J.L. Davis Weekly Update 6/27/2011

Quote of the Week:
"...Take away the cause, and the effect will necessarily cease"
Roger Sherman

Only a true history nerd might know that Roger Sherman was the only Founding Father to sign the four major documents of the American Revolution. Those are: the Articles of Association (1774), the Declaration of Independence; the Articles of Confederation; and the Constitution. Thomas Jefferson, who clearly had the better developed PR department, only signed three of them.

And, yes, this same "nerd" became aware that Mr. Sherman's formal education never went beyond grammar school; that with no legal training he took and passed the Connecticut Bar; spent time as a surveyor, shoemaker, store owner, lawyer, and town clerk; became a representative in the Connecticut House and the U.S. Congress; served as Treasurer at Yale (and received an honorary Master of Ballet degree). Mr. Sherman was a true American Patriot, who helped to shape and form the thinking and words in our most seminal national documents.

As we celebrate July 4th, we remember that for all its challenges and faults, our country is, has been, and forever will be, the land of unlimited opportunity - A land where, regardless of background or station in life, one has only to dream and work in order to achieve a lasting legacy. Here's to the many talented and hard working folks like Roger Sherman that America has produced, including you!


The Markets

Back to square one: The NASDAQ finally managed to turn around its five-week losing streak, putting it at dead flat for the year, while the small-cap Russell 2000 had the best week experienced by any of the four domestic indices since the beginning of May. However, the S&P 500 and Dow industrials saw their seventh loss in the last eight weeks; the S&P barely managed to stay in the plus column for 2011. Anxiety continued to send investors flocking to Treasuries; as prices rose, the 10-year yield returned to last November's levels.


Last Week's Headlines

• As Greece's government survived a key parliamentary vote of confidence, it reaffirmed its intent to obtain parliamentary approval of a €28 billion, five-year program of spending cuts and tax increases by the end of the month. European leaders have said the unpopular austerity package must be approved this week for Greece to receive the next installment of its existing aid package in July and increase its chances of obtaining a second.
• New single-family home sales fell 2.1% in May, the Commerce Department said, though they were 13.5% above last May's number. Existing home sales were even weaker; hurt by severe weather and expensive gas, they fell 3.8% during the month and more than 15% from last year, according to the National Association of Realtors®.
• Promising some relief from those high gas prices, oil fell to roughly $90 a barrel after the International Energy Agency announced that the United States and 27 other countries would release some strategic reserves to replace supplies lost from Libya.
• The Federal Reserve lowered its estimate of U.S. economic growth for the rest of the year from 3.1%-3.3% to 2.7%-2.9%. However, the Fed's statement also said that some of the reasons for that sluggish growth, such as high oil prices and supply-chain disruption, should be temporary. There was no suggestion of new easing measures once QE2 ends this week. Chairman Ben Bernanke left the door open to the possibility of setting an acceptable target range for inflation.
• The Bureau of Economic Analysis's final estimate of first-quarter economic growth rose slightly to 1.9%, but it was still far below the 3.1% of Q4 2010. Corporate profits rose by $48.7 billion in the first quarter, up from Q4's $38.2 billion. However, taxes, inventory, and capital consumption adjustments cut that increase to$15.5 billion.
• After falling the previous month, durable goods orders were up 1.9% in May, according to the Commerce Department.

Eye on the Week Ahead

The Greek parliament's midweek vote on budgetary reforms will be key. And investors have a few more days to anticipate how the end of quantitative easing might affect markets.

Key dates and data releases: personal income/spending (6/27); home prices (6/28); pending home sales (6/29); U.S. manufacturing, construction spending (7/1).

Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Prepared by Forefield Inc. Copyright 2011