CLOSING COMMENTS 8-1-05

The Last Week in Review:

Last Friday's Q2 GDP report helped to confirm the underlying strength of the U.S. economy. Consumer and business spending/investment accounts for 87% of overall growth, while the trade deficit contributes a negative -6% to the overall GDP. Domestic demand has shown year-over-year growth in excess of 4.5% since Q4 2003 and no softening in sight.

The competitive global economy is driven by business investment and the need to replace outdated equipment, which helps maintain investment funding. The current ability to fund investment is the best in years. The corporate profit to GDP ratio in the largest in 37 long years (1968) as corporate cash flows exceed business investment. That financing gap turned positive in 2003, and this was the first since 1947 when they began keeping records. Both income and spending growth are running at a strong 7% year-over-year rate as of late June. The unemployment rate now near 4% will limit the supply of labor thereby boosting income growth and improve productivity.

The result was another good week for the indexes with the S&P 500 and NASDAQ reaching their highest in four years and the Russell 2000 hit an all-time high. Dow continued to lag other indexes, losing 10 points for the week and is still off 1.3% for the year. The S&P 500 added less than 1 point, and is up 1.8% year-to-date. The NASDAQ rose 5 points, and is now up 0.5% for the year. The Russell gained 3 points, and is up 4.3% for year-to-date. The small-cap stocks are outperforming large cap stocks for the sixth straight year.

70% of the S&P 500 companies have reported Q2 earnings above Wall Street's forecasts. The historical average is 62% above forecast. Also year-over-year gains are now expected to exceed 10% verses forecasts of 7.5% growth when the period began.

What to Watch for this week:

Companies scheduled to report earnings this week include Procter & Gamble (PG) on Monday. Comcast (CMCSA), InterActive Corp (IACI), Marsh McLennan (MMC) and Tyco (TYC) on Tuesday. Prudential (PRU), Time Warner (TWX) and Duke Energy (DUK) on Wednesday. Friday Cardinal Health (CAH)will issue results. Siebel Systems (SEBL) holds an Analyst Meeting on Tuesday.

Economic reports this week will be highlighted by Friday's July Employment Report. Estimates are that 180,000 new jobs were created in July. June Construction Spending and the ISM Index for July will be released Monday. July Auto Sales, June Personal Income and Spending and Factory Orders will be released on Tuesday. Wednesday, the Weekly Energy Report will be released. Friday afternoon June Consumer Credit will be reported.

In summary, Investors should review the July Employment Report released Friday and the ISM Index for July, released today.

Stay tuned!