Tying DE Themes to the Materials Sector Materials Sectors

The U.S. dollar weakened versus the euro and pound over the past month, though it has recovered in recent weeks as expectations of a weak recovery reined in risk appetites.

First quarter earnings reports were replete with messages about sales to foreign customers outstripping U.S. results. This report documents why this portion of the expansion is so supportive of overseas business, and which industries and sectors are likely to benefit most in terms of earnings potential.

Economic Perspectives

Downgrade Hotels industry equity weighting to Market-Weight from Over-Weight for an 18-month horizon. - Hotel construction is booming. Despite a falling dollar and a healthy global economy, demand for U.S. rooms may not grow enough to overcome the hotel building boom, potentially weakening prices and profits.

Weak PC Sales Are a Drag on Q3 Tech Earnings, but Should Provide Lift in 2007

Decision Economics remains Overweight the Energy sector for equity investors. Today’s uncertain geopolitical environment has trumped fundamentals—at least on a tactical basis—for the market in general, but remains positive for Energy. However, a downshift in natural gas pricing has reconfigured recommendations within the sector.

New preliminary data from market researcher Gartner, Inc. provide some insight as to what caused profits to slow at Intel, at computer makers, and perhaps even at software producers.

In the short-run, we are tactically negative on stocks and on the consumer and believe the market is in the process of a small correction. Strategically, we have a Bull market view and believe that the market is entering into the second leg of the Bull market cycle.

Recent jobless claims data add to last month’s employment report to support the notion of a stronger labor market. As detailed in a prior DE Comment, more jobs obviously generate more wage income and thus enhance ability to consume and save, but several industry categories also benefit directly from acceleration in job creation.