July ended with the same uncertainty it brought in 2010, and I think mist are happy to move into August trading.  Markets were unusually slow and volume posthumously light as portfolio managers too the laptops to the beach or the back deck of the house and prepped for a summer BBQ. 

(AP) — News that economic growth slowed during the spring gave the stock market a fitting end to a choppy July — yet another back-and-forth day. The Dow Jones industrial average, down almost 120 points in the first minutes of trading, recovered and seesawed throughout the session. The Dow was up 17 in late afternoon. The other major indexes also rose modestly. Traders opted for the safety of Treasury bonds, and that sent interest rates lower. But stocks were on track for their strongest month in a year. The Dow was up 7.1 percent going into Friday’s trading. The Commerce Department said the gross domestic product, the broadest measure of the economy, grew at an annual pace of 2.4 percent from April to June. That’s less than the 2.5 percent economists polled by Thomson Reuters had forecast. At first the report confirmed investors’ belief that the recovery is weakening as unemployment remains high and government stimulus programs end. Consumers cut back on their spending because of job worries and companies spent less to rebuild inventories. But analysts said that as investors read deeper into the report, it didn’t look as bad as they initially thought. They found some good news in consumers’ savings rate. “The consumer actually decided to save more,” Jason Pride, director of investment strategy at Glenmeade, an investment management company. “Consumers have done more to repair their balance sheets than thought.” Pride said that means that those extra savings will eventually be spent, giving the economy a lift. Consumer spending accounts for the bulk of economic activity. Business spending on equipment and software jumped in the second quarter by the biggest amount in 13 years. That was encouraging, analysts said, because it means companies are eventually going to start adding jobs. “Companies are spending and eventually it will turn into employment,” said Ron Weiner, president and CEO at RDM Financial Group. It wasn’t surprising that stocks gave up their gains and turned lower. Trading has been erratic as weak economic numbers have conflicted with companies’ generally good second-quarter earnings and forecasts for the rest of the year. Investors have been quick to cash in their gains because they don’t have a sense of where the market is headed. In afternoon trading, the Dow Jones industrial average rose 17.48, or 0.2 percent, to 10,484.64. The Standard & Poor’s 500 index rose 3.34, or 0.3 percent, to 1,104.87, while the Nasdaq composite index rose 9.09, or 0.4 percent, to 2,260.78. Rising stocks outpaced losers by about 2 to 1 on the New York Stock Exchange where volume came to 745 million shares. Volume was extremely light even for a summer day. That continued a trend that has been seen for much of July. Analysts say many investors, uncertain about the where the market is heading, are staying on the sidelines or moving money into safer alternatives. That strategy sent Treasurys higher Friday. The yield on the 10-year Treasury note, which moves opposite its prices, fell to 2.91 percent from 2.99 percent. Its yield is often used as a benchmark for interest rates on mortgages and other consumer loans. A yield below 3 percent suggests investors are worried about long-term growth and don’t fear inflation will be a problem anytime soon. Inflation is a threat to the long-term value of bonds. Investors got some mildly good news from two other economic reports. The University of Michigan/Reuters consumer sentiment index for July rose slightly more than expected to 67.8 from a preliminary reading of 66.5. Economists expected it to rise to 67. And the Chicago Purchasing Managers Index, which measures manufacturing activity in the Midwest, rose unexpectedly to 62.3 this month from 59.1 in June. Economists were expecting a drop to 56.5. The report is seen as an indicator of how the Institute for Supply Management’s nationwide index is likely to come in when it’s released on Monday. Traders were also being cautious because they’re waiting for a series of key reports next week that will give a first look at how the economy is doing in the current quarter. The Institute for Supply Management releases its reports on the manufacturing and services sectors during July and the Labor Department issues its report on employment for this month. Economists predict the two ISM reports will show manufacturing and the services industry expanded in July but at a slower pace than in June. Meanwhile, the unemployment rate likely inched higher to 9.6 percent in July from 9.5 percent in June as the government laid off more temporary census workers. Private employers likely added 90,000 jobs during the month, slightly better than in June. Overseas markets mostly fell Friday after reports that Spain’s credit rating is likely to be cut by Moody’s Investors Service. The potential downgrade comes as the country’s unemployment rate jumped to a 13-year high of 20.09 percent and the government continues to grapple with rising debt problems. Spain’s IBEX 35 fell 1.2 percent. Britain’s FTSE 100 fell 1.1 percent, Germany’s DAX index rose 0.2 percent, and France’s CAC-40 fell 0.2 percent. Japan’s Nikkei stock average fell 1.6 percent.

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One of the most difficult sectors of the stock market to pick in 2010 are Media Companies, most Portfolio Managers missed the move in the past fiscal year because Google (NASDAQ: GOOG) is an active disruptive technology which has upset the apple cart.  Madison Avenue and others used to make most of the money now Google pulls out 5 billion a Quarter and this created chaos, and missed opportunity, this caused the Media Company valuations to be difficult and PM’s to take a pass..and everyone missed the move.  Now the question becomes what do you do now other than own Google, which most PM’s do anyway!! 

(Reuters) – U.S. media companies are set to report revenue increases of 5 to 15 percent as they issue earnings reports over the next two weeks — the best the industry has looked in at least two years. So how can share prices of Walt Disney Co, News Corp, Viacom Inc and other television and film powerhouses already be falling out of fashion?

One big reason is concern that the rebound in advertising spending that is lifting results this year cannot be sustained in 2011, according to analysts, who list unemployment and a stagnant housing market among the main threats.

Consider the Standard and Poor’s media index, which rose by nearly a third over the past 12 months and far outperformed the broader market.

In recent weeks the index has stalled, as have shares of all the major media companies. Time Warner Inc, CBS Corp and entertainment companies that were once red-hot buys are now treading water.

Company executives will likely have to ease worries about 2011 on conference calls to get the shares jumpstarted.

“One of the difficulties right now is that they seem fairly valued,” said Cowen and Co analyst Doug Creutz. “A lot of that has to do with the uncertainty about what the economy and the ad environment is going to look like when we go into 2011.”

Another Wall Street analyst, Anthony DiClemente of Barclays Capital, notes that spending by certain categories, such as retail, remain at risk because of weak employment.

“Here is the big question people want to talk about: Are advertisers seeing any signs of that slowdown?” he asks.

GOOD FOR NOW

So far, DiClemente said Madison Avenue is still spending.

Take Google Inc’s results, which came out earlier this month and showed the rebound in ad spending helped drive a 24 percent rise in second-quarter revenue

Several newspaper companies, including The New York Times, have also shown improvement in ad sales. That should bode well for Time Warner, Viacom, CBS, News Corp and Disney when they report quarterly earnings over the next two weeks. The third and fourth quarters could also show solid advertising growth from depressed levels of 2009.

“We are seeing a very strong advertising environment continue well into third quarter and into the fourth quarter,” said Michael Kupinski, a media analyst at Noble Financial.

One indication is the strong market broadcasters experienced in the recently completed upfront negotiations, the annual period when advertisers book commercial time for the fall season.

ABC, CBS, Fox and NBC fetched 8-9 percent price increases during the upfront, according to Barclays Capital Research. And pricing for the scatter market — commercial time bought on a short-term rather than long-term basis — remains robust.

Kupinski noted that the fall U.S. elections for congressional seats and U.S. gubernatorial races could provide an extra lift to revenue. “The companies I’ve been speaking with indicated to me that whatever number you throw out, we’ll probably exceed it,” he said, referring to projected ad spending by political candidates as Republicans try to wrest control of Congress.

For the just-completed quarter, CBS revenue is expected to rise around 7 percent, News Corp by 15 percent and Disney by 9 percent, according to Thomson Reuters I/B/E/S.  As for earnings, all the media companies should also post increases from a year ago, with top analysts predicting that Walt Disney and News Corp are most likely to beat Wall Street estimates, according to Thomson Reuters StarMine. 

But stronger earnings are not likely to make stars of media company stock prices, given the worries about 2011. Nor will media companies likely return to the type of valuations they used to experience on Wall Street.

“Even though stocks have rallied recently if you look at their trading multiples they are still way, way below historical norms,” said SNL Kagan analyst Derek Baine. “It shows even though the market is coming back, it is not clear if we will ever have the rah-rah days again.”

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