DJIA / Market Close for Friday, July 15, 2011

This week ended. That was the good news. For the week DJIA was down -1.4%, Nasdaq -2.4%, S&P 500 -2.1% and Russell 2000 was down -2.8%.

Stocks fell more than 2% as Europe debt concerns and the inability of U.S. lawmakers to reach a debt ceiling agreement weighed on sentiment. Mine included.

The major indices suffered broad-based losses, with less than 50 stocks in the S&P 500 advancing. Nine of the 10 sectors fell more than 1%. Financials (-4.1%) and industrials (-3.6%) faced the most selling pressure. The energy sector outperformed on a relative basis after settling unchanged.

Fed Chairman Bernanke gave his semi-annual testimony to lawmakers. Bernanke stated that the Fed remains prepared to adjust monetary policy in the event that economic developments warrant such a move. Bernanke also noted that the Fed has reached a consensus on the steps involved in an exit strategy from current policy.

European sovereign debt concerns continues to weigh on stocks. An emergency EU meeting prompted speculation that the EU may be considering including Italy in any new bailout packages. Meanwhile, Moody’s downgraded Ireland’s debt to junk.

While the U.S. has extremely low borrowing rates currently, the country has debt concerns of its own. Major rating agencies Moody’s and S&P 500 both put the U.S. on review for a possible downgrade as uncertainty regarding the debt ceiling persists. S&P gave it a 50% chance that it will lower its long-term U.S. rating within the next 90 days.

Second quarter earnings reporting season unofficially started this week with Alcoa’s (AA) report after the close Monday. A total of 13 S&P 500 companies reported earnings. Although 10 of them topped earnings expectations, only two of the reporting stocks posted a weekly share price advance.

Alcoa missed EPS estimates by a penny, but posted better-than-expected revenue and offered a reassuring outlook. Shares fell -5.8% for the week.

Banking giants JPMorgan Chase (JPM -2.0%) and Citigroup (C -8.7%) both saw their share prices decline despite posting upside EPS results.

Shares of Google (GOOG 12.7%) rallied after the company handily topped EPS expectations. Revenue increased 24% y/y and EPS gained 36%. In my opinion, GOOG will be moving higher.

Earnings reporting season speeds up in the coming week. Operating earnings are projected to increase 14% y/y. Given the current uncertainty in the capital markets, guidance will be a key factor.

PSVIX closed the week at 32.43. Down -1.54% for the week and is sitting at+8.57% for the year-to-date.

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