It's not an avalanche, and that's great news. Of course it's another session where you wonder where the next catalyst will come from. But, you know, I don't know if there will be a single catalyst or event outside of Election Day that will send stocks higher. Instead, I think it could happen under a cloud of disappointing news. So much of this is impression and expectations, even though there is a component in how the market trades that is directly linked to fundamentals. Keep in mind the news we get is backward looking. They have forward-looking implications, however.

But, let's look at the expectations game. If you were running a business and posted record earnings and a bunch of other superb business results would you take everyone out for champagne and a toast or would you cower in the corner wondering what to do? If we are talking about a publicly traded company, where outside observers figured you should have done better, you aren't drinking champagne unless it's to wash down the Tums. Last night, Cisco (CSCO) posted impressive business results but guidance was iffy as far as the Street is concerned; the stock is getting hammered today.

The stock has been hammered so often it has traded in the same neighborhood for a decade. We had John Chambers, CEO of Cisco, on "Varney & Co." this morning and he was so boring I could see why he couldn't jawbone the stock higher. However, he tried to sell the good points. The sad thing is that he was even thrust into that position in the first place. So, the expectations game will ultimately get the ball rolling on a longer term rebound, and it will have to be backed up with material improvements in fundamentals. With that in mind, what's the deal with the foundation of American wealth and sentiments, housing? It's ugly, but we knew July wouldn't be pretty. Here's the latest from our homebuilder analyst, David Urani.

The Roof, The Roof, The Roof is on Fire
By: David Urani, Research Analyst

Foreclosure filings for July increased from June, reaching 325,229 total for the month. That makes 17 consecutive months that foreclosure filings have been above 300,000. Both new delinquencies and foreclosure completions rose during the month, indicating an all-around bad report. New delinquencies had previously been on a good run of declines, indicating stabilization in the health of homeowners. However, the latest uptick in new filings indicates that we are by no means home free yet, and in fact, it's possible that weak pricing continues to put borrowers underwater.

In addition, the rate of foreclosure completions (repossessions) continues to rise and now rests at the second highest level on record, second only to May 2010. Essentially, that means that the rate of vacant homes hitting the market is at an all-time high pace, threatening to add to the excess supply in the market. In fact, existing home supply has already risen for four of the last five months, and is up 22% year to date.

Having seen the massive downturn in home sales after the expiration of the homebuyers' tax credit, one can say that the housing market is truly in the gutter, from both a supply and demand standpoint. Applying some Econ 101, we can deduce that falling demand + rising supply = lower prices. The major pricing indices such as the Case-Shiller Index continue to show somewhat flattish pricing over the past year or so (the tax credit provided an artificial bump), but the way things are going now, it seems almost impossible for prices not to fall. Extremely low mortgage rates (now 4.4%), mortgage modifications, tax credits and more have hardly put a dent in the problem. Sure, some of the mortgage relief programs have slowed the process down, but with roughly seven million borrowers in delinquency, slowing the process down can only do so much.

In truth there is no silver bullet; if the Obama Administration really wanted to do something extreme they could reduce principals on droves of troubled homeowners, but that would come at an exorbitant cost and would obviously be re-fueling the housing bubble. As liberal as he is, I think even he knows that's a bad idea. When it comes down to it, it's simply going to take a true rebound in employment to turn the housing market in the right direction.

Random Musings
By: Brian Sozzi, Equity Research Analyst

* The market has given a skeptical glance at the Federal Reserve's latest policy move, and is this even surprising? What has essentially happened is that the Fed admitted the economic recovery was stalling and as a result, it was coming to the rescue. With the return of some form of QE (quantitative easing), the 30-year should continue to be low, but does it matter? Mortgage rates have been attractive and yet housing activity has softened post tax credit. Jobs and confidence are needed, and the Fed can't necessarily control those two (they may have hammered confidence with their latest move). One term investors should get accustomed to hearing shortly... "QE2"
* It was sure positive to see Macy's (M) raising its same-store sales guidance for the second half of the year. However, the margin picture is of critical importance as the company cycles difficult year ago comparisons and ramps up promotions to move newly ordered inventory.
* Economists are lowering their estimates for 2H10 GDP growth as a result of renewed consumer weakness. There seems to be a disconnect between the early earnings reports from retailers and the actual economic data. Retail executives, while still sounding cautious, are saying consumers are back in the malls and outlets. It may just be a matter of time before economic data becomes a self-fulfilling prophecy and whacks consumer spending ahead of the holiday shopping season.
* If Macy's (M) is winning for the early back to school shopping season (guidance yesterday confirms that) it means a few department stores are losing mightily. The losers of the sector are JC Penney (JCP) and Kohl's (KSS). JC Penney has lacked the exclusive label wow factor for back to school; the shares have gone straight down since mid-July, Macy's straight up. Weak guidance was received from Kohl's (KSS) this morning, which overshadowed a modest beat on the earnings line.
* Right now, retailers are driving same-store sales through transaction growth. In other words, people are coming to the store and spending more. However, with average unit retail prices coming down fast, and consumer traffic slowing, there is definitely risk to monthly sales results in the second half of this year.

What a Difference a Year Makes: GM Swings to Billion Dollar Profit
By: David Silver, Research Analyst

This morning, General Motors released its operational results for its second quarter of 2010. The results were better than the first quarter as China, and improved operations in North America, offset weakness in Europe. Not only did the company report earnings of $1.3 billion (above $895 million in the first quarter), but General Motors also announced that it received a $5 billion revolving credit facility. The credit facility was one of the last hurdles before GM files for its initial public offering. Rumor has it that GM will file for its IPO tomorrow, and is expected to raise approximately $16 billion, but more on that later.

Overshadowing the solid earnings release is the announcement that CEO Ed Whitacre would be stepping down (effective September 1) and that board member Dan Akerson would succeed as the new CEO of GM. Mr. Whitacre said "It was my plan all along to help return this company to greatness and that I didn't want to stay a day beyond that. The transition will be very smooth. He [Mr. Akerson] is aware of the things going on at General Motors."

Mr. Akerson has been a part of GM's board since July 2009 (right after the company emerged from bankruptcy), and a representative for the Treasury, so the hope is that he has the largest shareholder's (the U.S. government) support. The timing of the announcement makes you wonder; however, the action should not surprise anyone, and the hopes are for a smooth transition. General Motors is expected to file for its IPO, and Mr. Whitacre has been adamant about turning the company around and then stepping down. What investor would want to invest in a company that would have its CEO imminently stepping down with no predecessor in store? I had expected Chris Liddell to be named the new chief.

Back to the results. North America performed much better year over year as all of the plant closures and shuddered brands helped to boost the bottom line. The company is concentrating on its core 4 brands (Chevrolet, Cadillac, GMC, and Buick), and has been performing extremely well. However, market share fell in the fast growing economies of Brazil, China, and India (also fell in Germany) compared to the first quarter, with improvements in the U.S. and the U.K. offsetting that decline. Total market share for the second quarter was 11.6% for the world, and 11.4% for the first six-months of the year.

Refer to our website, www.wstreet.com, later today to read the remainder of the article.

Techs Stocks Taking a Hit
By: Carlos Guillen, Research Analyst

Tech stocks have been on a decline for most of this week as fears of a weakening world economy continue to spook investors. After reaching a trough in early July, the Philadelphia Semiconductor Index (SOX) had been recuperating some lost ground, but in the last couple of days it has been trending significantly lower and broke through support at the 330 level.

Today, tech stocks are being negatively affected by uninspiring results from Cisco, and by poor initial claims numbers from the Department of Labor. Although Cisco beat on the bottom line by a penny at $0.33 per share, the top line was slightly below expectations at $10.8 billion compared to the consensus of $10.9 billion. While it was not that much of a difference, investors were hoping for a beat on the top line to give them confidence that the corporate sector would give the economy a lift. Making things worse, on the call Cisco guided September quarter revenue to be in the range of $10.6 billion to $10.8 billion, below the Street's consensus estimate of $10.9 billion.

It is interesting to see just how much fear there is out there. For most of this earnings season most tech companies have been reporting revenues and earnings per share that have been well above the Street's consensus estimates. However, tech stocks remained flat to down. On the other hand, as soon as there is any bit of macroeconomic uncertainty, these stocks make moves to the downside. The news from Cisco last night, although not horrible, did not give investors the reassurance they so badly wanted. And the initial claims data exacerbate the situation further. At the moment, it is clear that the most significant driver of tech stocks is the economy and jobs. Great companies are getting hit not because of poor product or ineffective management, but because of resurging fear of a double-dip recession. Consumption represents approximately 70% of GDP, and with continuing high unemployment levels, investors are finding it difficult to see strong consumption growth in the near future, and now investment spending may also be at risk.