Disappointing economic news continued to weigh on the US markets this month. On July 31, the US reported second-quarter economic growth of 1.9%, compared to economists’ expectations of 2.3%. The US also lowered its GDP estimates for the first quarter of this year and the fourth quarter of 2007 to 0.9% and negative 0.2%, respectively. In addition, overseas demand considerably weakened, leaving economists with a bleak global economic outlook (see page 1).

Despite the bearish environment, there were several encouraging signs in July. Crude oil prices fell 13% to the end the month at $124 a barrel. Also, consumer spending and durable goods orders were better than expected. Second-quarter corporate earnings, while mixed, remained moderately positive. And, despite weak results from the financial sector, the government’s support of Fannie Mae and Freddie Mac prompted investors to return to the markets, igniting a sharp rally. Over July 15–16, the Dow, S&P 500 and NASDAQ climbed 4.4%, 3.7% and 3.1%, respectively. However, investors remained apprehensive due to deteriorating economic data, as the likelihood of a recession increased.

For July, the markets remained mixed as the Dow and NASDAQ ended higher, improving 0.2% and 1.4%, while the S&P 500 fell 1.0%. For the year, the Dow, S&P 500 and NASDAQ are all trading lower, down 14.2%, 13.7% and 12.3%, respectively.

Due to a number of the larger- and medium-sized companies in the IBO Stock Indexes reporting strong second-quarter results, all four IBO Indexes climbed appreciably higher. The Process/Metrology/Motion Instrumentation Index gained the most ground, improving 8.4%, while the Lab Consumables/Equipment. Laboratory Instrumentation and Diversified Instrumentation Stock Indexes rose 6.2%, 6.1% and 3.3%, respectively.

Laboratory Instrumentation Stock Index

For the month, the Laboratory Instrumentation Index climbed 6.1% to close at 639.07. Seventeen companies improved, while six companies declined. Symyx Technologies and X-Rite led the Index, each gaining 36%, while Cepheid fell 27%. Year to date, the Index has lost 2.6%, with Sequenom leading the way, up 124%, while X-Rite has declined 70%.

In July, a number of companies in the Index reported strong second-quarter earnings and increased full-year guidance. On July 22, Illumina reported second-quarter EPS of $0.32 (see page 12), $0.04 better than estimates, and 81% above the second quarter of 2007. The company also raised its 2008 adjusted earnings guidance by approximately 5% to $1.65–$1.75 a share and announced a two-for-one stock split, sending shares up 9.3%. On the same day, Waters reported adjusted second-quarter EPS of $0.76 (see page 12), beating estimates by 7.0%, and raised its 2008 EPS forecast by $0.05 to $3.25–$3.35. Waters’ second-quarter EPS jumped 29% year over year, helping shares climb 11.1%.

On July 24, PerkinElmer announced adjusted second-quarter EPS of $0.36 (see page 12), $0.02 ahead of Wall Street expectations, leading shares up 3.5%. The company also increased its adjusted full-year EPS range by 2%–3% to $1.50–$1.53. On the same day, Thermo Fisher Scientific announced adjusted EPS of $0.79 (see page 12), $0.02 ahead of analysts’ forecasts, and increased the lower end of its adjusted full-year EPS by $0.04 to $3.11–$3.17 a share. Despite Thermo’s 23% increase in year over year EPS, shares ended the day relatively unchanged. After the close on July 30, Symyx Technologies announced a second-quarter loss of $0.05 a share, $0.11 better than analysts’ expectations, sending shares up 9.6% the following day. The company also provided an improved full-year EPS outlook, estimating a loss of $0.29–$0.23 per share compared to previous guidance of a loss of $0.34–$0.28 per share.

Bruker and Applied Biosystems both beat analysts’ estimates, but neither company provided specific EPS guidance. On July 31, Bruker reported adjusted second-quarter EPS of $0.13 (see page 12), $0.04 better than analysts’ expectations, leading shares up 16.2%. Year over year, Bruker’s EPS soared 160%. Applied Biosystems reported on July 24 adjusted fourth-quarter EPS of $0.49 (see page 12), $0.04 better than analysts’ expectations, leading shares up 1.1%. The company anticipates 2009 EPS to grow higher than the forecasted mid-single digit revenue growth.

Not all companies in the Index reported positive results. After the market close on July 23, Varian reported fiscal third-quarter EPS of $0.54 (see page 12), $0.13 below analysts’ expectations, and revised downward its full-year adjusted earnings outlook by approximately 5%–6% to $2.69–$2.79 a share. The following day, shares fell 17.7%. On July 24, Affymetrix reported a second-quarter loss of $0.04 a share (see page 12), compared to analysts’ expectations of $0.09, and lowered its full-year revenue guidance by 7%–10%, sending shares down 26.8%. On the same day, Cepheid reported a second-quarter loss of $0.13 a share (see page 12), $0.07 below analysts’ expectations, leading shares down 35.1%. The company now expects a loss of $0.35–$0.38 for the year, double the previous forecast. Sequenom announced after the market close on July 30 a second-quarter loss of $0.21 a share, $0.06 lower than analysts’ consensus, but maintained its full-year revenue outlook. Shares traded up 1.0% the following day.

Prior to Cepheid’s earnings release, on July 15, RBC Capital Markets initiated coverage of the company with an “Outperform” rating; however, shares traded relatively flat. On July 25, following Affymetrix’s negative earnings report, Deutsche Securities and Canaccord Adams downgraded the company to “Hold” from “Buy.” On the same day, Robert W. Baird downgraded Affymetrix to “Neutral” from “Buy.” Then, on July 30, UBS downgraded the company to “Neutral” from “Buy.” However, on July 31, Affymetrix received approval from the FDA for its cancer diagnostic system and test, helping shares climb 6.1% that day.

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index rose 8.4% to 360.40 in July, with five companies improving and three companies trading lower. MTS Systems led the Index, climbing 17%, while Nanometrics fell 25%. For the year, the Index has declined 8.9%, with seven companies in negative territory, led by RAE Systems and Nanometrics, each down 56%, and FEI Company, which is up 2%.

After the market close on July 23, MTS announced adjusted EPS of $0.64, $0.01 ahead of analysts’ expectations, and raised its 2008 EPS guidance by approximately 8% to $2.65–$2.70, which includes $0.14 a share from the sale of a product line. Shares climbed 5.7% the following day. After the market close on July 29, FEI reported adjusted EPS of $0.17, $0.02 better than analysts’ consensus, but down almost 100% year over year. Shares traded down 7.6% the following day. Nanometrics reported after the close on July 31 a second-quarter loss of $0.23, $0.21 wider than expected, leading shares down 19.0% the following day.

Lab Consumables/Equipment Stock Index

In July, the Laboratory Consumables/Equipment Stock Index gained 6.2% to 516.00, with six companies improving and QIAGEN down 7%. Sigma-Aldrich and Invitrogen led the Index, each gaining 13%. For the year, the Index is the only IBO Index in positive territory, up 2.1%, with three companies trading higher and four companies losing ground. Techne has gained the most, up 20%, while Kewaunee Scientific has lost 43%.

On July 22, Sigma-Aldrich announced adjusted second-quarter EPS of $0.70, $0.03 ahead of analysts’ forecast and up 16.7% year over year. The company also increased 2008 adjusted EPS by $0.05 to $2.62–$2.72, yet shares traded down less than 1%. Invitrogen reported on July 24 adjusted second-quarter EPS of $0.68, $0.11 better than analysts’ expectations, leading share up 2.0%. Year over year, EPS jumped 36%. For 2008, the company expects earnings to grow approximately 8%–11% to $3.62–$3.72 per share. After the close on July 31, Millipore announced adjusted EPS of $0.92 (see page 12), $0.07 better than analysts’ consensus, up 13.6% year over year. However, shares traded marginally lower

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index gained 3.3% for the month to 113.68. Five companies improved, while Roper Industries declined 7%. For the year, the Index is down 4.9% as four companies are trading lower, led by Danaher, which has dropped 9%, while Teledyne Technologies and AMETEK are up 18% and 2%, respectively.

On July 17, Danaher reported adjusted EPS of $1.09 (see page 12), $0.03 better than analysts’ consensus and up 16.0% over the previous year, sending shares up 6.2%. The company also raised its full-year EPS outlook to $4.34–$4.42 from $4.30–$4.40. On July 21, AMETEK reported adjusted second-quarter EPS of $0.61, $0.04 ahead of analysts’ expectations and up 13.0% year over year. The company raised its EPS outlook by approximately 3% to $2.50–$2.54, yet shares traded slightly lower. Teledyne reported on July 24 adjusted EPS of $0.89, $0.16 above analysts’ consensus and 33% higher year over year. The company also increased the low range of its full-year earnings by over 7% to $3.20 a share. Over the following two days, shares climbed 18.0% to a new all-time high of $65.17. However, on July 28, Jefferies and Company downgraded Teledyne to “Hold” from “Buy,” sending shares down 5.5%

International

In July, four Pacific Region companies declined, while Techcomp gained 12%. For the year, all companies are trading lower, with Horiba losing the most value, down 42%.

The European companies fared poorly as well, with nine firms declining, five improving and Spectris trading flat. Alpha MOS led all firms , up 16%, while Millbrook Scientific Instruments fell 58%. For the year, Renishaw leads all European companies, up 27%, while Cybio has lost 72%.

On July 3, Millbrook reported it narrowed its year over year loss to 0.30 pence (less than $0.01), yet shares fell 18.2%. On July 16, Genetix reported that earnings grew 7% to £0.02 pence ($0.3) for the first half, leading share up 1.8%.