• Dell (NASDAQ:DELL) reported disappointing third quarter earnings of 23 cents a share, missing Zacks estimates of 27 cents a share, as a 15% fall in revenues from a year ago generated revenues of $12.9 billion, below Zacks projections of $13.2 billion.  Nevertheless, CEO Michael Dell said early Windows 7 demand was proving correct his assumption that firms which had passed over Vista would upgrade with Windows 7, driving the market growth above traditional 10% averages

• JM Smucker (NYSE:SJM) reported record fiscal second-quarter earnings of $1.22 a share, 18 cents better than Zacks estimates, on revenues of $1.28 billion, above Zacks estimates of $1.24 billion.  The company said it sees full-year earnings of $3.95 to $4.05 a share

The Dow, which had slid as much as 77 points in the morning trading, closed down 11.11 points, or 0.1%, to 10,426.31.  The broader S&P 500 index slipped 0.52, or 0.1%, to 1,109.80, while the Nasdaq, hurt by the weakness in tech shares, fell 10.64, or 0.5%, to 2,193.14.  Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.37% from 3.33% late Tuesday.  Crude prices advanced 44 cents to settle at $79.58 per barrel.  Volume remained light, with only 1.063 billion shares trading on the NYSE, and declining issues ahead of advancers by an 8 to 7 margin.

Technology shares were under pressure after Autodesk Inc. (NASDAQ:ADSK) and Salesforce.com (NYSE:CRM) gave grim forecasts and BMO Capital Markets noted Research in Motion (NASDAQ:RIMM), the maker of Blackberry phones, faces increased pressure as consumers opt for cheaper phones.  However, shares in Sprint Nextel(NYSE:S) continued their forward run, jumping 6.7% after the previous session's 13% surge, on reports the company had paid off $1 billion in debt.

A weak housing report fuelled recovery concerns but shares in the sector managed to move higher after Citigroup (NYSE:C) raised Pulte Homes (NYSE:PHM) to “buy," saying the shares are "undeservedly out of favor." Citigroup raised its price target on the firm to to $12 from $11.  DR Horton (NYSE:DHI) rose 1.9% and Ryland (NYSE:RYL) advanced 0.8%, while Toll Brothers (NYSE:TOL) fell 0.9%. 

Financials also helped stem the retreat as hedge fund operator John Paulson noted in a quarterly post to shareholders that Bank of America shares will reach $29.81 by the end of 2011.

Seven of the ten S&P500 industry sectors moved lower Wednesday.  Tech shares slipped 0.6%, followed by 0.5% declines in basic materials, industrials, and utilities, 0.4% drops in oil and gas, 0.2% retreat in consumer services, and a 0.01% fall in consumer goods.  Stemming the retreat in the sector were financials, up 0.8%, and telecommunications, up 0.2%.  In a quarterly post to shareholders, hedge fund operator John Paulson said he expects Bank of America (NYSE:BAC) shares to double over the next few years.

After the house vote, financials slumped 1.5% and led the decliners among the S&P 500 industry groups.  Analyst Meredith Whitney noted the biggest U.S. banks may face declining values on home-loan bonds with government backing as the Fed moves towards ending its $1.25 trillion purchase program.  Whitney said bank earnings are far from approaching "normalcy," and will reflect regulatory changes for an extended period.  JPMorgan (NYSE:JPM) fell 1.2% to $42.21 and Wells Fargo (NYSE:WFC) retreated 3.1% to $26.82.  Citigroup (NYSE:C) slipped 1.7% to $3.97.

On Wednesday, the 30-stock Dow Jones industrial average closed up 30.23 points, or 0.31%, at 9,802.14.  The broad Standard & Poor's 500-stock index edged was up 1.09 points, or 0.10%, at 1,046.50.  The tech-heavy Nasdaq ended the day almost unchanged.  On the New York Stock Exchange, eight stocks advanced for every seven that declined as volume slowed to 1.35 billion shares.

Meanwhile, gold prices continues their upward run and hit an intraday record high of $1098.50, before giving up most of that gain to settle at $1087.30.  The US dollar retreated 0.5% against a basket of currencies.

Yesterday, investors breathed a sigh of relief after the Fed’s announcement to keep interest rates near historically low levels for an extended period.  The Fed, in its policy assessment, noted the economic activity was likely to remain weak for some time and ruled out any plans of a premature exit.  As it continued with its highly accommodative monetary stance, the Fed offered a reminder that the current recovery still lacks strength to be self-supportive.

Healthcare shares Wednesday rose 1% and led the gainers within the S&P500 industry sectors as Republican gubernatorial wins were seen as votes against President Obama's healthcare initiative, likely to result in further delays to changes to the healthcare program. The Senate unanimously voted to extend jobless benefits and broaden homebuyer tax breaks, with the Congress expected to vote before week's end. Helped by the news housing shares finished higher, with Pulte Homes (NYSE:PHM) up 3.5%, Lennar (NYSE:LEN) up 3.4%, and DR Horton (NYSE:DHI) adding 3.2%.

On Thursday, the European Central Bank and Bank of England left interest rates unchanged.  Sentiment also received a boost from domestic corporate borrowing, which rose for the eight straight week. 

The growing optimism surrounding consumer spending, which is crucial for an economic recovery, followed late Wednesday's good results from Alcoa.  The company surprised investors with its first profit in nine months, which the aluminum company attributed to cost-cutting and rising sales to automakers.  Analysts believe that it will take more than just cost cutting to impress investors this earnings season.  

Meanwhile, a better reading on the job market also fueled investors' optimism.  The Labor Department reported that new claims for jobless benefits fell to 521,000 last week from 554,000 during the previous week.  Claims came to the lowest level since early January.

The Dow rose 61.29, or 0.6%, to 9,786.87. The index ended off its highest level after demand at a government auction of 30-year bonds fell short of expectations.  The Standard & Poor's 500 index rose 7.90, or 0.8%, to 1,065.48, while the Nasdaq composite index rose 13.60, or 0.6%, to 2,123.93.  About three stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 5.2 billion shares, compared with 5.1 billion on Wednesday.  The market's measure of investor worries, the CBOE Vix, dropped 2% to 24.18.

The Dollar Index, which tracks the US currency against a basket of currencies, dropped 0.7% to 75.968 after reaching 75.767, its weakest level since August 2008.  This morning, however, the dollar rebounded from its lows after Fed Chairman Bernanke seemed to signal a shortening of its accommodative policy timeline.  Economists currently do not expect policy shifts before mid-2010; however, Bernanke advised the Fed is ready to tighten monetary policy once the economy improves.  At the same time, he cautioned that "accommodative policy will likely be warranted for an extended period."  Gold closed at a record $1,056.30 an ounce and hit an electronic trading high of $1,062.70 during the day.

A weak dollar, along with rising oil and gold prices, gave a boost to dollar-sensitive multi-nationals, such as Dow components 3M (MMM), GE (GE) and Johnson & Johnson (JNJ). The rise in oil prices lifted Chevron (CVX), Exxon Mobil (XOM) and other commodity names. 

The House is considering an extension of the first-time homebuyers' tax credit, slated for November expiration. Pulte Homes (NYSE:PHM) shares climbed 4.3%; DR Horton (NYSE:DHI) increased 8.0%; and Lennar (NYSE:LEN) rose 9.1%.

Among retailers, Macy's (NYSE:M) increased 5.1% after reporting a 2.3% sales drop, half the projected decline. Abercrombie & Fitch (NYSE:ANF) rose 5.2% after its sales decline proved less than feared.  Luxury retailer Saks (NYSE:SKS) fell 4.5% following its reported 11.6% decline in comparable sales.

Yesterday, fifteen of the thirty DJIA components closed higher; 245 of the S&P500 closed up and 42 of the NASDAQ100 finished on higher ground.  Trading was subdued with NYSE volume of 1.05 billion well below last year's average of 1.49 billion.  The DJIA gained 4 points to close virtually flat at 9543; the NASDAQ and S&P500 each recorded gains of 0.01%.  Declining issues beat those that advanced eight to seven.  Treasuries were mixed after the government successfully auctioned $39 billion in five-year notes.  The Treasury is scheduled to auction $28 billion of 7-year notes today.

Five of the S&P500 sectors recorded gains.  The consumer services sector, which advanced 1.2% yesterday, edged up 0.5% on improved expectations for the consumer segment due to better-than-projected housing numbers and confidence report.  Healthcare shares issues were off 0.2%.

Basic material and industrial shares each declined 0.7% on Chinese Premier Wen Jiabao's comments regarding economic difficulties in that country, particularly domestic consumption.  The Chinese cabinet reportedly is assessing steps to control overcapacity in steel and cement production. US Steel (NYSE:X) and Nucor (NYSE:NUE) each dropped 2.4%. 

DJIA components 3M (NYSE:MMM) fell 1.7%, Caterpillar (NYSE:CAT) was off 1.2%, and General Electric (NYSE:GE) declined 1.3%.  Housing news, nevertheless, continued to signal a leveling off in the sector, with DR Horton (NYSE:DHI) up 5.7%, Beazer Homes (NYSE:BZH) up 5.0%, and Lennar (NYSE:LEN) up 4.1%.  Hovnanian Enterprises (NYSE:HOV) rose 43 cents, or 9.4%, to $5

• Xstrata, the world's fifth largest diversified mining group, reported a 77% fall in six month results to 38 cents a share adjusted from $1.66, although above estimates of 33.6 cents

• UBS (NYSE:UBS) reported a higher-than-expected second quarter loss of $1.32 billion, which was less than the prior quarter loss. The bank's Tier 1 capital ratio rose to 13.2% at quarter's end from 10.5% at the beginning of the quarter

• Vulcan Metals (NYSE:VMC) reported a second quarter earnings of 14 cents, ex-items, versus estimates of 20 cents a share, as revenues fell 29.3% from a year earlier to $721.9 million, off estimates of $759.1 million. The firm said it expects full-year earnings of 40 cents to 65 cents a share from continuing operations, versus Street estimates of 68 cents

• Emerson Electric (NYSE:EMR) missed by one penny, as fiscal third quarter numbers posted at 56 cents ex-items on a 22.5% y/y revenue drop to $5.09 billion, off consensus estimates of $5.34 billion. The firm, however, issued in-line fiscal 2009 guidance of $2.20 to $2.30 a share, versus Street projections of $2.28
 
• Progress Energy (NYSE:PGN) reported second quarter earnings of 64 cents a share, 5 cents below expectations, on in-line revenues of $2.3 billion

• Tenet Healthcare (NYSE:THC0 reported a loss of three cents a share, a 2 penny miss, on inline revenues of $2.2 billion

• Duke Energy (NYSE:DUK) reported second quarter earnings of 26 cents a share, one cent better than estimated, on revenues of $2.9 billion versus $3.2 billion a year ago

• DR Horton (NYSE:DHI) reported fiscal third quarter loss of 45 cents a share, a 22 cent miss, on revenues of $922.5 million versus $792 million

• CVS Caremark (NYSE:CVS) reported second quarter earnings of 65 cents a share, one penny above estimates, on revenues of $24.9 billion that beat estimates of $24.4 billion. The firm raised its full-year earnings guidance to $2.59 to $2.64 a share from its earlier view of $2.55 to $2.63 a share

The National Association of Realtors' index for pending home sales continued its advance for the third month in a row, rising 6.7% in April.  At day's end, the Dow Jones industrial average managed a gain of 19 points or 0.2%, after briefly turning positive for the year.  The S&P 500 edged up 0.2% and Nasdaq gained 0.4%.  Volume on the NYSE remained light with 1.4 billion shares exchanging hands with advancing issues outpacing declining stocks by a three-to-two margin.   Yesterday, better-than-expected reports on personal income, manufacturing and construction spending had propelled S&P 500 to a seven-month high.

Treasury Secretary Geithner, travelling to China amid growing worries in that country over the prospects of American economy, sought to calm nerves, noting, "What I sense is a fair amount of confidence in the underlying strength of the American economy."  There is a growing worry in China, the largest holder of American debt, that bulging deficit in the US could hurt the dollar and obliterate the value of US Treasuries held by China.  Treasury prices edged slightly higher on optimism following the friendly talks in China.  However, US dollar dropped to its lowest since late September, declining 0.9% against a basket of currencies, after crude prices, continued to hover near the year's high set on Monday.

Among DJIA components, American Express (NYSE:AXP) and Citigroup (NYSE:C) led the list of declining components, off 4.9%, respectively.  JP Morgan (NYSE:JPM) dropped 4.5%. Bank of America (NYSE:BAC) shares, however, gained 1.8% after the company said it has raised almost $33 billion, and said it would easily achieve the $33.9 billion capital requirement.  During the last four weeks, banks have raised more than $85 billion, with American Express (NYSE:AXP), JP Morgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) raising $7.7 billion meet heightened cash payback requirements. Nevertheless, Moody's (NYSE:MCO) also maintained a negative outlook on banks and their credit outlook, noting US companies are expected to face $470 billion in pretax loan losses and write downs this year and next.

Allergan Inc. (NYSE:AGN) added 4.6% to $46.23 and Intuitive Surgical Inc. jumped 6.5% to $159.05 after the stocks were upgraded by analysts.

Following the positive housing data, D.R. Horton (NYSE:DHI) added 4.1% to $9.63; Pulte Homes (NYSE:PHM) increased 3.5% to $8.97; KB Homes (NYSE:KBH) shares rose 2.7% and Toll Brothers (NYSE:TOL) was up 3.9%.  This morning, Toll Brothers (NYSE:TOL) reported a second quarter loss of 52 cents a share, before items, versus the expectations of a 50 cents a share loss.  Revenues during the quarter plunged 51.3% year-over-year to $398.3 million. The company said it expects deliveries of 2200-2800 homes this year, versus its March guidance of 2000-3000 homes, but at lower delivery prices.

According to Autodata, Aggressive April discounting resulted in a total auto market annualized selling rate of 9.91 million, up from April's 9.32 million, and the highest so far this year.  Ford (NYSE:F) shares rose 4.6% on the news, while General Motors (OTC:GMGMQ), now trading in the pink sheets, plunged 18.7%.

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579.

Here are highlights from Thursday's Analyst Blog:

New Home Sales Flat

With interest rates backing up sharply, it appears that the bulk of the work to bring the months of supply back to more normal levels will have to come from further reductions in new housing starts. This is bad news for the homebuilders like D.R. Horton (DHI) and Lennar (LEN) as well as for the suppliers to the homebuilders, including lumber companies like Weyerhaeuser (WY) and roofing and insulation suppliers like Owens Corning (OC).

Overall however, we have seen worse new housing reports -- "flat" is better than "flattened." Stabilizing at a very low level is better than continuing to plunge. However, I do not see a real recovery in the cards anytime soon.

Allergan Battling Challenges Well

From a fundamental standpoint, we are enthusiastic about the future of Allergan, Inc. (AGN). Although the company is facing significant challenges in the form of slowing sales due to the global economic weakness, safety issues surrounding the use of Botox and foreign currency headwinds, we think Allergan will be able to face these challenges well and will be back on its historical mid-to-high teens earnings growth trajectory starting in 2011.

We consider Allergan to be one of the premier specialty pharmaceutical companies in the world. The company possesses a strong blockbuster product in Botox and a slew of innovative new products in the eye and skin care markets.

Allergan has also been pretty active on the acquisition front over the past few quarters. We believe these acquisitions will provide the company with the opportunity to drive growth in its existing business and to expand into new areas of business. Even in the face of slowing consumer spending, Allergan's presence across different segments and geographies should help maintain decent growth going forward.

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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

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579.

Here are highlights from Tuesday's Analyst Blog:

Petrobras Brings Good News

Yesterday, Petrobras (PBR) announced the finding of a new oil field, named BM-S-3, in the Santos Basin. This new block is close to the field BM-S-7, which Petrobras and Repsol YPF S.A. (REP) recently declared commercial feasibility. Even better, this new field is 100% owned by Petrobras. Even though there is just the indication of hydrocarbons, more information will depend on further tests to be carried on in the following months.

Additionally, Brazilian President Lula is in China this week, and Brazilian papers have announced that a credit line in the amount of US$10 billion from the development Bank of China to Petrobras is to be announced in the following hours. Petrobras has a huge investment program going on, focused on the development of the Tupi field in the Santos Basin, one of the most promising oil field in the world nowadays.

Permits and Starts Fall Again

While the drop in permits and starts means that we are following the first law of holes -- when you find yourself in one, stop digging! -- it does indicate that residential investment will once again be a significant drag on GDP in the second quarter. These figures are well below anything on record, with total starts below the previous low points in other recessions for single-family starts alone.

It is also bad news for not only the Homebuilders like D.R. Horton (DHI) but also for suppliers like Weyerhaeuser (WY) and Masco (MAS).

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

Pre-market futures suggest a higher opening on the Wall Street, following better-than-expected earnings from Home Depot (NYSE:HD), which reiterated full-year guidance and reported a 44% jump in profit despite lower sales.

On Monday, U.S. stocks rallied as Lowe's (NYSE:LOW) improved earnings outlook fueled optimism of a rebound in housing sector.  Chief Executive Robert Niblock advised, "Encouraging signs in recent weeks that suggest perhaps the worst is behind us."  Lowe's (NYSE:LOW) jumped 8.1%. Shares of Home Depot (NYSE:HD) also rallied on the news and ended the day with a 6.6% gain.  Lowe's results beat Street expectations and the firm's full-year guidance was ahead of consensus views. Goldman (NYSE:GS) added Macy's (NYSE:M) to "conviction buy" list, citing its $400 million cost savings plan and a likely recovery in profits as the economic situation rebounds.

On Monday, the S&P 500 gained 3% to 909.71 for its steepest gain in two weeks. The Dow Jones Industrial Average added 235.44 points, or 2.9%, to 8,504.8.  The NASDAQ led the indices with a 3.1% advance to 1,732.

The National Association of Home Builders' latest Housing Market Index which rose to 16 from 14 in April suggested home builders are growing increasingly confident. Citigroup (NYSE:C) raised its rating on Lennar (NYSE:LEN) from "hold" to "buy;" Lennar (NYSE:LEN) shares jumped 13.7%.  Taking the cue, DR Horton (NYSE:DHI) rose 8.8%; Centex (NYSE:CTX) 8.4%, and KB Home (NYSE:KBH) 8.2%.

The 3-month LIBOR declined 4 basis points to 0.79%, its steepest fall since March 19 and market's volatility index, the CBOE Vix, plunged 8.70% to 30.24.  On the NYSE, advancing issues outpaced declining stocks by a seven-to-one margin.  Volume was relatively moderate at 1.42 billion.

Of the thirty DJIA components, twenty-nine closed higher on Monday.  Financials were the leading gainers, up 6.7%, followed by a 4.8% jump in basic materials stocks, 3.9% in consumer services, and 3.4% surge in oil and gas and industrial sector shares.

Among financial components, Bank of America (NYSE:BAC) led the advancing issues with a 9.9% gain, followed by a 7.8% jump in American Express (NYSE:AXP), and a 6.7% advance in JP Morgan (NYSE:JPM) stocks.  Morgan Stanley (NYSE:MS) shares jumped 8.2%, Goldman Sachs (NYSE:GS) added 6.5%, and Wells Fargo (NYSE:WFC) surged 8.3%.  Financials got a boost after Goldman Sachs (NYSE:GS) added Bank of America (NYSE:BAC) to its "conviction buy" list, citing confidence in the banks' ability to come out of the current credit crisis, as well as expectations of improved second quarter results due to strength in refinancing and capital markets.  Citigroup (NYSE:C) raised its price target on Goldman Sachs (NYSE:GS) shares 10% to $160, citing improved debt and equity underwriting activity.

Goldman Sachs (NYSE:GS), JP Morgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) applied for permission to repay TARP funds worth $45 billion.  State Street (NYSE:STT) shares jumped 8.5% in spite of news the firm would take a $3.7 billion loss putting conduits on its balance sheet.  The company said it will sell stocks to pay back funds borrowed under TARP.  However, after the markets' close, American Express (NYSE:AXP) announced plans to cut 6% of its global workforce, or 4000 jobs, citing increased defaults generated by the weak economy.

Today's economic posts include the 8:30 AM ET housing releases on building permits and housing starts. Both the posts are expected to show modest improvements.  April permits are expected to have risen to 530,000 from 516,000, and starts to 527,000 from 510,000. Minneapolis Fed President Gary Stern speaks at 1:15 PM ET on financial conditions. Crude prices hit $60 this morning, following yesterday's 4.8% increase, upon reports of a Sunoco (NYSE:SUN) refinery fire impacting Northeastern US supplies, and Nigerian militant threats to block waterways.

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676.

Here is a synopsis of all five stocks:

Bull of the Day:

We are changing our recommendation on Petrobras (PBR) ADRs from Hold to Buy. We like Petrobras for its positive production-growth profile, and the improving outlook for its downstream business.

Moreover, the discovery of the giant Tupi field opens up a new range of possibilities for the company in the long run. The continued growth in production is a trend that should prevail in the short-to medium-term.

First quarter 2009 results were positive due to increased production, improved operating margins and sound cash-flow generation. Finally, oil prices have been recovering in the last several weeks.

Bear of the Day:

We maintain our under-performer rating on Liberty Interactive (LINTA). We now think the consumer-led economic slowdown will continue to stifle the company's earnings growth well into 2009, with little visibility to improvement other than easing comps.

When the economy turns, we expect Liberty Interactive to accelerate EPS growth to a mid-teens rate and maintain it for several years, driven by QVC. Indeed, despite QVC s challenging retail environment, Liberty Interactive posted 2% revenue growth, albeit with declining margins. Also driving the growth is Liberty's e-commerce business, which currently is doubling its revenue and OIBDA year over year.

Neverthess, at 14.0x our 2010 EPS estimates, we think the stock is richly valued, presenting a poor risk/reward proposition in a climate of murky earnings visibility with potential earnings estimate cuts more likely than increases.

Latest Posts on the Zacks Analyst Blog:

How Big Was the Housing ATM?

If we didn't have growth due to the housing bubble, we would have hardly had any growth at all.

This data does seem to correspond to the data showing no increase in median income over the period. It also explains why it is not just people who bought their houses near the top who are in trouble right now.

Historically, Residential Investment (RI) has been the primary driver to lead the economy out of a recession. A housing recovery obviously helps homebuilders like D.R. Horton (DHI) and those that supply it like Whirlpool (WHR) and Fortune Brands (FO).

The equity extraction helped support just about every part of the consumer based economy. With foreclosures still on the rise and a huge inventory of houses (both new and used) still out there, it is hard to see RI lifting the economy this time around. RI has already shrunk to its smallest percentage of GDP on record (after being at near record highs just a few years ago), so it might not fall that much further.

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=2649.

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

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 by visiting 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 InvestmentResearch 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=4582.

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

As an investor, I realize that you are less concerned with the details that economists seemingly over-analyze and more concerned with what the report means to your portfolio. So, today, I'm going to show you where some of the investment opportunities and risks lie in the current environment.

Consumers Opened Their Wallets

The biggest positive surprise in the report was that Personal Consumption Expenditures ("PCE") actually contributed 1.50 points to GDP.

Clearly, in the first quarter, consumers took advantage of discounted prices. The much higher than expected PCE is part of the reason that the retailers and restaurants have been earning so much more than was expected. Almost every retailer and restaurant in the S&P 500 that has reported so far has come in with higher than expected earnings. Given the need to rebuild savings and the mounting levels of unemployment, I am skeptical that the strong PCE levels can be sustained.

Inventory Levels Plunged

On a forward-looking basis, perhaps the best part of the GDP report was that inventory investment subtracted 2.79 points from growth (versus -0.11 in Q4). Large inventory draw downs in one quarter have a tendency to be reversed in the next quarter. When the shelves are bare, people start to order more to restock them, causing output to rebound.

The destocking of inventories has contributed to the cash flow of the retailers, but the restocking will reverse that. On the other hand, restocking the shelves will increase orders for manufacturers, both here and abroad. The report is not detailed enough to say where exactly the biggest inventory draw downs were, so it does not give that much guidance as to which manufacturers might benefit the most from the restocking.

A Bad Trend for Equipment Makers and Software Developers

Essentially all investment in the real economy, both fixed and inventory, residential and non-residential, came to a screeching halt in the quarter. While ugly contributions from inventories are a good thing, the same cannot be said about fixed investments. There bad is bad, and this was real bad.

Fixed investments, particularly non-residential fixed investment is what drives increases in the productive capacity of the economy (along with investments in education which is counted as part of PCE and state & local spending). In other words, it is the engine of future growth, not just a part of the current growth. The stunning declines in all forms of fixed investment mean that businesses are in effect eating their seed corn. However, given the huge amount of idle capacity in the economy right now, it is easy to understand why businesses are cutting back.

Until we see a large rebound in capacity utilization, it is unlikely that businesses will start to spend more for equipment and software. Capacity utilization is at a post WWII low, and is below 70% for the first time since it has been tracked. As a general rule of thumb, 80% is normal, 85% is a boom and 75% is a nasty recession. This is obviously not good news for more traditional equipment manufacturers, such as Parker-Hannifin (PH) or Ingersoll-Rand (IR), nor is it good news for software firms like Microsoft (MSFT) or Oracle (ORCL).

Expect this part of the economy to remain weak for at least several more quarters. This is particularly true on the structures side. I suspect that most of the spending we did see in the quarter was simply finishing off projects that were started in earlier quarters. The Commercial Real Estate ("CRE") bust is just getting started and will last at least another year. Investment in structures has only started to decline and was a major contributor to GDP up until the third quarter of last year.

This means that demand for the basic materials that go into building large structures, steel, glass and cement, are likely to remain depressed for at least the next year. Not exactly bullish for Nucor (NUE), PPG Industries (PPG) or Cemex (CX).

Vacancy rates going up and effective rents are going down in almost all areas of commercial real estate. I would be very cautious about investing in REITs here. Commercial foreclosures are going to become a much bigger story over the next year. This will hurt the banks, particularly the mid-sized banks (between $1 and $10 billion in assets). The Wall Street titans do have as much exposure (relative to their overall size) to CRE.

The decline in equipment and software has been unusually steep (it was down 33.8% in the first quarter, following a 28.1% decline in the fourth quarter), and it now represents the smallest share of the economy since the mid 1960s. The decline will probably continue, but is may be at a slower rate in coming quarters.

At some point it will turn up again since equipment wears out and software becomes obsolete. I would focus on those equipment makers where the product most obviously decays over time. For example, spending on transportation equipment was 61% lower in the first quarter of 2009 than it was a year ago. This means that there is some potential pent up demand for firms like PACCAR (PCAR) that is building up.

Residential Investment Still Slumping

Perhaps the most surprising number on the downside in fixed investment was the subtraction of 1.36 points from Residential Investment ("RI"). RI is now only 2.7% of GDP, down from a peak of 6.3% in the Q4 of 2005.

RI turning up is a classic signal that a recession is ending, and there is no sign that it is happening yet, but it seems unlikely that RI will fall to zero. Normally the rebound is very sharp, but I have my doubts that it will be so this time around, given the huge inventory of unsold houses, both new and used and the second wave of foreclosures that is starting to crash upon the shore.

I have long been very bearish on the Homebuilders like D.R. Horton (DHI), however at this point I am becoming more neutral since it is hard to see how much lower residential investment can go as a percentage of GDP. That does not mean that I expect a big rebound anytime soon, but the worst of that particular storm may have passed.

Net exports helped prevent the quarter from being a total disaster, adding 1.99 points to growth. This was however not due to a surge of exports, but rather a collapse of imports.

The decline in imports was stunning, contributing 6.05 points to growth. (Imports are a subtraction from GDP, so when they fall GDP goes up). Put another way, if we had continued to import in the first quarter at the rate we had in the fourth quarter, then GDP would have crashed at an annualized rate of over 12% in the first quarter.

When inventories are drawn down, we buy less from China as well as less from domestic manufacturers. In case you have not noticed a lot of the stuff on the shelves of Wal-Mart Stores (WMT) and Target (TGT) comes from overseas. If PCE can continue its surprising strength going forward, the decline in imports is unlikely to continue. That, however, is a big IF.

No industry is more exposed to a decline in world trade more than the shipping industry. There are lots of ships that were ordered during the boom times that are just putting to sea. It will be a while before enough ships are scrapped to bring capacity into line with demand, thus keeping shipping rates very low. Ships represent very large capital investments and having them idle is very expensive. While the group has been hammered, I would still avoid those firms for anything but a very short term trade.

Understand that the longest recession since the Great Depression is not over by a long shot, but it will not last forever. We are past the steepest rate of decline, but are still going down.

The U.S. consumer is once again proving to be the Rasputin of the world economy, he is very hard to kill thanks, in part, due to some extraordinary measures taken by Dr. Bernanke. This is probably the key reason for the better than expected PCE numbers.

As I said earlier this week, there are still very substantial risks out there that could cause the rate of decline to accelerate again, most notably the prospect of long messy bankruptcies in Detroit, and the worst fears of the Flu epidemic coming true (almost impossible to tell at this point). However, the seeds of recovery have been planted. Inventory will need to be restocked and eventually businesses will have to replace some of their equipment and will start to spend again. However, I would not expect a bumper crop from those seeds. The recovery, when it comes, is likely to be very anemic.

Best of Luck,
Dirk van Dijk, CFA
Director of Research,
Zacks Equity Research

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Following a reasonably upbeat June quarter for D.R. Horton (DHI) shares, analysts have been ratcheting down estimates for both the September quarter and fiscal year.  What's more, 8 analysts have revised down earnings estimates for the following fiscal year (FY09) within the past month.  The Ryland Group (RYL), as well, had 8 analysts downgrade expectations for both FY08 and FY09.

Zacks senior homebuilding industry analyst Mario Ricchio currently has Hold recommendations on both DHI and RYL.  To quote: "The majority of homebuilding companies will be reporting negative earnings for at least the next two to three quarters."  However, in D.R. Horton's case, he comments, "[T]he company acknowledges the challenges in the housing market and the strategy to deploy through the downturn. We applaud the plan to reduce debt, lower inventories, lower the land lots under development, and generate cash flow."

A sampling of U.S.-based homebuilders including D.R. Horton (DHI), Lennar (LEN), Ryland (RYL), Beazer (BZH) and Hovnanian (HOV) shows none of these companies with anywhere near positive earnings estimates for their coming quarters or fiscal year. Yet every one of these companies' stocks is up thus far in today's trading, from 3.9 percent (Ryland) to 8.7 percent (Beazer).

Driving up the valuation on homebuilding stocks may cause some ratings downgrades in the future.  In fact, Zacks senior equities analyst Mario Ricchio issued an Analyst Note (click here for access) on D.R. Horton recently with a Hold recommendation but with a target price under its current $11.57 per share.  Here's a quote: "Until housing demand stabilizes, we see no reason to build up the land lot position above the current 5.4 months supply."