Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Week In Review: August 16, 2013

|Includes: Cisco Systems, Inc. (CSCO), WMT

Disappointing earnings from Cisco (NASDAQ:CSCO) and Wal-Mart (NYSE:WMT) shook major indexes with exposure to these stocks, while a strong CPI and unemployment report increased the odds that the Federal Reserve will begin tapering in September.

The main blow to the indexes came from disappointing earnings. Cisco delivered on its earnings report, but said it will cut 4000 jobs to boost the bottom line. The news of the job cuts signaled to investors that growth would be tough to come by, and CEO John Chambers remarks about an inconsistent economic recovery supported a reduced outlook for the firm's shares.

Wal-Mart delivered an even worse report, given that it has the pulse of the American consumer. The retail giant cut its revenue growth estimates in half and blamed tax increases, higher gas prices and high unemployment for the disappointing report. The firm barely missed on revenue and earnings, but the poor guidance did the stock in.

However, as we've said before, retail is a lagging indicator. Wal-Mart's troubles are based on problems in the prior quarter. The disappointing earnings report is a backwards looking report on a lagging indicator. Consumers are at the end of the economic cycle, with resource extraction and manufacturing at the beginning. Manufacturing and employment have been looking up in the U.S., and that is where future growth will come from.

Aside from Wal-Mart and Cisco, the housing and real estate markets sank again this week as interest rates broke out to new highs. Unless we see a reversal in rates today, the 10-year Treasury bond will close the week at a two-year high. The U.S. dollar also weakened, and that helped gold and commodities rally. Interest rates and commodities will not continue moving in the same direction though, unless the rise in interest rates and commodities is a signal that inflation is about to move higher.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.