28, 2014 | Weekly Commentary

Most of the time the U.S. stock market looks to 3 factors (call them the “pillars” that support the stock market) to support its upward trend – let’s grade each of the pillars.

CONSUMER SPENDING: We have graded this factor B (above average) based upon the increase in retail sales as reported in recent economic reports.

THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.

BUSINESS PROFITABILITY: We CONTINUE to rate this factor B- (slightly above average).Earnings results have mostly beaten expectations. With nearly half of the S&P 500 having reported, companies have eclipsed earnings expectations 76% of the time and exceeded sales expectations 67% of the time, according to FactSet. Companies are on track to grow earnings by about 6.7%, which would exceed expectations for 4.9% growth as of June 30.

NOTE: There is no change from the last report.

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