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The markets remain bullish which could be bearish for U.S. Treasuries. Further, Spain's bank bailout was approved by German politicians and the House of Representatives passed the 2013 Defense Department spending bill. Microsoft reported second quarter earnings and minus a botched acquisition the report was bullish for shares of the company.

While there may be upside in the intermediate term in the 30-year U.S. Treasury bond market, upside may be limited as major divergences form. Treasuries may be heading for a sell-off of major proportion. Investors should be wary of a sharp decline as equities and commodities rally thus increasing inflation expectations and interest rates.

July 19th, the German Lower House of Parliament approved the Spanish bank bailout. That approval of the bailout is probably priced into the market. In other words, it has been being discounted by the market participants for the past several weeks.

Personally, I think Spain is in an economic depression as the unemployment rate hovers near 25 percent. Regardless of the technical measure of economic depression - a 10 percent decline in gross domestic product - the unemployment rate suggests Spain is in a depression. Historically, that has been an excellent time to buy equities. Spain's stock market may offer attractive returns for long-term investors.

The House of Representatives passed the 2013 Defense Department spending bill; the passage of the bill is bullish for shares of General Dynamic (GD), Northrop Grumman (NOC), Huntington's Ingalls Industries (HII), United Technologies (UTX) and Lockheed Martin (LMT).

Microsoft

Microsoft (MSFT) reported second quarter earnings, sales grew 4 percent to $18.1B. Further, unearned revenue was $20.1B. The firm's margins expanded. Net income for period was negative after the firm took a $6.2B charge on a goodwill impairment. Operating income shrank 97 percent. During the past 12 months operating income-earnings per share declined 20 and 26 percent while revenue grew 5 percent. However, there was an improvement in the firm's financial positions as liquidity improved-book value increased.

Earnings were high quality and the firm's cash balance increased. Although, the cash balance grew slower than the year-ago quarter. Additionally, Microsoft spent $57B on investments over the past 12 months.

Revenue grew in every division except the Windows and Windows Live division. The division is Microsoft's third largest by revenue-was the second largest by operating income. Additionally, unearned revenue in the Windows and Windows Live division increased substantially compared to the year-ago quarter.

Overall, the report was bullish for Microsoft. I would like to see the company be more careful with the acquisitions that it makes. That said, I think Microsoft should make the PCs that run its operating system. That would allow them to control the quality of the product and enhance the Microsoft brand. Otherwise, I believe Microsoft will face serious threats from competition in the future if it doesn't place more emphasis on product quality control.

Source: S&P 500 Higher On Spain Bank Bailout And Microsoft