The Associated Press reports that jobless claims -- at 455,000 -- hit a six-year high in July. Analysts underestimated the total by 25,000, as they forecast 430,000 such claims. When combined with this morning's disappointing July retail sales results, the economy appears to be doing worse than experts expected.
AP reports that many companies announced layoffs recently. These include General Motors Corp. (NYSE: GM), Weyerhaeuser Co. (NYSE: WY), Starbucks Corp. (NASDAQ: SBUX) and Bennigan's restaurants. More such layoffs are likely to be announced as the economy prepares a recessionary banquet of woes for the presidential candidates.
The lesson for those interested in economics is pretty clear. You can create the illusion of prosperity by borrowing lots of money. If someone lends me $100 million and I buy a big estate on Long Island, people will think I am rich. But if I can't pay back the loan, the bank will kick me out of the house and suddenly I won't look so well off.
That's what the banks are doing now across wide swaths of the economy. And it will be years before the mess is cleaned up.
With a turn of the calendar page, we drift into the middle portion of the current quarter, but the earnings season rolls on. Among the many companies scheduled to report quarterly results this coming week are Time Warner Inc. (NYSE: TWX), Cisco Systems Inc. (NASDAQ: CSCO), News Corp. (NYSE: NWS), and Whole Foods Market International (NASDAQ: WFMI). Let's take a look at which companies Wall Street analysts are expecting to be among the top earnings gainers and decliners this week.
Analysts surveyed by Thomson Financial expect the following to report strong earnings growth when compared to the same period of the previous year.
MOST NOTEWORTHY: International Paper, Dynavax Tech and Telecom Italia were today's noteworthy downgrades:
JP Morgan downgraded International Paper (NYSE: IP) to Neutral from Overweight and said its purchase of Weyerhaeuser's (NYSE: WY) containerboard business will shift the company's focus back to North America and result in a less attractive product mix given increased OCC exposure.
Merriman downgraded shares of Dynavax Tech (NASDAQ: DVAX) to Neutral from Buy after the company's hepatitis B vaccine was placed on clinical hold.
Merrill cut Telecom Italia (NYSE: TI) to Neutral from buy as they expect stronger competition and regulatory measures to cut prices.
OTHER DOWNGRADES:
Bear Stearns (NYSE: BSC) was downgraded to Neutral from Accumulate at Buckingham.
ViewPoint Financial (NASDAQ: VPFG) was lowered to Market Perform from Outperform at Keefe Bruyette.
Bear downgraded Siemens (NYSE: SI) to Peer Perform from Outperform.
MOST NOTEWORTHY: DiamondRock Hospitality, Pzena Investment and Vodafone were today's noteworthy upgrades:
DiamondRock Hospitality (NYSE: DRH) was upgraded to Outperform from Neutral at Baird, citing the newly-announced 4.8M repurchase plan, strong balance sheet and valuation.
Keefe Bruyette upgraded shares of Pzena Investment (NYSE: PZN) to Market Perform from Underperform after the company announced February ending AUM.
Goldman added Vodafone (NYSE: VOD) to its Conviction Buy List following the recent weakness as they expect the company to benefit from growth in wireless data.
Looking back at recent company statements regarding earnings and guidance, there seems to be a big disparity in the type of companies reporting above average numbers to those reporting below average numbers.
If legendary mutual fund manager Peter Lynch's adage that higher stock prices follow higher earnings still holds true, then it is time to take a closer look at technology stocks.
Contrary to the words of our economic cheerleaders -- Ben Bernanke and Hank Paulson -- the subprime mortgage meltdown refuses to stay contained. This economic cancer has now spread to the lumber and title insurance industries.
Reuters reports that one of the biggest lumber companies, Weyerhaeuser Company (NYSE: WY), will probably have to close plants and restrict operations because of weak market conditions. This should not come as a surprise since dropping home prices may crimp new home construction -- leading to less demand for lumber, roofing material, nails, concrete, and all the other materials and labor that go into building a house.
But the Wall Street Journal [subscription required] surprised me by reporting that the title insurance industry -- which issues policies that essentially guarantee a homebuyer is the rightful owner of a property -- also is taking a dive. The paper reports that claims against leading title insurers -- due, in part, to a rise in subcontractors who file a lien for unpaid work on a house -- have spiked 52%. Moreover, title insurance revenues are down which indicates a drop in new mortgages that require title searches to get approved.
MOST NOTEWORTHY: RadioShack (RSH), Weyerhauser (WY), Goodyear Tire (GT), Hot Topic (HOTT) and Unilever (UL, UN) were today's noteworthy downgrades:
Citigroup downgraded RadioShack (NYSE: RSH) to Sell from Hold on valuation as they believe shares have priced in a more aggressive top-line recovery than the company can deliver over the next 12 months and that margin improvement is likely to slow.
Merrill downgraded Weyerhauser (NYSE: WY) to Neutral from Buy based on the tighter credit environment and the impact on a potential containerboard divestiture or merger.
Matrix downgraded shares of Goodyear Tire (NYSE: GT) to Sell from Hold to reflect rising oil prices and negative fundamental trends.
AG Edwards downgraded Hot Topic (NASDAQ: HOTT) to Sell from Hold to reflect negative performance momentum and a lack of back-to-school prospects.
Credit Suisse downgraded Unilever (NYSE: UN, UL) to Underperform from Neutral as their analysis suggests the company continues to lose market share...
The U.K. Times reported that Rio Tinto plc (NYSE: RTP) has warned that the future of its only operation in the U.K. is bleak, with negotiations on its future having failed to deliver a solution.
The Washington Post said, according to a National Intelligence report, that the situation in Iraq will get worse and the United States has little control over it.
Investor's Business Daily's"New America" column mentioned Heelys (NASDAQ: HLYS) positively, saying there is plenty of room for growth in the wheeled sneaker market, although cautioning it could be a fad like rollerblades or the Razr scooter before it.
From BusinessWeek's "Inside Wall Street" column:
Weyerhaeuser Company (NYSE: WY) named Debra Cafaro, a well-regarded REIT executive, to its board, sending a "clear signal that Weyerhaeuser will be looking at moving its huge timberlands into a REIT," says Mark Wilde of Deutsche Bank.
Archer Daniels Midland Company (NYSE: ADM) should rise to $6 a share this year, says Carl Birkelbach, president of Birkelbach Investment Securities
Access Pharmaceuticals' (NASDAQ: ACCP) two cancer drugs -- one of which, MuGard, has already been O.K.'d by the Food & Drug Administration -- are catching the eye of investors.
With a turn of the calendar page, we drift into the middle portion of the current quarter, but the earnings season rolls on. Among the many companies scheduled to report quarterly results this coming week are 
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The week in preview: Mulling over techs, financials
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Yogi is right: Ninety percent of this (economics) game is half-mental
