On Monday, the 30-stock Dow Jones industrial average surged 132.79 points, or 1.29%, to 10,450.95.  The broad Standard & Poor's 500-stock index rose 14.86 points, or 1.36%, at 1,106.24 and the tech-heavy Nasdaq composite index jumped 29.97 points, or 1.40%, to 2,176.01. Trading volume was light, with NYSE volume less than 1 billion shares, as advancing shares outran decliners by a four-to-one margin.  Wall Street’s fear gauge, the CBOE Vix, plummeted 4.6% to 21.16.

Treasuries lost ground as investors’ risk appetite grew.  A number of analyst upgrades also helped shares yesterday and after the close Hewlett-Packard (NYSE:HPQ) came out with strong numbers and also announced plans to triple its repurchase plan.

Among the DJIA components, all but two gained, led by Verizon (NYSE:VZ), up 3.0%, AT&T (NYSE:T), up 2.9%, General Electric (NYSE:GE), up 2.9%, and Chevron (NYSE:CVX), up 2.6%.  A Barron's article suggested AT&T (NYSE:T) shares undervalued due to concerns its exclusive iPhone contract with Apple (NASDAQ:AAPL) might not be extended next year; Verizon (NYSE:VZ) shares jumped shot up on hopes the exclusivity agreement might not be extended.  And Chevron (NYSE:CVX) shares gained from the dollar’s retreat.

All ten S&P 500 industry groups advanced, led by consumer services and telecommunications, both up 2.7%, oil and gas, up 1.6%, and industrial and tech shares, both up 1.5%.

Gold prices jumped to fresh highs yesterday, before giving up some ground to settle at $1164.70, up $17.90.  Meanwhile, the greenback dropped 0.7% to 75.13 against a basket of currencies.  This afternoon's FOMC meeting minutes will be scrutinised by investors for any evidence of a timing change for its asset purchase programs.  Such considerations are also key to the trajectory for gold pricing, viewed as an inflation hedge.

Earnings reports are due from Barnes and Noble (NYSE:BKS), Borders (NYSE:BGP), Dollar Tree (NASDAQ:DLTR), Heinz (NYSE:HNZ) and Hormel (NYSE:HRL).

Today, we're fortunate to have Willem Thorbecke, Senior Research Fellow at Asian Development Bank Institute and a Consulting Fellow at Japan's Research Institute of Economy, Trade and Industry, as a guest contributor.

Asia's role in the propagation of the global recession has been a subject of study, but relatively little attention has been devoted to the interaction of exchange rates and production chains. The structure of East Asian production networks and the severity of the recession places a premium on policy coordination in the region.

Multinational corporations in East Asia have established value chains by slicing up production processes and allocating the production blocks across countries in the region based on relative endowments of capital, skill, labor, and infrastructure. As MNCs increase their tenure in developing Asia, they procure more from local firms. This leads to the formation of industrial clusters, and local engineers and skilled workers begin migrating among firms and sectors. They bring their accumulated human capital with them and disperse it across the economy, promoting technological assimilation and productivity growth.

For instance, Kraemer and Dedrick document that the lion's share of the international production of notebook PCs is produced in the Yangtze River Delta by Taiwanese Original Design Manufacturers (ODMs). These manufacturers form part of a network that includes branded firms such as HP, Apple, and Toshiba, suppliers of key parts and components, producers of basic industrial materials, and makers of operating systems and CPU. Local Chinese firms supply connectors, batteries, switches, and displays and are also active in molding, casting, forging, plating, and module-assembling. Both digital and human networks enable PC producers to react efficiently in real time to changes in consumer preferences and technology. Firms assembling the notebook PCs have also kept inventories lean by processing 98 percent of the orders within three days. Productivity growth within this value chain has been amazing.

The Achilles heel of Asian production networks, though, is its dependence on developed economies for final demand. As private demand in the U.S., Europe, and Japan fell during the crisis, exports produced within regional production networks collapsed. This in turn caused output and employment throughout Asia to plummet.

Signs are emerging that East Asian production networks are reviving. Figure 1 shows imports for processing into China and processed exports from China to the rest of the world. Imports for processing are goods that are brought into China for processing and re-export. Processed exports are final goods that are produced using imports for processing. The figure shows that imports for processing and processed exports both collapsed earlier this year. Since then, however, imports for processing have recovered 85 percent of their losses and processed exports 75 percent. Thus trade within East Asian production networks is recovering. This is the good news coming out of Asia.

The not so good news is that exchange rate arrangements within the region may not allow this revival to be sustained. While many Asian countries have adopted greater exchange rate flexibility, China has returned to a de facto dollar peg. This implies that exchange rates between Asian countries have become very volatile (see, e.g., Figure 2). In general the effect of exchange rate volatility on trade is ambiguous. Within East Asian production networks, however, both theoretical and empirical evidence indicates that exchange rate volatility deters trade (see Thorbecke (2008) and Hiyakawa and Kimura (2009)). This effect arises because the service link cost for production blocks separated by national borders is an increasing function of risk and uncertainty, and exchange rate volatility increases risk and uncertainty. In a recent survey of Japanese MNCs, Professor Takatoshi Ito and his co-authors found that exchange rate stability between Asian currencies is essential for the uninterrupted flow of parts and components within regional production networks.

In addition, since Asian economies do not only cooperate within production networks but also compete in third markets, China's exchange rate peg puts pressure on other countries in the region to prevent their exchange rates from appreciating. Thorbecke and Smith (2009) reported that exchange rate appreciations across Asian supply chain countries are necessary to reduce global imbalances. If the renminbi is kept fixed, it becomes much harder for the huge surpluses generated within East Asian production networks to lead to a generalized appreciation of Asian currencies.

A solution to this impasse would be for China to abandon its de facto dollar peg and adopt a regime characterized by a multiple-currency, basket-based reference rate with a reasonably wide band. In this case, there would be more stability between the renminbi and other Asian currencies. In addition, exchange rates in the region would be able to appreciate together in response to regional trade surpluses.

This move would be difficult for China. Labor-intensive exports and thus employment in these industries are sensitive to exchange rate appreciations. On the other hand, exchange rate appreciations would reduce the need for Chinese and other Asian central banks to continue accumulating U.S. Treasury securities. Private and social rates of return are much higher for investments in education, healthcare, and clean water than for investments in U.S. government securities. An appreciation of the RMB would also allow Chinese consumers to purchase more of the final manufactured goods that were previously exported to developed markets (Thorbecke, 2009). A stronger renminbi would thus allow Chinese workers to enjoy more of the fruits of their labor while reducing their dependence on final demand in the West.

A good policy mix for Asia would thus involve relatively stable intra-regional exchange rates that could appreciate together in response to regional trade surpluses combined with more spending on human capital. Stable exchange rates would help to strengthen regional production networks. Joint appreciations would prevent unpleasant outcomes such as beggar-thy-neighbor policies and excessive reserve accumulation while also reducing global imbalances and encouraging production for domestic markets. Spending on human capital would facilitate technology transfer by allowing firms in developing Asia to become more involved in the engineering and design aspects of production. If Asian countries could climb the value chain in this way and focus on knowledge-intensive activities rather than assembly operations, not only would living standards in developing Asia rise but the region could become an engine of growth for the rest of the world.

This post written by Willem Thorbecke

Bank of America (NYSE:BAC) said it lost $2.2 billion during the quarter after it wrote down almost $10 billion in bad loans and General Electric’s (NYSE:GE) revenue numbers were below Street projections.  Higher loan losses aggravated investors’ concerns as Citigroup (NYSE:C) and JP Morgan (NYSE:JPM) had also reported higher loan losses during the quarter.  General Electric’s (NYSE:GE) results were impacted by lower earnings at its GE Capital unit.    

The 30-share Dow Jones industrial average fell 67.03 points, or 0.67%, to close at 9,995.91. The broad Standard & Poor's 500-stock index retreated 8.88 points, or 0.81%, at 1,087.68.  The tech-heavy Nasdaq composite index lost 16.49 points, or 0.76%, to 2,156.80.

Last week only 61 of the S&P500 released results, too early to signal trends, although the results were mainly above projections.  This week hundreds of companies report their earnings, and that could signal where the economy is headed in the times to come.  So far most earnings reports have beaten expectations.

Although nine of the ten S&P 500 industry sectors dropped Friday, on the week eight of the ten sectors managed gains.  Financials dropped 2.4% Friday, and ended off 0.2% for the week.  Oil and gas shares were the leading gainers during the week, up 5%, for a 20.2% year-to-date increase, as crude prices continued their advance, rising 95 cents Friday to $78.53 per barrel.  Crude prices have been rising on promising economic signs as well as the dollar's decline.  This morning China announced that its economy grew at a rate of more than 7% during the first nine months of the year and said it was comfortably placed to achieve its full-year target of an 8% GDP growth.  The greenback rose slightly Friday from a 14-month low.

This week 75 S&P500 firms are due to report their earnings, including today's results from Apple (NASDAQ:AAPL) and Texas Instruments (NYSE:TXN) after the close.  On Tuesday results are due from: Caterpillar (NYSE:CAT), Coca-Cola (NYSE:KO), DuPont (NYSE:DD), Pfizer (NYSE:PFE) and United Technologies (NYSE:UTX).  On Wednesday: Boeing (NYSE:BA), Freeport-McMoRan (NYSE:FCX), Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC).  On Thursday: 3M (NYSE:MMM), AT&T (NYSE:T), Credit Suisse (NYSE:CS), Dow Chemical (NYSE:DOW), McDonald's (NYSE:MCD), Merck (NYSE:MRK), and Travelers Cos (NYSE:TRV). Microsoft (NASDAQ:MSFT) reports its numbers on Friday.

After a two-week selloff, fueled in part by concerns that the seven-month old rally had gotten ahead of any economic recovery, stocks got a boost last week following better-than-estimated economic numbers and Alcoa’s (NYSE:AA) surprise quarterly profit.  That helped investors set aside worries and extend the rally.  Meanwhile, White House economic adviser Lawrence Summers reiterated the Obama administration’s commitment to a strong dollar, citing recent comments by U.S. Treasury Secretary Timothy Geithner.

This morning’s stock futures show markets are headed for a higher opening as the busy week of earnings commences. Ahead of the market's open, Dow Jones industrial average futures are up 59 points, or 0.6%, to 9,866.  Standard & Poor's 500 index futures gained 7.30 points, or 0.7%, to 1,075.40, while Nasdaq 100 index futures rose 11 points, or 0.6%, to 1,736.50.

On Friday, the Dow Jones industrial average rose 78 points, or 0.8%, to 9,864.94 -- its highest closing level in a year.  The S&P 500 index gained 6 points, or 0.6%, to 1,071.49 and the Nasdaq climbed 15 points, or 0.7%, to 2,139.28.  On the New York Stock Exchange, advancing issues beat those that declined in price by a three-to-two margin.  For the week, the DJIA rose 4% and the S&P 500 index gained 4.5% - their best performance since July.  The Nasdaq advanced 4.5% during the week.

Last week's rally saw all but one of the S&P500 industry sector recording gains.  Only telecommunications shares failed to advance, and fell 5.9%, following AT&T's (NYSE:T) announcement that it plans to allow internet-based phone calls on phones including Apple's (NASDAQ:AAPL) iPhones.  The gains last week were led by basic materials (+8.4%), oil and gas (+7.6%), financials (+6.3%), industrials (+5.0%), tech (+4.9%), consumer services (+4.5%), consumer goods as well as utilities (+2.9%), and health care (+2.7%).  Financials rose after a Goldman Sachs (NYSE:GS) report recommended large-cap banks. Gains in industrial shares were helped by last week’s fall in dollar and Caterpillar's (NYSE:CAT) announcement that it plans to hike prices globally in 2010.  Retail shares rose after firms reported better-than-expected comparable monthly sales numbers.

This week sees the release of the first big batch of third-quarter earnings.  Companies reporting their numbers include Johnson & Johnson (NYSE:JNJ), Intel (NASDAQ:INTC), JP Morgan (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Nokia (NYSE:NOK), Google (NASDAQ:GOOG), IBM (NYSE:IBM), Bank of America (NYSE:BAC), and General Electric (NYSE:GE).

• Microsoft (NASDAQ:MSFT) released its new mobile-phone software to take on Apple's (NASDAQ:AAPL) iPhone

• Amazon.com (NYSE:AMZN) announced the company will begin selling an international version of its e-reader in over 100 countries. The firm also lowered the price of its Kindle 2 from $299 to $259

• Yum Brands (NYSE:YUM) reported mixed third quarter results of 70 cents adjusted, 12 cents better than estimated, on revenue of $2.778 billion versus estimates of $2.79 billion.  The firm boosted 2009 guidance to $2.14 from $2.10, versus consensus estimates of $2.13

• Costco (NASDAQ:COST) reported fourth quarter earnings ex-items of 83 cents, topping estimates of 77 cents as revenue of $22.38 billion exceeded projections of $22.34 billion. Comparable sales fell 6% in the US and dropped 3% abroad

• Family Dollar Stores (NYSE:FDO) reported fiscal fourth quarter earnings of 43 cents versus 38 cents a year ago, topping estimates of 41 cents and at the high end of the company's range of 39-43 cents. For the current year the company expected sales growth of 5-7% and earnings of $2.15-$2.35, versus Street estimates of $2.25

• Morgan Stanley (NYSE:MS) upgraded Kohl's (NYSE:KSS) to "overweight"

• Morgan Stanley upgraded Abercrombie & Fitch (NYSE:ANF) to "equal weight"

• FBR upgraded Goodrich (NYSE:GR) and lifted the target price to $65 from $45

• MBIA's (NYSE:MBI) main bond insurance unit was downgraded by S&P to non-investment grade status

• Dell (NASDAQ:DELL) revealed a new, high-end, ultra thin PC

• Cameron International (NYSE:CAM) reported a $500 million subsea equipment deal with Petrobras

• Howard Shultz, CEO of Starbucks (NASDAQ:SBUX), offered high hopes for its Via Ready Brew instant coffee product, claiming it "perhaps the biggest opportunity" in the company's history, amid today's North American launch

• Walgreens' (NYSE:WAG) reported fiscal fourth quarter results of 47 cents ex-items, topping estimates of 39 cents, on sales of $15.7 billion

• Goldman Sachs (NYSE:GS) lifted price targets on several retailers, including conviction buys on Target (NYSE:TGT) and Macy's (NYSE:M)

• Citigroup (NYSE:C) started coverage of Dr. Pepper Snapple (NYSE:DPS) and Coca-Cola (NYSE:KO) with "buy" recommendations

• Bank of America (NYSE:BAC) upgraded Phillips-Van Heusen (NYSE:PVH) to a "buy" with a price target of $54

• The CEO of Cadbury (NYSE:CBY) noted "complementary elements" of Kraft (NYSE:KFT) and Cadbury, but said he would still advise rejecting the deal at the current $16 billion bid

• Oracle's (NASDAQ:ORCL) CEO noted dangers of the European regulatory delay of its proposed $7 billion acquisition of Sun Microsystems (NASDAQ:JAVA), saying Sun Micro is currently losing about $100 million a month

• AMR (NYSE:AMR) announced a 30 million common and $250 million convertible senior notes offering

• Louisiana-Pacific (NYSE:LPX) said it is planning a public offering of 18 million shares of its common stock

• TJX (NYSE:TJX) said its board approved a $1 billion share buyback, reflecting 6.2% of the company's outstanding shares

• Microsoft's (NASDAQ:MSFT) Bing search engine managed to grab more share from Google (NASDAQ:GOOG), reaching 9.3% of market share in August, according to reports

• Harbinger Capital Partners said it sold 5 million shares of its total stake in the New York Times (NYSE:NYT), reducing its stake in the New York Times (NYSE:NYT) to 16.38% from 19.94%

• Credit Suisse (NYSE:CS) downgraded Dell (NASDAQ:DELL) to "neutral" and advised adding to positions in Hewlett-Packard (NYSE:HPQ), Apple (NASDAQ:AAPL) and EMC Corp (NYSE:EMC).  The analyst raised concerns of Dell's risky acquisition path

• Apple's (NASDAQ:AAPL) San Francisco event once again saw the shares move lower, this year off 1%, despite the welcome appearance of Jobs, and iPod price cuts and improvements.  An 8 GB iPod Nano will include built-in video and an FM radio; price cuts of as much as $120 were made.  This morning JP Morgan (NYSE:JPM) upped its rating on Apple to "outperform" from "market perform," with a $200 price target

• Texas Instruments (NYSE:TXN) raised its third quarter earnings and sales guidance, with third quarter guidance increased to 37 cents to 41 cents a share from prior range of 29 cents to 39 cents a share; revenues guidance was lifted to $2.73 billion to $2.87 billion from prior $2.5 billion to $2.8 billion, with estimates at $$2.68 billion

• Vivus (NASDAQ:VVUS) noted its experimental obesity drug showed dramatic results in two late-stage clinical trials

• Disney (NYSE:DIS) reported improvements in local ad markets with increased activity from automakers nationally, although still anticipating lower theme park hotel bookings for the September quarter

• Monsanto (NYSE:MON) said it continues to see 2009 results from continuing operations at the lower end of its prior guidance of $4.40-$4.50; the Street has expected $4.41. For 2010 the company expects $3.10-$3.30, off consensus estimates of $4.12

• Yahoo (NASDAQ:YHOO) shares were upgraded by Bank of America (NYSE:BAC) to "buy," with a price target hike to $19 from $17

• BP (NYSE:BP) shares were lowered to "neutral" by analysts at HSBC (NYSE:HBC). The company's Tiber Field, last week's "giant discovery" 9km beneath the Gulf seabed, is unofficially estimated to contain 500m-1 billion recoverable barrels of oil

The greenback remained near its year lows against a basket of currencies while gold prices eased a little to settle at $995.30.  Crude prices were slightly up ahead of the September OPEC meeting.

The Dow Jones industrial average, which rose as much as 80 points earlier in the session, pared some gains to close at 9,547.22, up 49.88 points.  The broad S&P 500 index advanced 7.98 points, or 0.78%, to close at 1,033.37, its best finish so far this year, and the tech-heavy NASDAQ rose 22.62 points, or 1.11%, to close at 2,060.39.  On the NYSE, volume was a moderate 1.24 billion shares as advancing stocks outpaced those that fell seven to three.

Even as unemployment levels continuing to remain vexing, the Fed’s Beige Book revealed “signs of improvements" in 11 of the 12 districts.  Meanwhile, OPEC also exited its monthly meeting with soothing words, leaving production levels unchanged, and asserting current prices were within their desirable range.  Nevertheless, fears of a jobless recovery have given rise to worries that the economic recovery might be reversed after inventory builds and government assistance end.

Apple (NASDAQ:AAPL) shares declined even as CEO Steve Jobs made a much-awaited comeback after his almost six-month long medical leave.  The company announced the launch of new products and slashed prices of existing iPod Touch models.  SanDisk (NASDAQ:SNDK) jumped 6.1% to $19.32, its highest close in 11 months; Palm (NASDAQ:PALM) shares declined more than 8.7% after the company announced the launch of its Palm Pixi phones.  The stock was downgraded by Credit Suisse to “neutral" from “outperform."   

Among the S&P500 industry groups, nine recorded gains with industrials (+1.5%) and financials (+1.4%) topping the list.  Among the industrial conglomerates, General Electric (NYSE:GE) advanced 2.6% to $14.87, its highest level since January and Illinois Tool Works (NYSE:ITW) jumped 5% to $43.93.  Goldman (NYSE:GS) raised Illinois Tool Works (NYSE:ITW) to “conviction buy" from “neutral."  Caterpillar (NYSE:CAT) rose 3.1% to $48.41.  GE also benefited from an analyst upgrade from JP Morgan (NYSE:JPM), and a hiked price target from Goldman Sachs (NYSE:GS).  Boeing (NYSE:BA) shares added 2.1% following the firm's projection of a return to growth in global air traffic next year.  United Technologies (NYSE:UTX), which rose 1.4%, was also upgraded by Goldman Sachs (NYSE:GS).  3M (NYSE:MMM) rose 2.1%

• Talbots (NYSE:TLB) reported an adjusted fiscal second quarter loss of 33 cents a share, versus estimates of a 52 cents per share loss on revenues of $304.6 million, versus estimates of $309.34 million.  The firm said it sees third quarter losses of 24-30 cents a share, ex-items

• JP Morgan (NYSE:JPM) upgraded UPS (NYSE:UPS) to "overweight" from "neutral" and raised the price target on the firm to $70 from $57

• Goldman Sachs (NYSE:GS) downgraded DuPont (NYSE:DD) on valuation concerns with a price target of $32

• Goldman Sachs (NYSE:GS) upped Illinois Tool Works (NYSE:ITW) and added the firm to its Conviction Buy List with a $55 price target

• Palm (NASDAQ:PALM) cut prices on its Pre smartphone, introducing a cheaper and thinner model, "Pixi"

• Apple's (NASDAQ:AAPL) San Francisco event is expected to see a fresh iPod launch, new iTune offerings, an Apple TV tune-up, with hopes of a Steve Jobs appearance

Following advances in the overseas markets, US stocks are expected to gain at the opening.  The DJIA futures added 79 points for a gain to 9496; the S&P500 increased 9.9 points heading toward a 1023.80 open.  Markets were closed yesterday for the Labor Day holiday.

On Friday, the 30-stock Dow Jones industrial average rose 96.66 points, or 1.03%, to 9,441.27.  The S&P 500 index rose 13.16 points, or 1.31%, to 1,016.40.  The technology-laden NASDAQ advanced 35.58 points, or 1.79%, to 2,018.78.  However, all three indexes ended the week lower.  During the week, the DJIA retreated 1.1% and the S&P 500 was off 1.2%; NASDAQ was comparatively better, easing only 0.5%.   

As stock prices gained, Treasury bonds lost ground.  The yield on the benchmark 10-year note rose 0.09% to 3.44% and the 30-year bond yield rose 0.11 to 4.27%.  On Tuesday $38 billion in 3-year notes is slated for auction, on Wednesday $20 billion of 10-years, and on Thursday $12 billion in 30-years.

Last week, Tax preparer (NYSE:HRB) saw its shares fall after the firm reported a wider-than-expected loss of 39 cents a share.  Apple (NASDAQ:AAPL) shares rose ahead of its media event next week where it is expected to introduce iPod Nano and Touch models that include digital cameras.  Societe Generale sharply raised its price target on the iPhone maker.

Traders return to their desks in a holiday-shortened week with last September’s collapse of Lehman Brothers absorption of Merrill and a government bailout of AIG still fresh in their minds.  Although a lot of water has passed under the bridge since then, traders still remain skeptical about the prospects of a full blown economic recovery.

This week, healthcare and insurance stocks may take a cue from President Obama's attempt to garner support for his much-talked-about healthcare initiative in a rare joint session of Congress Wednesday.  Remarks from Saudi Arabia's oil minister that crude markets are "in good shape" indicate further production cuts are not expected at this week's OPEC meeting.

Moreover, a Credit Suisse (NYSE:CS) report noting, "This is the ideal phase of the economic cycle...There is more of a positive growth surprise to come over the next three to six months," could be viewed in positive light.  Credit Suisse projected a 13% gain in the S&P500 to 1150 by mid-2010.

• AIG (NYSE:AIG) and its former CEO and CFO have reportedly agreed to terms of binding arbitration in settling claims from shareholders regarding lost investments due to financial restatements

• Apple (NASDAQ:AAPL) will host a September 9, music-themed media event in San Francisco, expected to include a new iPod line, with a Beatles' catalogue available on its iTunes store

• Sony (NYSE:SNE) will distribute Google's (NASDAQ:GOOG) Chrome browser on its Vaio PCs

• Media reports said Bank of America (NYSE:BAC) is planning to repay part of the $45 billion in government aid recovered from TARP, beginning with a $20 billion repayment.  The move would remove its status as a recipient of "exceptional aid," allowing certain government oversight measures to be lifted

• EBay (NASDAQ:EBAY) is expected to announce plans to sell its Skype Internet calling division to private investors.  The company has said it wants about $2 billion for the unit

• Wal-Mart (NYSE:WMT) began website sales of merchandise not carried in its stores in a revenue-sharing exchange similar to Amazon.com's (NASDAQ:AMZN)

• Citigroup (NYSE:C) said its sold $1.3 billion in credit-card assets to an undisclosed buyer.  Terms of the sale were also not revealed

• Credit Suisse cut its Nokia (NYSE:NOK) rating to "underperform" from "outperform," and removed the company from its focus list.  The firm also cut its estimate for 2010 by 28%. Credit Suisse expects Nokia to lose smart phone market share next year

• Robert W. Baird upped its price target for Wells Fargo (NYSE:WFC) to $33 from $30

The Shanghai Composite Index, which had declined nearly 3% on Friday, plunged 6.7% to 2,697.  Hong Kong's Hang Seng retreated 1.9%. In Japan, the Nikkei 225 stock average, which was up 200 points earlier in the session, fell 41.61 points, or 0.4%, to 10,492.53.  In Yesterday’s landslide victory, the Democratic Party of Japan came to power ending an almost half-a-century rule by the Liberal Democratic Party.  The yen strengthened, helped by the election results.

This morning’s U.S. stock futures show Wall Street is headed for a lower opening.  Dow Jones industrial average futures fell 59, or 0.6%, to 9,477. Standard & Poor's 500 index futures fell 5.70, or 0.6%, to 1,021.70, while Nasdaq 100 index futures fell 11, or 0.7%, to 1,631.50. 

On Friday, U.S. stocks closed mostly lower after a report showing a drop in consumer confidence offset a rally in technology stocks that was fueled by better-than-expected results from Intel (NASDAQ:INTC) and Dell (NASDAQ:DELL).  Also, Apple (NASDAQ:AAPL) announced that it entered into a deal with China Unicom to launch the iPhone in the country.  The rally in tech shares was also helped by signs of a bottoming in the personal computer market after Intel (NASDAQ:INTC) raised its third quarter sales forecast to at least $8.8 billion from its prior forecast of $8.1 billion.  The firm also raised its outlook on gross margin expectations.

The Dow Jones industrial average lost 36 points, or 0.4%. The S&P 500 index retreated 2 points or 0.2%. The Nasdaq composite added 1 point, or 0.1% and rose to its fresh 2009 high, closing at the highest point since October 1.  Trading was light as most traders remained out of the market due to the summer vacations.

Among the S&P500 industry groups, financials led the gainers rising 1.2% during the week; consumer services shares rose 1.2%, followed by technology shares (+0.8%), industrials (+0.1%), and telecommunication stocks (+0.1%).  The week saw financial stocks recording huge gains, helped by advances in AIG (NYSE:AIG), Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE).

Among the week's losers, basic material and consumer goods shares fell 0.8%; utilities declined 0.7%; oil and gas shares dropped 0.3%, and health care issues retreated 0.2%. 

Gains in retail stocks helped shares of consumer services companies record some gains.  Luxury jeweler Tiffany (NYSE:TIF) reported better-than-expected earnings for the quarter, and also raised its full-year guidance. Housing shares showed some strength, helped by a report on new home sales, which revealed a more-than-expected, 9.6% advance in July.

• J Crew (NYSE:JCG) also beat expectations, with second quarter earnings of 29 cents a share, higher than last year's 28 cents, and well ahead of Zacks expectations of 15 cents a share.  The firm said it sees third-quarter earnings of 30 cents to 33 cents a share

• Tiffany (NYSE:TIF) reported second quarter earnings of 46 cents a share, 23 cents above Zacks estimates, on revenues of $612 million versus $602 million.  The company expects full-year earnings of $1.65 to $1.75 per share

• Toyota (NYSE:TM) announced plans to halt production at it California plant shared with General Motors

• China's Unicom announced plans to sell Apple's (NASDAQ:AAPL) iPhone in China this year, with sales projected to start in the fourth quarter

Lithium ion batteries are in the evolution stage and the fastest growing secondary battery type in the market today. The lithium ion polymer (cobalt, manganese or phosphate) offers high energy density at low weights, which is the primary reason for its growing adoption in notebooks, cell phones and cameras. As the target market continues to expand, the batteries are now being used in automotive, industrial and power line applications as well.

One of the most attractive features of the MAX11080 is that up to 31 devices can be daisy-chained together to monitor up to 372 battery cells, reducing power consumption by 10X and battery management costs by up to 80% in hybrid cars. It also uses 75% less board space than other discrete designs.

The product also offers redundant cell monitoring to detect thermal leakage, thus preventing batteries from exploding. Battery explosion is always an area of concern and many big computing and consumer electronics firms like Dell (DELL), Apple (AAPL) and Sony (SNE) have faced such issues in the past. Enhanced safety makes the product particularly suitable for automotive and industrial applications, where hazardous operations sometimes increase the significance of thermal discharge.

Maxim has a broad range of products that enables it to serve customers across many end markets. This product is an addition to the core analog range and is targeted at small and mid-size industrial and communications customers. This is a key strategic area for the company as it affords scope for differentiation and thereby, stronger prices and higher profits.

• AIG (NYSE:AIG) shares jumped 11% yesterday. In an interview, new CEO Benmosche calmed fears of a fire sale of the firm's assets, instead pointing to a measured approach to retaining the company's diversified base, noting that in a year the company will be said to be performing well

• Microsoft (NASDAQ:MSFT) announced a $71 cut on its highest-priced Xbox 360 in Europe and US markets after Sony (NYSE:SNE) cut price of its PlayStation 3 last week

• General Electric (NYSE:GE) is reportedly seeking bids for its security business, with interest said to be forthcoming from United Technologies (NYSE:UTX) and Tyco (NYSE:TYC). The firm hopes for bids of about $2 billion

• Guess? (NYSE:GES) beat second quarter estimates with earnings of 64 cents a share, ahead of Zacks expectations of 44 cents a share, on revenues of $522.4 million, beating
estimates of $480 million.  The company raised its quarterly dividend 25% to $0.125; guidance for the current quarter was set at 46 cents to 49 cents per share on sales of $465 million to $485 million

• The US Navy awarded a $2.4 billion contract to Northrop Grumman (NYSE:NOC) for work on nuclear-powered aircraft carrier, USS Theodore Roosevelt

• Toll Brothers (NYSE:TOL) reported a third quarter loss of $2.93 a share, worse than the Zacks projections of a $1.40 per share loss, on revenues of $461.38 million, compared with estimates of $414 million. The firms expects lower fourth quarter sales

• Apple (NASDAQ:AAPL) told US regulators that Google's (NASDAQ:GOOG) voice app was not approved for use on Apple's (NASDAQ:AAPL) iPhone because it interferes with "user experience"

• According to Nokia (NYSE:NOK) the firm expects to regain market share against Apple's (NASDAQ:AAPL) rival iPhone and Research in Motion's (NASDAQ:RIMM) Blackberry, mentioning a new device with a Linux operating system and a netbook product likely

• Southwest Airlines (NYSE:LUV) promised Wi-Fi in all of its planes by next year

The benchmark S&P 500 index closed up 1% at 989.67. The Dow Jones Industrial Average added 0.9% to 9,217.94 and the Nasdaq Composite index gained 1.3% to 1,955.92.  About four stocks advanced for every one that declined.  Volume was light with only 991 million shares exchanging hands.  With investors back among equities, Treasuries declined, as the 2-year fell 1/32 and its yield rose to 1.028%, and the price of the 10-year eased 12/32 in price and its yield increased to 3.517%. The measure of market volatility, the CBOE Vix, reversed Tuesday's near-15% jump, retreating 6.1% to 26.18.

With no clear sings of a near-future rebound, and a shaky U.S. consumer continuing to hold dollars, investors appear nervous about the next leg of a rally that many feel has gone too far too fast.  This morning’s U.S. stock futures indicate shares are set to fall at the opening.  Technology stocks are expected to remain under pressure following last night’s cautious projections from Hewlett-Packard (NYSE:HPQ).    

On Tuesday, financial, industrial and technology stocks showed strength.  Apple (NASDAQ:AAPL) rose 2.8%.  Among financial issues, Bank of America (NYSE:BAC) added 2.1%, while JPMorgan Chase (NYSE:JPM) rose 2.4%.  Key stocks yesterday fueled stock market gains.  The retail sector got a boost as Target (NYSE:TGT) reported better-than-expected results, helped by cost-cutting measures and lower inventories.  Home Depot (NYSE:HD) also beat expectations due to its lowered costs, and also raised its full-year guidance.

A number of shares also benefited from analyst upgrades, including American Express (NYSE:AXP), which was the leading gainer on the DJIA with its 4.3% advance.  The firm received a KBW upgrade to "outperform", citing "improving trends in credit."  Goldman Sachs (NYSE:GS) raised its rating of HSBC (NYSE:HBC) to "buy," noting its loan loss provisions may decline.  Broadpoint AmTech raised Microsoft (NASDAQ:MSFT) to "buy."

Gains were broad-based with nine of the ten S&P500 industry sectors recording gains.  Leading the gainers were basic materials (+1.8%), financials (+1.7%), industrials and technology shares (+1.5%) and oil and gas (+1.0%).  Only health care, a defensive sector, eased with a modest, 0.1% drop.

Meanwhile, Warren Buffett warned in a New York Times article that "Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects."

Among the corporate results, Deere (NYSE:DE) and BJ Wholesale (NYSE:BJ) have reported their earnings. Limited (NYSE:LTD), Network Appliance (NASDAQ:NTAP), and Petsmart (NASDAQ:PETM) are also scheduled to report.

The Dow Jones industrial average added 37 points, or 0.4%, and closed at its highest point since November 4.  The broad S&P 500 index added 7 points, or 0.7%, and closed at its highest level since October 6.  The tech-heavy Nasdaq gained 10.63 points, or 0.5%, ending at its highest point since October 1.  On the New York Stock Exchange 776 million shares exchanged hands and advancing stocks outpaced those that fell two to one.  The Vix "fear factor" index, fell 2.9% to 24.71.

Treasury prices rose after an auction of $15 billion 30-year bonds met with strong demand.  The 30-year rose 1 20/32 in price and its yield declined to 4.432%; the 10-year was up 30/32 in price as its yield declined to 3.604%. This week the government issued a total of $75 billion of debt. 

Financials led the gainers yesterday on news that John Paulson’s hedge fund bought stakes in Bank of America (NYSE:BAC).  Bank of America shares surged 6.7% to $17 and were the leading gainers on the DJIA.  Basic material shares rose 2.7%.  On the DJIA Alcoa (NYSE:AA) shares gained 5.8%.  An increase in metal prices sent shares of Freeport McMoran (NYSE:FCX) up 4.9% and Newmont Mining (NYSE:NEM) 2.5%.  Ford (NYSE:F) shares increased 2.6% on its announced plans to increase current quarter production by 100,000 vehicles, with additions to the fourth quarter as well.

Technology shares advanced 1%.  Barclay's (NYSE:BCS) raised its price target on Apple (NASDAQ:APPL) shares to $208, citing its product pipeline. JP Morgan (NYSE:JPM) raised its price targets for Dell (NASDAQ:DELL) to $13 from $10 and Hewlett-Packard (NYSE:HPQ) to $49.50 from $40.

Nevertheless, consumer spending, which accounts for a whopping 70% of the US economy, remains a concern.  Yesterday’s report which showed a surprise 0.1% fall in retail sales, versus estimates of a 0.8% growth, did raise some doubts on demand side growth assumptions from the consumer sector.  The drop indicated that the "cash for clunkers" program may have stolen from alternative purchases and perhaps from future purchases as well.

The main growth driver for Apple is its increased Mac shipments and higher iPhone sales. The company’s Macintosh product continues to gain market share, with significant gains in portables, music players and smartphones.

We believe the strong growth at Apple is primarily driven by increased revenue contribution from iPhone, which has exceeded our estimates. Meanwhile, strong revenue growth has also driven margins and resulted in significantly higher earnings.

However, the company provided a cautious revenue outlook for the upcoming quarter due to the global crisis followed by lower consumer spending. A weak MP3 market has also led to lower iPod sales. Although demand for traditional MP3 players could continue to decline, it should be offset by growth in more advanced units such as iPod Touch.

Apple faces significant competition in all areas of its business—PCs, MP3 players and cellular phones. Its Mac OS has a very small share of the personal computer market, which is dominated by Microsoft’s (MSFT) Windows and Hewlett-Packard’s (HPQ) HP UX.

Although the company is a market leader in the iPod line, it faces competition from Microsoft's Zune and Sandisk's (SNDK) Sansa player. Finally, in the cellular phones segment, Apple has a strong product in the iPhone but is pitted against Research In Motion’s (RIMM) Blackberry, Palm’s (PALM) Pre and Nokia (NOK).

We believe Apple is likely to gain some share in the enterprise market through its compelling products but remain on the sidelines due to the macro uncertainty, weak consumer spending and intense competition. We expect the company to trade at a significant premium to its peers.

We believe the positives for Apple are already priced into its shares, and therefore maintain our Neutral rating on the stock. Our six month target price is $175.

• Honeywell (NYSE:HON) reported in-line second quarter earnings of 60 cents a share, as revenues increased 22% to $7.6 billion versus estimates of $7.73 billion.  The firm cautioned "Economic conditions, however, remain challenging and we are not planning for any recovery in 2009." It expects second quarter earnings of $2.85 a share, up from the consensus estimates of $2.82

• Verizon (NYSE:VZ) reported in-line quarterly numbers at 63 cents a share, on revenues of $26.9 billion versus projections of $26.85 billion

• Tellabs (NASDAQ:TLAB) posted second quarter at 7 cents, 1 penny above estimates, as revenues fell 11% to $385 million

• Aetna (NYSE:AET) disappointed with its second quarter posting of 68 cents, a dime under expectations, as revenues increased 10.3% to $8.7 billion, versus estimates of $8.56 billion. The company also provided downside guidance for 2009 of $2.75-$2.90, versus Street consensus of $3.53

• Goldman Sachs (NYSE:GS) added Energizer (NYSE:ENR) shares to its Conviction Buy List

• Morgan Stanley (NYSE:MS) upped its price target on Credit Suisse (NYSE:CS) shares, noting "Low rates and policy response are starting to suppress non-performing loans formation in Western markets, and alongside strong wholesale earnings, this is driving up book value expectations"

• According to the Financial Times, Apple (NASDAQ:AAPL) is working on a tablet-sized device with a planned holiday release

On Thursday, the Dow Jones industrial average gained 188 points, or 2.1%, and closed at its highest point since November 5; the broad-based S&P 500 index rose to its highest in eight months, jumping 22 points, or 2.5% and the Nasdaq surged 47 points or 2.5%, closing higher for the twelfth consecutive session.  The tech-heavy index recorded its best performance since 1992.  Treasuries declined, with the 10-year off 31/32 and the corresponding yield up to 3.665%.

Although much of the earnings growth has been driven by cost-cutting measures, it has nevertheless bettered analysts’ projections.  On Thursday, 48 of the 59 firms reported earnings that beat estimates.  Pending home sales that bettered expectations and a decline in jobless claims also helped sentiments on the Street.

Among the DJIA components, twenty-seven closed higher, led by a 7.4% jump in 3M (NYSE:MMM) after the company reported results that beat earnings and revenues estimates.  Caterpillar (NYSE:CAT) jumped 6.7%, helped by its increased profit forecast.  DuPont (NYSE:DD) and Alcoa (NYSE:AA) gained 5.8% and 5.6%, respectively.  The declining components were McDonalds (NYSE:MCD), off 4.6%, Wal-Mart (NYSE:WMT), down 0.8%, and Boeing (NYSE:BA), down 0.1%.

All ten industry groups on the S&P500 notched up considerable gains as the index zoomed off to an eight-month peak.  Gains were led by basic materials (+3.3%) and oil and gas (+3.0%), as hopes for increased basic commodity demand amid a global economic recovery gained ground.

Better-than-expected earnings from Celgene (NASDAQ:CELG) and Intuitive Surgical (NYSE:ISRG) helped Thursday's gains.  EBay (NASDAQ:EBAY) also reported numbers that beat estimates and provided an upbeat current quarter guidance. After the close of markets Thursday, however, Amazon.com's (NASDAQ:AMZN) revenues missed estimates. Microsoft (NASDAQ:MSFT) countered the stellar Apple (NASDAQ:AAPL) results posted earlier in the week, as they indicated a steeper-than-expected revenue drop, which the firm attributed to global PC and server market weakness.

The day's main economic post is the University of Michigan Sentiment index, expected to improve slightly to 65.0 from 64.6. Companies reporting their results include Fortune Brands (NYSE:FO), Ingersoll-Rand (NYSE:IR), LM Ericsson (NASDAQ:ERIC) and Schlumberger (NYSE:SLB).

The Dow Jones industrial average ended up 68 points, or 0.8% and the broader S&P 500 index edged up 3 points, or 0.4%, its highest close in 8 months. The tech-heavy NASDAQ added 7 points, or 0.4%, and recorded its 10th consecutive day of gains.

Crude prices continued to climb, advancing 74 cents to $64.81, and climbing over $65 for the first time in more than two weeks.  Bond prices gained as Fed Chairman Bernanke noted that interest rates are likely to remain low for an "extended period."  The 10-year rose 1 1/32 and the yield declined to 3.484%.

Gains in the DJIA were driven by a 7.7% advance in Caterpillar (NYSE:CAT) and a 6.1% jump in Merck (NYSE:MRK).  Caterpillar (NYSE:CAT) reported a much smaller-than-expected earnings decline and raised its full-year guidance, fueling hopes for a global industrial recovery.  However, Caterpillar’s (NYSE:CAT) stocks pared gains after it said third quarter would be the year's weakest for sales and profits.

Gains in the S&P500 were led by health care (+1.4%), oil and gas (+1.2%), and utilities (+1.1%). Three industrial groups declined, with financials off 0.8%, consumer services down 0.3%, and industrials off 0.2%. After the close, Apple (NASDAQ:AAPL) reported non-GAAP earnings to $2.14 per share, well ahead of consensus estimates of $1.17, helped by a 626% surge in iPhone sales; revenues of $8.34 billion exceeded consensus projections of $8.2 billion.  Yahoo's (NASDAQ:YHOO) reported earnings of 16 cents a share, inline with last year's figures and eight cents ahead of estimates; sales declined 13% to $1.57 billion; the company’s third quarter guidance was, however, below Street estimates.

Regions Financial (NYSE:RF) and State Street (NYSE:STI) posted results which fell well short of last week's strong financial numbers.  Coca-Cola (NYSE:KO) noted the US consumer remains under pressure.  The three airline majors posted dismal results, as leisure travel bookings held, but business travel weakened.  Southwest (NYSE:SWA) turned a profit, but said the situation was yet to improve.  UAL (NYSE:UAL) said it expects a 12% drop in overall capacity in the second half.  Continental (NYSE:CAL) reported a loss of $1.36 a share that was well off expectations of a 5 cent per share loss.

On Monday stocks hit their highest levels since November 5, as all ten industry groups on the S&P500 moved higher during the session, led by consumer, commodity and industrial stocks.  The gains were led by basic materials (+2.4%), industrial (+1.9%) and oil and gas (+1.5%).  The DJIA added 1.2% or 104 points to close at 8,848 points.  The NASDAQ rose 1.2% to finish at 1,909; the S&P500 index rose 1.1% to 951.  The US dollar fell to six-month lows against a basket of foreign currencies as its safe-haven appeal lost its allure.

Helping the gains yesterday was Goldman Sachs which raised its forecast for the S&P 500 index, saying better earnings will spur the steepest second-half rally since 1982.  The bank raised its year-end target for the index to 1,060.  Nevertheless, the firm pointed out that "the US economic backdrop represents the most significant risk to our equity market forecast," and "the risk of a double-dip recession is significant." Sentiments also got a boost from reports that said small and mid-sized corporate lender CIT Group (NYSE:CIT) avoided an imminent bankruptcy with $3 billion rescue financing from some major bondholders, following last week's collapse of a government bailout.

Also buoying sentiments were a number of analyst upgrades, including a Bank of America/Merrill (NYSE:BAC) report on Caterpillar (NYSE:CAT), asserting demand for its construction machinery likely bottomed in the second quarter, with a recovery expected to begin next year.  After the close, Texas Instruments (NYSE:TXN) beat projections for the second quarter, but CFO March warned, "The global economy is, by all indications, still declining," ..."What we are seeing here is that the rate of inventory depletion slowed down quite a bit."

Twelve DJIA components are scheduled to report this week, and among S&P500 stocks 145 are due to report their earnings during the week.  According to Bloomberg, on average, S&P500 firms have topped estimates by 15% since July 8; Thomson Reuters' numbers show S&P500 results, boosted by last week's strong financial firm numbers, fell 35.2%, compared with a prior second-quarter estimates of a 35.7% decline.

Monday's economic post of three straight months of improvements in the Conference Board's Index of Leading Economic Indicators, also helped sentiments on the Street, with its 0.7% rise in June, which beat estimates of a 0.5% increase.

As Federal Reserve Chairman Bernanke presents his semi-annual economic report to Congress at 10:00 AM ET, he may point to weak economic conditions as evidence that the inflation outlook remains subdued, paving the way for the Fed to maintain current low interest levels. While most expect Bernanke will mention exit strategy options, few expect clear details and timing to be offered.

Today's earnings calendar is heavy with numbers due from Apple (NASDAQ:AAPL), Caterpillar (NYSE:CAT), Coca-Cola (NYSE:KO), DuPont (NYSE:DD), Merck (NYSE:MRK), United Technologies (NYSE:UTX) and Yahoo (NASDAQ:YHOO).

The Dow Jones industrial average rose 44.13 points, or 0.5%, to 8,324.87, and the broader Standard & Poor's 500 index edged up 2.30 points, or 0.3%, to 898.72. The technology-laden Nasdaq declined 9.12 points, or 0.5%, to 1,787.40.  Among DJIA components, 19 closed higher while six of the ten S&P 500 industry groups advanced.  On the New York Stock Exchange, declining issues beat advancing ones by a three-to-two margin.

Among DJIA components, American Express (NYSE:AXP), up 5.6% and Merck (NYSE:MRK), up 3.3% led on the upside.  American Express gained after Stifel Nicolaus upgraded its rating on the firm (NYSE:AXP), noting the company the best positioned of credit-card issuers to endure the regulatory changes, advising as well that worries of bad debt are easing.  Dupont (NYSE:DD) shares added 2.2% and Proctor & Gamble (NYSE:PG) gained 2.1% on their safety play appeal.  However, as commodities declined, Alcoa (NYSE:AA) slid 6.1% ahead of its quarterly post after the markets closed Wednesday.

Bank of America (NYSE:BAC) shares declined 3.9% following a Credit Suisse (NYSE:CS) report that warned of worse-than-expected loan losses likely impacting the company's second-quarter results. Nevertheless, financials rose 1% with Bank of NY Mellon (NYSE:BK) adding 2.9%, Goldman Sachs (NYSE:GS) gaining 2.1% and JP Morgan (NYSE:JPM) rising 1% on news that Moody's (NYSE:MCO) may lift its rating on Brazil debt, lowering banks' exposure risk.  FedEx (NYSE:FDX) gained 3.2% to $56.04 after head of the company's international business said he saw signs of an economic rebound in the second half of the year.

Amid lingering worries about the pace of an economic recovery, commodity and material issues proved to be a drag as crude prices plunged to a five-week low of $64.05 after hitting an eight-month high of above $73 per barrel last week.  Among the ten S&P500 industry groupings, basic material shares fell 1.9% and oil and gas declined 1.3%. Technology shares eased 0.5%, as Apple (NASDAQ:AAPL) fell 1.0% and Microsoft (NASDAQ:MSFT) edged 0.7% lower, even as chipmaker Samsung projected a fivefold profit increase for the quarter.  A bullish report on semiconductors was also issued this morning, as Bank of America/Merrill (NYSE:BAC) upped its ratings on the sector, estimating 21% 2010 revenue gains versus 14%, and upgrading Intel (NASDAQ:INTC), Marvell (NASDAQ:MRVL) and LSI (NYSE:LSI) to "buy" and Maxim Integrated Products (NASDAQ:MXIM) and National Semiconductor (NYSE:NSM) to "neutral."  Sprint Nextel (NYSE:S) jumped 3.5% after receiving a ratings upgrade on strength of its Boost prepaid mobile telephone contracts.

Remarks from Obama advisor Tyson who noted a second stimulus package should be planned "on a contingency basis," and aimed at infrastructure investment may underscore remarks from Vice President Joe Biden Sunday complaining of a worse-than-anticipated economic legacy from ex-President Bush as well as the possibility of a second stimulus.

All ten industry groups in the S&P 500 suffered losses Thursday after the U.S. Labor Department reported an accelerated pace of job declines and unemployment rate jumped to 9.5%, highest in 25 years; nevertheless, it was below expectations of 9.6%.  The report said US employers cut 467,000 jobs from their payrolls in June.  According to one estimate, almost 6.5 million jobs have been lost since the recession began in December 2007.

American Express (NYSE:AEP) fell 6.3% to $22.27 and Caterpillar (NYSE:CAT) plunged 8.2% to $31.74.  Alcoa (NYSE:AA), which reports its earnings this week, lost 8.4% to $9.86.  Crude oil's decline to less than $67 per barrel hurt energy stocks. Exxon Mobil Corp. (NYSE:XOM) eased almost 3% to $68.49, National Oilwell Varco (NYSE:NOV) declined 6.8% to $30.84 and Hess (NYSE:HES) plunged 8.5% to $49.65.  Losses were broad based with energy, industrials, financials, technology and consumer-oriented shares bearing the brunt of the sell off. Among technology stocks, IBM (NYSE:IBM) was the leading decliner among Dow components, declining 3% to $101.73; Apple (NASDAQ:AAPL) eased 2% to $140.02.  Elan Corp. (NYSE:ELN) jumped 8.6% to close at $7.60, after Johnson & Johnson (NYSE:JNJ) said it agreed to pay $1 billion for an 18.4% stake in the company.

The earnings season begins this week with Alcoa (NYSE:AA) reporting its results on Wednesday.  Analysts expect a 34% earnings decline this quarter with all ten industry groups expected to post lower results.  The attention, nevertheless, will also be on any talks of sanctions on Iran, North Korean aggression and Afghanistan elections.

Chicago, IL - July 2, 2009 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Dell Inc. (DELL), Google Inc. (GOOG), Apple (AAPL), Hewlett-Packard (HPQ) and Microsoft (MSFT).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Wednesday's Analyst Blog:

Will Dell Succeed with New Device?

According to some sources, Dell Inc. (DELL) may be launching an iPod "Touch-style" pocket-sized Mobile Internet Device (MID) sometime in the second half of 2009. The gadget is expected to tap the Internet and will run on Google Inc.'s (GOOG) Android software.

The device will feature a bunch of services such as music, videos, and connectivity similar to the iPhone. It is expected to be slightly bigger than Apple's (AAPL) iPod Touch but may not have a cellphone. The source also commented that the production could be delayed or scrapped completely. Dell declined to comment on any plans for future product releases.

During March, in a conference call, Dell accepted that it plans to offer a handheld device but did not provide any specific details. "The company was exploring smaller-screen devices," said CEO Michael Dell.

We believe this may not be successful, as Apple has created a niche market for its iPhone and the entry in the music player market will be tough for Dell. We also do not expect Dell to catch up anytime soon with competition due to its long track record of failing new product launches (see Digital Jukebox - DJ Ditty music player line and the Axim PDAs). Dell has struggled to keep pace with the consumer market due to intense competitive pressure, particularly in the low-priced desktops and notebook market.

Dell's products lack features desired by consumers and the retail distribution of large competitors, such as Hewlett-Packard (HPQ), Microsoft (MSFT) and Apple. Dell has been losing shares to H-P in the consumer market over the past few years. We believe this is largely the result of more "consumer friendly" devices and a growing retail distribution channel of H-P. Dell also lacks the product diversity enjoyed by H-P. Also, Microsoft's new product named Zune HD is expected to provide strong competition to Dell due to enhanced multimedia capabilities and an Internet browser.

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* Reuters reported 100,000 of Apple (NASDAQ:AAPL) iPhone 3Gs were sold via preorders, explaining away some of the launch's diminished excitement level. Some news reports said Steve Jobs underwent a liver transplant two months ago in Tennessee, and is still due back at month's end

* Walgreen (NYSE:WAG) is expected to report fiscal third-quarter earnings of 56 cents a share

* UBS (NYSE:UBS) upgraded Vulcan Materials (NYSE:VMC) to "buy," based upon housing and infrastructure recovery

* JP Morgan (NYSE:JPM) upgraded Verisign (NASDAQ:VRSN) to "overweight" from "neutral"

* According to a Wall Street Journal report, Amazon.com (NASDAQ:AMZN) may stop conducting businesses with some retailers in states, which would force sales tax payments on online transactions

* McDonald's (NYSE:MCD) posted comparable sales numbers for May of 5.1%, which failed to equal April's 6.9% advance

* Goldman Sachs (NYSE:GS) downgraded shares of Burlington Northern (NYSE:BNI), and raised CSX (NYSE:CSX)

* Morgan Stanley (NYSE:MS) downgraded shares of Nucor (NYSE:NUE)

* Google (NASDAQ:GOOG) and eBay (NASDAQ:EBAY) will present at the Credit Suisse (NYSE:CS) convergence conference

* Qualcomm (NASDAQ:QCOM) will present at the UBS (NYSE:UBS) Tech and Service conference at 12:45 PM ET

* Procter & Gamble (NYSE:PG) and Coca-Cola (NYSE:KO) are due to present at the Deutsche Bank (NYSE:DB) global consumer and Food Retail Group

* Citigroup (NYSE:C), no longer among the DJIA components, is reportedly ready to restart last week's delayed $58 billion stock swap

* Apple's (NASDAQ:AAPL) worldwide development conference this week promises heightened attention for a major new product announcement of a lower-priced iPhone, priced at either $149 or $99, compared to the current low end of $199, with expectations that Steve Jobs would make an appearance.  Apple has closed higher over the past nine consecutive trading days.

* According to the International Air Transportation Association, global airline losses are expected to reach $9 billion this year, almost twice its projections three months ago, due to rising fuel costs and weak demand

* General Mills (NYSE:GIS) raised its 2009 earnings guidance by several cents from prior estimate of between $3.87 to $3.89 per share

Among S&P industry groups, financials were the leading gainers, rising 3.4% as traders took reports of a failed Latvian bond auction in their stride.  A Bernstein upgrade of Goldman Sachs (NYSE:GS) to "outperform" also helped financials and the effects of the failed bond auction were nowhere to be seen.  Bernstein suggested Goldman's capital strength will allow the firm to consolidate its position further in fixed income, currency and commodity markets. Fifth Third Bancorp (NASDAQ:FITB), which has been asked by regulators to raise $1.1 billion as part of the stress tests, reported sale of $1 billion common shares and said it is on track to raise the required amount. Keycorp (NYSE:KEY) jumped 20% after RBC Capital Markets cited the stock a "top pick." Today's reports suggesting the FDIC is pushing for an executive shuffle at Citigroup (NYSE:C) may imperil CEO Pandit's tenure, and provide another reason for firms to shun government funds and rush to pay back TARP monies.

Basic material shares continued their advance, rising 2.1%, with Alcoa (NYSE:AA), up 6.2%, leading the list of gainers on the DJIA.  Improved demand scenario, especially from China, helped the advance in Alcoa shares. Oil and gas sector shares gained 2.1%. Among stocks from the sector, Chevron (NYSE:XOM) and Exxon Mobil (NYSE:CVX) led the gainers as crude prices surged 4.1% to $68.81, a seven-month closing high. Bullish analysts at Goldman Sachs (NYSE:GS) upped their forecasts for crude to $85 per barrel in 2009 and $95 in 2010.

Technology stocks advanced 1.5%, helped by prospects for new product launches and analyst upgrades. Apple (NASDAQ:AAPL) rose after the iPhone-maker's profit and share-price target was increased by Oppenheimer. Some reports suggested CEO Steve Jobs was expected to return from his medical leave by month's end.  Citi (NYSE:C) raised Google (NASDAQ:GOOG) price target to $580 from $450, on expectations that second quarter results will meet estimates and the company will report better results next year. Advanced Micro Devices (NYSE:AMD) said the company expects fourth quarter sales to improve from a year ago, helped by better economic conditions. Intel (NASDAQ:INTC) announced plans to purchase Wind River Systems (NASDAQ:WIND) for an all-cash deal valued at $884 million.

Dismal retail sales numbers in May, with an estimated 75% of retailers falling short of targets, posting an estimated 8.6% average drop in same-store-sales, however, could not check the rally. Costco (NASDAQ:COST) reported a 7% drop, versus estimates of a 6.4% decline; Target (NYSE:TGT) comparable-sales fell 6.1% versus expectations of a 4.3% drop; Saks (NYSE:SKS) disappointed with a 26.6% sales fall versus an anticipated 14% drop; Macy's (NYSE:M), however, was slightly ahead of expectations with its 9.1% decline, less than the 9.3% anticipated.

On Tuesday, U.S. stocks shot higher for the first time in five sessions as the Conference Board's consumer confidence index rose sharply in May, refueling hopes that the consumers are getting more optimistic about the economy.  The surprise rise in consumer confidence, which vaulted to 54.9 from 40.8 in April, offset dismal housing news and put investors back on buying track.  Traders, back after a long weekend, bought enthusiastically pushing every industry group on the S&P 500 stock index higher.  Nevertheless, declining home prices served a reminder that the economic outlook is yet to show signs of stabilization.  The consumer confidence index jumped to an eight-month high and marked its third rise in as many months. Volume on the NYSE was light as only 1.4 billion shares exchanged hands and advancing shares outpaced declining issues by a five to one margin.

The broad-based rally saw 28 of the 30 Dow components ending the day higher, with JP Morgan Chase (NYSE:JPM) leading the list of gainers, followed by a 5% rise in American Express (NYSE:AXP) shares.   Technology-focused Nasdaq surged 3.4%, helped by gains in computer manufacturers, Internet firms and search engines.  Apple (NASDAQ:AAPL) surged 6.7% after it was upgraded by Morgan Stanley (NYSE:MS) to "overweight."  Morgan Stanley (NYSE:MS) said analysts are underestimating demand for iPhones.  Qualcomm Inc. (NASDAQ:QCOM) jumped 4.8% to $43.29, after Barclays Plc raised its 2010 earnings estimates on the company.  Energy stocks also advanced as crude prices jumped to a six-month high, fueled by comments from Saudi Arabian Oil Minister Ali al-Naimi, who expects oil to hit as much as $75 per barrel between the third and fourth quarter on higher China consumption.  Exxon Mobil Corp. (NYSE:XOM) added 1.4% to $69.81.  Reuters expects crude inventory levels fell 1.1 million barrels over the past week, while gasoline levels dropped 1.8 million barrels. Tomorrow's OPEC meeting is generally expected to result in members maintaining current production levels.

Gains on the S&P 500 were led by financials and consumer-related stocks.  Financials were the leading gainers, up 4.1%.  Technology stocks rose 3.3%.  Industrials gained 3.3%.  Defensive areas of health care and consumer goods rose 1.6% and 1.2%, respectively.

J.C. Penny Co. (NYSE:JCP) rose 6.5% to $26.76 and Best Buy (NYSE:BBY) added 5.3% to $37.05.  Among financial shares, Wells Fargo (NYSE:WFC) added 5.5% to $25.65 and PNC Financial (NYSE:PNC) rose 5% to $43.25.  Restaurant chains and home builders also advanced.  Darden Restaurants Inc. (NYSE:DRI) rose 7.9% to $35.64. CKE Restaurants (NYSE:CKR) jumped 13.8% to $8.80.  Home builder KB Home (NYSE:KBH) rose 5.9% to $15.50, and DR Horton Inc. (NYSE:DHI) rose 5.1% to $9.47.

One of the bones of contentions of the past week had been the overhanging Treasury auctions scheduled for this week amid a ballooning budget deficit necessitating further sales to meet the $2 trillion in extra debt needs expected this year.  However, the record-tying $40 billion in 2-years auctioned yesterday met with bids 2.94 times the offered amount and the 2-year note sale received strong response, with $117.5 billion in bids coming in for $40 billion in debt.  The US dollar edged up 0.1% against a basket of currencies.

Today's data includes the expected turndown by General Motors' (NYSE:GM) bondholders of its offer to convert their holdings into company shares, making bankruptcy the foregone conclusion it has been for a while.

General Motor's bankruptcy is all but a sure thing, and with it, the company's 81-year run as a component of the Dow Jones Industrial Average will come to a merciful end.

According to Reuters, sources say that GM (NYSE: GM) will likely file for bankruptcy some time after midnight tonight and before June 1. The company has apparently failed to convince bondholders to exchange their debt for an equity stake in a restructured company, ensuring the bankruptcy filing.

(In an interesting quirk, the AP reports that many bondholders hold credit default swaps on their GM debt. If the company files for bankruptcy, these CDS swaps will be triggered. The Depository Trust & Clearing Corp. says these CDS swaps will pay out $2.33 billion if the company enters bankrupt. Talk about perverse incentives.)

As always, I can't help but to speculate about which company will be chosen to replace GM when it exits the Dow.

I wrote a similar blog back in September 2008, when American International Group (NYSE: AIG) was removed from the benchmark.  At the time, my thoughts focused on two companies:  the banking giant Wells Fargo (NYSE: WFC) and the biotech megalith Amgen (Nasdaq: AMGN). 

Both healthcare and finance were under-represented in the DJIA vis-à-vis the S&P 500 and I figured the index committee would look towards those sectors for replacement to round out the index.

As we all know, I was wrong.  Dow picked Kraft Foods (NYSE: KFT), adding the first food component to the index.  It said it did not replace AIG with another financial company due to "extremely unsettled conditions" in the financial market.

Fast-forward to today: Have things settled down enough now to make adding a financial company an OK bet?

I'm of mixed minds.  Things have certainly settled down since September 2008, when it was not clear there would be a financial sector going forward, and companies faced a day-to-day battle to survive.  But it's not as if the financial industry is completely out of the woods.

So what do I think will happen?  If I were a betting man, I'd say that the good folks at Dow Jones do a bit of a clean-up of the index, replacing not just GM but Citigroup (NYSE: C), too. If that happens, the smart money says that Wells Fargo will enter the index as a new financial representative, with Goldman Sachs (NYSE: GS) a distant second bet.

Beyond that, it's an open race. I still think Amgen would be an interesting choice, but Nike (NYSE: NKE), Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG) and a few others probably make the short list as well.

A Note For Jim

Before you jump on your holier-than-thou indexing horse when writing about my reflation portfolio, it might pay to actually read my blog first.

You write of my list of ETFs designed for a reflationary environment: "Laying out a portfolio that adds up to 100% and filling it with mostly alternatives that should probably add up to 5 or 10% maximum of someone's portfolio seems like dangerous advice."

Good point. 

That's why I wrote: "I don't think this should be 100% (or even 50% or 25%) of someone's portfolio. I don't own all these funds myself; my portfolio, as most people know, is boring, long-term focused and ultra-low-cost."

It's funny how I make all the most important points a day or two before you do.

* Apple (NASDAQ:AAPL) was upgraded by Morgan Stanley (NYSE:MS) to "overweight," as its analyst increased 2010 earnings estimate to $7.50 from $5.52, citing better-than-expected earnings from iPhone strength. The price target was raised to $180

* Natural Foods (NASDAQ:UNFI) was downgraded by Goldman Sachs (NYSE:GS) to "sell" from "neutral," on price considerations

* Freddie Mac (NYSE:FRE) plans the first commercial bond deal in almost a year on Tuesday, with a $1 billion commercial mortgage bond sale back by multi-family loans

* Canadian Solar (NASDAQ:CSIQ) reported a first quarter loss of 10 cents per share, topping estimates by 16 cents, as revenues plunged 71.1% year-over-year to $49.5 million

* Hewlett-Packard (NYSE:HPQ) recalled 15,000 laptop batteries distributed in China

* Rio Tinto (NYSE:RTP) announced agreement with Japan's Nippon Steel to cut contract prices for iron ore 33%

* Apple (NASDAQ:AAPL) was upgraded by Morgan Stanley (NYSE:MS) to "overweight," as its analyst increased 2010 earnings estimate to $7.50 from $5.52, citing better-than-expected earnings from iPhone strength. The price target was raised to $180

* Natural Foods (NASDAQ:UNFI) was downgraded by Goldman Sachs (NYSE:GS) to "sell" from "neutral," on price considerations

* Freddie Mac (NYSE:FRE) plans the first commercial bond deal in almost a year on Tuesday, with a $1 billion commercial mortgage bond sale back by multi-family loans

* Canadian Solar (NASDAQ:CSIQ) reported a first quarter loss of 10 cents per share, topping estimates by 16 cents, as revenues plunged 71.1% year-over-year to $49.5 million

* Hewlett-Packard (NYSE:HPQ) recalled 15,000 laptop batteries distributed in China

* Rio Tinto (NYSE:RTP) announced agreement with Japan's Nippon Steel to cut contract prices for iron ore 33%

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Here are highlights from Thursday's Analyst Blog:

Garmin's Next Phase of Growth

GPS capability is expected to provide further impetus to growth in cell phones. Garmin Ltd. (GRMN) already enjoys an important position in automotive navigation, and management intends to leverage this position in the cell phone market.

The first step in this direction is the launch of the company's own smartphone. Although the cell phone market is relatively more competitive, management expressed enthusiasm about the growth prospects for its nuvifone.

The company announced two nuviphone models. Both phones are feature-rich 3.5G devices incorporating a PND with on-board maps and premium points of interest; UMTS, HSPDA and Wi-Fi data connectivity; a premium mobile web browser; a local search portal that seamlessly integrates navigation functions; SMS; instant messaging and e-mailing; a camera with automatic location tagging and picture navigation; and multimedia functions such as a video recorder, MPEG 4 video player and MP3. Research In Motion's (RIMM) Blackberry is the most popular platform for smartphones in North America. Apple's (AAPL) launch of the iPhone in Q3 of 2008 met with resounding success, lifting it to the second position.

3SBio Stays a Buy, Post Report

In addition to a diversified marketed product portfolio, 3SBio, Inc. (SSRX) also has a decent pipeline under development.

In the EPO franchise, the company has filed new drug applications (NDA) with China State Food and Drug Administration (SFDA) for higher dose EPIAO (36,000 IU/vial vs regular 10,000 IU/vial) for the treatment of anemia associated with chemotherapy in cancer patients. If approved, high-dose EPIAO would be the only dosage form of this kind available in China.

Also, 3SBio has completed preclinical test for NuPIAO and the company plans to move NuPIAO into clinic in 2009. NuPIAO is second generation of EPIAO that is designed to have a longer half-life. NuPIAO is comparable in structure and function to Amgen's (AMGN) Aranesp. Preliminary testing has demonstrated that NuPIAO has a comparable half-life to Aranesp.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=2677

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

* Kraft (NYSE:KFT) reported better-than-expected first quarter earnings of 45 cents a share, beating estimates by 5 cents, as revenues fell 6.5% to $9.4 billion

* Archer Daniels Midland (NYSE:ADM) reported worse-than-expected second quarter earnings of 37 cents a share, a 12 cent miss, as revenues plunged 20.7% to $14.8 billion

* Duke Energy (NYSE:DUK) reported worse-than-expected first quarter earnings of 28 cents a share, a 4 cents miss, as revenues declined 0.7% year-over-year to $3.31 billion

* Avon Products (NYSE:AVP) reported first quarter earnings of 27 cents a share, which missed estimates by 6 cents, as revenues fell 12.9% to $2.18 billion

* CVS (NYSE:CVS) announced better-than-expected first quarter earnings of 55 cents a share, beating estimates by a penny, as revenues jumped 9.7% year-over-year to $23.4 billion

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Here are highlights from Wednesday's Analyst Blog:

What Could Kill Apple-Verizon Deal?

In the continuing saga of the iPhone and Verizon (VZ) the press has written about a liaison between Verizon and Microsoft (MSFT) to sell a Microsoft-designed iPhone killer.

There is a cultural divide between Apple (AAPL) and Microsoft with rabid Apple devotees denigrating anything Microsoft. The popular opinion is that it takes three tries before Microsoft gets anything right (this goes back to the introduction of Windows where version 3.1 was the first version that worked).

There is also the notion that Microsoft is a software company. However, Microsoft has a very successful business selling mice and keyboards. Apple is known for its better operating systems.

NAL Beats, but Credit Deteriorates

NewAlliance Bancshares, Inc. (NAL) reported its 1Q09 financial results after market close yesterday. A conference call to discuss the results was held this morning.

Diluted earnings for the quarter came in at $0.12 per share, four cents ahead of our estimate. An almost-stable NIM, strong organic loan originations, growth in core deposits, reduced deposit costs, continued diligent expense control and a strong capital position were the key positives for the quarter.

Anadigics Hurt by Lower Guidance

Shares of Anadigics Inc. (ANAD, Hold) are off nearly 8% in early trading today following the company's better-than-expected Q1 results released yesterday. Apparently, the stock is discounting ANAD's forward guidance, which is lower than our and consensus expectations.

The company saw continued weakness in the Broadband area as directly related to the current economic downturn, impacting its wireless and cable segments. ANAD sees this weakness well into Q2 and clearly does not expect an upturn until Q3.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=2649.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=2677

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

* Verizon (NYSE:VZ) shares gained Tuesday amid rumors the company is in talks with Apple (NASDAQ:AAPL) about a possible new iPhone and/or Microsoft (NASDAQ:MSFT) on an iPhone competitor

* Dendreon's (NASDAQ:DNDN) drug Provenge was found to increase lives of advanced prostate cancer victims by 4.1 months, increasing the likelihood of FDA approval

* US Steel (NYSE:X) reported a worse-than-expected first quarter loss of $3.84 per share versus expected loss of $1.69 per share. The company slashed its dividend to 5 cents from 30 cents; expects another operating loss in the second quarter; plans 18 million common share offering and $300 million senior notes due 2014; will curb capital spending to $410 million from $740 million expected

* Waste Management (NYSE:WMI) reported first quarter results one penny better than anticipated at 42 cents per share, as revenues fell 14.1% year-over-year to $2.8 billion

* General Dynamics (NYSE:GD) reported first quarter earnings topping estimates by 8 cents at $1.54 per share, as revenues gained 18% year-over-year to $8.26 billion

* Hess (NYSE:HES) reported a first quarter loss of 18 cents per share, beating estimates by 9 cents, as revenues fell 35.8% year-over-year to $6.87 billion

* Wyeth (NYSE:WYE) topped estimates by 7 cents, reporting first quarter results of 95 cents (ex-items), as revenues fell 6% year-over-year to $5.38 billion. The firm reaffirmed its 2009 EPS guidance in the range of $3.33-$3.53; the Street expects EPS of $3.50

* Medco Health Solutions (NYSE:MHS) reported inline quarterly results of 63 cents, as revenues gained 14.4% year-over-year to $14.83 billion. The company expects full-year 2009 results in the range of $2.67-$2.77 versus estimates of $2.73

* Aetna (NYSE:AET) reported its first quarter topped estimates by 3 cents, posting at 96 cents as revenues advanced 10.5% year-over-year to $8.6 billion

* Time Warner (NYSE:TWX) reported first quarter results of 45 cents, 7 cents better than expected, as revenues fell 7% year-over-year to $6.95 billion. The company reaffirmed its 2009 earnings guidance of $1.98 per share versus estimates of $1.96

* Baker Hughes (NYSE:BHI) reported first quarter results of 82 cents, beating estimates by 6 cents as revenues fell 0.1% year-over-year to $2.67 billion

* ArcelorMittal (NYSE:MT) reported a 78 cent first quarter loss, missing estimates by 39 cents, as revenues fell 49.3% year-over-year to $15.12 billion

On Friday, U.S. markets advanced with the Nasdaq ending higher for the seventh straight week, driven by several better-than-expected tech quarterly earnings reports.  The DJIA and S&P 500 ended the week slightly lower, trimming six-weeks of gains. On the DJIA, shares edged 0.7% lower for an 8.0% year-to-date decline; the decline on the S&P 500 totaled 0.4%, bringing its year-to-date fall to 4.1%.  The Nasdaq, however, ended the week 1.3% up for a 7.4% year-to-date gain.

Although company remarks failed to assure demand situation is improving, the steady stream of key earnings reports, nevertheless, beat the pessimistic Wall Street assumptions. Boosting the sentiment further were signals of a cyclical upturn and signs the rate of contraction is slowing, with commodity prices up, credit spreads improving, growth in money supply and a steepening yield curve.

Among sector gains last week: basic material shares rose 2.2%, taking their year-to-date jump to 9.4%; industrials added 1.9%; oil and gas edged up 0.7%; tech sector shares rose 1.4%, sending its shares to a 16.3% surge on the year; and consumer services gained 0.1% for a 3.4% year-to-date gain. With investors resorting to risk taking, defensive plays came under pressure, with health care, down 3.6% last week (-9.4% in 2009), utilities off 2.5% (-13.4% in 2009), telecommunications 2.3% lower (-6.9% in 2009) and consumer goods off 1.2% (-6.2% in 2009).

Among 143 S&P companies that reported earnings last week, eighty beat earnings estimates while 40 reported earnings that were below expectations; thirty revenue projections were exceeded and 70 missed. Of the thirteen DJIA components that reported results during the week, 10 either matched or exceeded Street expectations.  Of the notables, Microsoft (NASDAQ:MSFT) CFO's news that the launch of its new operating system is on schedule masked pessimistic remarks of "a broad-based slowdown across virtually all product lines and geographies." The CEO of American Express (NYSE:AXP), which reported better-than-expected results, warned the firm remains "very cautious about the economic outlook." Upside surprises from Apple (NASDAQ:AAPL), eBay (NASDAQ:EBAY) and Amazon.com (NASDAQ:AMZN) fueled assumptions the decline in consumer spending may be abating. Moreover, McDonald's (NYSE:MCD) CEO Skinner noted April same-store-sales "at least as strong as or better than first quarter sales in every area of the world."  Texas Instruments' (NYSE:TXN) better-than-expected results indicated demand beginning to stabilize.

Wednesday will offer the week's economic posts of most market-moving potential, the advance first quarter GDP stats and the FOMC rate decision.  The decline in GDP is widely expected to moderate from the fourth quarter's sharp 6.3% decline to a 4.9% decrease. Looking forward, however, traders will search for any Fed indication of signs of stabilization and a declining rate of recession. The calendar also covers a look at consumer confidence in April in reports on Tuesday and Friday; the housing market in February S&P/Case Shiller home prices on Tuesday, personal income and spending Thursday; factory orders, the ISM Index and vehicle sales on Friday. Investors may search for hints of any leakage on financials' stress test results, with Friday's post of white page assumptions leading to positive survival assumptions for most US banks.

Among sector groupings, financials were the leading decliners with a 3.8% plunge; health care was off 1.4%, utilities declined 1.2%, oil and gas was down 1.2% and consumer goods was off 0.6%. On the upswing were industrials, up 1.3%, basic materials up 0.8%, telecommunications up 0.7%, technology up 0.3% and consumer services up 0.2%. Of the 113 companies that have reported results since April 7, profits are down 25% on average; however, analysts had entered earnings season well prepared, anticipating an earnings decline of 37.4%, according to Thomson Reuters (NYSE:TRI).

Boosting the sentiment were Altria (NYSE:MO), AT&T (NYSE:T), Ingersoll-Rand (NYSE:IR), McDonald's (NYSE:MCD), Texas Instruments (NYSE:TXN) Wells Fargo (NYSE:WFC), and Yahoo (NASDAQ:YHOO) that beat analyst expectations. Wells Fargo (NYSE:WFC) reported better-than-expected results on strength in its mortgage operations. McDonald's (NYSE:MCD) beat profit estimates, with CEO Skinner making note of improving comparable sales trends, with April "trading at least as strong as or better than first quarter sales in every area of the world." Boeing's (NYSE:BA) results missed estimates; however, the firm's full-year guidance topped most analysts' projections.

A 81% dividend cut after losses at Morgan Stanley (NYSE:MS) that was worse than expected halted a string of impressive financial firm results.  The company said real estate and debt-related write downs exceeded gains in its trading operations. This morning's announcement from Credit Suisse (NYSE:CS) came as a sweet surprise. Credit Suisse (NYSE:CS) announced first quarter earnings that doubled Street expectations on improved trading revenues, which offset write downs in commercial real estate assets and asset management losses. The bank, however, warned that volatility could continue throughout the year. Despite Geithner's remarks suggesting that the "vast majority" of banks have more capital than they need, tomorrow's release of the stress test criteria will keep sentiments under check.

Today's economic posts cover two of the most critical areas - employment and housing. Last week jobless claims plummeted 53,000 to 610,000, although continuing claims increased 172,000 to a record 6+ million. This week's estimates place the number of first-time claims at 630,000, up 20,000. On the housing front, economists place little hope in a continuation of the 5.1% rebound in existing home sales recorded in February, driven by depressed prices, first-time buyers, and distress sales. Economists anticipate sales dropped to 4.65 million in March from 4.72 million. However, better-than-expected numbers from Apple (NASDAQ:AAPL) and eBay (NASDAQ:EBAY) have painted a more optimistic face on consumer resiliency, improving sentiment this morning.

Why? Because due to the QQQ's unusual weighting methodology, Apple accounts for 12.6% of the fund's assets. For comparison, Microsoft makes up only 4.8% of the ETF, despite having a significantly larger market cap than Apple: $166 billion vs. $108 billion.

The market-cap oddities don't end there. Google counts for just 4.7% of the fund, despite having a market cap of $120 billion, almost identical to Apple. And Google's weight is just a shade above Gilead Sciences, a biotech company that accounts for 3.5% of the fund, despite having one-third of the market-cap of Google.

Confused?

The oddities trace back to the Nasdaq-100's methodology. The index is officially a "modified market-cap-weighted index." New companies entering the index are weighted essentially based on their market cap. But once they're in the index, the weight of companies rises and falls based on that company's stock price, with no real rebalancing as other components are added and subtracted from the index.

Apple was added to the index long ago, and the stock has been one of the better-performing equities over the past decade. As a result, its weight in the index has grown and grown and grown.

It's a potential weak point for the fund. If Apple stumbles, the QQQs will suffer.

Curiously, few people comment on the QQQ's unusual weighting methodology. Instead, there seems to be much more criticism of the fact that the fund is not a true "pure-play" technology fund.

People love to point this out, and it's true. According to PowerShares, the fund is 62% invested in technology, with significant chunks in health care (17%), consumer discretionary (13%) and industrials (6%).

When you buy QQQ, you are buying into companies like Apple, Intel and Cisco. At the same time, you're also buying the generic drug manufacturer Teva Pharmaceuticals (2.6% of the fund); retail shops like Starbucks (1.1%), Bed Bath & Beyond (0.9%) and Costco (0.9%); as well as industrial firms like Paccar (1.1%).

This criticism misses the point. There are plenty of pure-play tech ETFs out there, such as (by order of assets):

• Technology SPDR (XLK)
• iShares DJ Tech (IYW)
• Vanguard Info Tech (VGT)
• iShares GS Tech (IGM)
• SPDR MS Tech
• PowerShares Dynamic Tech (PTF)
• First Trust Nasdaq-100 Tech (QTEC)
• Rydex S&P Equal Weight Tech (RYT)
• First Trust Tech AlphaDex (FXL)

If you truly want "Technology" (with a capital T), you'd buy one of these funds.

But I'm not convinced that most investors who buy the QQQs truly want "Technology" exposure. What they're looking for is high-beta, growth-oriented, tech-driven exposure. And to that end, the QQQs deliver.

Consider, for example, the second-largest sector in the fund: health care. Nearly all of the health care names in the QQQs - Genzyme, Biogen Idec, Intuitive Surgical - are tech-driven companies, even if they are technically not "Technology" firms. Even a decent portion of the consumer discretionary sector is made up of names that could be considered tech-related (Amazon.com, Garmin, DirecTV, Expedia). They don't fall into the official GICS Technology category, but they reflect the same general economic and market trends.

Investors who buy the QQQs may say they are looking for "Tech." But what they're really looking for is tech-driven, high-growth companies. And to that end, the QQQs deliver.

Now if they could just fix that strange market-cap issue ...

As risk appetite grew treasuries declined, taking the yield on the 2-year to 0.981% and the 10-year to 2.953% as prices fell 4/32 and 30/32, respectively on Friday. The Vix, CBOE's volatility index, declined 2.59 points over the week, closing at its lowest in seven months and the week's success with IPOs Rosetta Stone (NYSE:RST) and Bridgepoint Education (NYSE:BPI) also signaled the market's heightened interest in assuming riskier investments.

First-quarter corporate earnings will reach a peak this week, with 40% of the Dow Jones Industrial Average companies and a quarter of those in the Standard & Poor's 500 Index reporting their quarterly numbers.  Markets are likely to face turbulence as big names including Microsoft (NYSE:MSFT), IBM (NYSE:IBM), Apple (NYSE:AAPL), Eli Lilly (NYSE:LLY), Merck (NYSE:MRK), Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP) American Express (NYSE:AXP), Bank of America (NYSE:BAC), and McDonalds (NYSE:MCD) report their earnings. 

On Friday, financial companies jumped 4.1% to help fuel a slender advance in stocks.  Citigroup (NYSE:C) which has been hit hard by the credit crisis, was the leading gainer on the DJIA.  The stock jumped 20% to close at $3.65 after swinging to a $1.6 billion first quarter profit. JP Morgan (NYSE:JPM) rose 1.6% to close at $33.26 and Goldman Sachs' earnings of $3.39 a share surpassed Street expectations. Huntington Bancshares (NASDAQ:HBAN) jumped 81% to $3.89.

General Electric (NYSE:GE), which reported a 35% decline in first-quarter earnings, advanced 9.4% as the numbers were better than Street expectations. The firm advised it saw no need for a fresh capital. GE reported net income of $2.9 billion, or 26 cents a share, versus Street estimates of 21 cents a share. Revenue fell 9% to $38.41 billion.

On Friday, the Reuters/University of Michigan preliminary consumer sentiment index for April showed consumer confidence jumped to 61.9, compared with 57.3 in March, and was better than expected 57.5.

General Motors Corp. (NYSE:GM) interim Chief Executive Fritz Henderson did not rule out liquidation, saying bankruptcy remains a "probable" outcome for GM, subsisting on government loans and in need of more cash.

This Friday's release of the preliminary assumption of the stress tests performed on 19 US banks will bring into sharper focus the likely capital-raising needs of several banks. Today's media reports indicate the administration is considering taking what some consider back-door steps toward nationalization by stretching existing loans through equity conversions to up firms' capital cushions.

The week's major economic reports will reveal March leading indicators on Monday (10:00 AM ET), expected to indicate a lessening pace of decline, down 0.2% versus the prior month's 0.4% drop. Housing will remain in focus as investors seek signs of its bottoming after last week's report that U.S. March housing starts fell 11 percent and building permits, a sign of future construction, fell to a record. Existing home sales and new home sales for March are expected to reveal existing sales eased to 4.54 million from 4.72 million, while new sales edged higher to 340,000 from 337,000. Friday's durable orders report for March is expected to reverse February's 5.1% jump with a 1.5% drop.