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Jul 27 2015

Weak results add concerns regarding strength of the global economy

7/24/15 Market Recap:

U.S. stock indexes ended their worst week since March with further losses on Friday, pressured by the latest in a series of weaker-than-expected earnings as well as signs of slowing global growth. Biogen Idec (BIIB) shares plummeted after the biotechnology giant cut its revenue growth forecast for 2015 by more than half, an outlook that weighed on the overall biotech sector. While more companies than usual have been topping earnings expectations thus far this quarter, including some big names like (AMZN) and Visa (V), revenue growth has been weak, and Biogen follows Apple (AAPL) and Microsoft (MSFT) as a bellwether name to disappoint. The weak results have added to concerns about the strength of the global economy, with some tepid data from both China and the euro zone adding to these fears on Friday. Energy and Material shares were especially weak at the close of last week, with investors concerned that weak grow would decrease demand for commodities like oil and copper.

Looking Ahead:

Futures are lower on Monday, with investors still taking their cue from overseas markets. Chinese equities plummeted, with the Shanghai Composite Index down more than 8 percent on the day, the biggest one-day drop since 2007. Such weakness suggests equities markets will remain volatile, and that recent moves by Beijing to shore up its markets may be inadequate. The uncertainty will have an outsized impact on U.S. commodity names, which could decline on any further hint of weakening global demand. Large-cap names in general, which have more direct revenue exposure to overseas markets than their smaller peers, could also see weakness. Investors also continue to study second-quarter earnings results, which have included some high-profile disappointments, raising concerns about U.S. growth and market valuation. Norfolk Southern (NSC) and Plum Creek Timber (PCL) are among the names set to report on Monday. On the economic data front, June durable goods will be released before the market open.  Make sure to tune into Fox Business this Thursday at 6 PM when our President, Oliver Pursche, joins Charles Payne during the 6 o’clock hour to give our latest outlook and discusses why, in spite of the recent negative market action, we remain cautiously optimistic. And don’t miss this week’s Money Matters with Gary Goldberg, Sunday at 11 AM on WOR 710 AM Radio. Visit our website for more details.