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Tickers in this Article: DE, LOW, HD, CAT
The performance of companies like Deere & Co. (NYSE:DE) can be excellent indicators as to the confidence of the broader economy. Unfortunately, the company reported that its fiscal second-quarter profit fell 38% along with a revenue fall of 17%. Even more worrisome is that the company slashed its outlook for the rest of the year by 27%. These disappointing numbers do not bode well for the economy overall.

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Agriculture is Key
Deere is a major manufacturer of agricultural equipment such as tractors, irrigation equipment and harvesters. The company also sells consumer products like lawn mowers, golf course equipment, utility vehicles and landscape and nursery products. In other words, Deere's business lines sell to both consumers and businesses; they sell items that help farmers grow more food, homeowners look after their homes and construction companies develop sites. Deere covers it all.

If one of society's most non-discretionary industries is still trying to work itself out of this recession, you can imagine how difficult it is for discretionary companies like retail, travel and the like. And considering that two-thirds of U.S.GDP growth is consumption based, you can begin to see the difficulty that still lies ahead. (For more, see Four Tips For Buying Stocks In A Recession)

Tough All Over
Deere's results are par for the course right now. This week both Lowe's (NYSE:LOW) and Home Depot (NYSE:HD) reported declining numbers. While Home Depot may have surpassed analysts estimates, it's due more to cost cuts than a strengthening consumer environment. More importantly, folks are only spending money to fix and repair - buying lower-priced replacement parts - not to upgrade.

Several weeks ago, Caterpillar (NYSE:CAT) reported a loss of $0.19 a share against a profit of $1.64 a share in the comparable quarter. To be sure the loss came as a result of charges due to layoffs, but a loss is a loss. Even without these charges, the company earned only $0.39 a share, still a far cry from the prior quarter. (For more, see Recession Proof Your Portfolio)

Down But Not Out
Such weak results should come as no surprise to investors. Businesses and consumers alike are quickly cutting back spending across the board. However, investors should not extrapolate from these weakening numbers that the economy is forever doomed. It's going through a correction - albeit a painful one - but corrections are good for capitalistic markets as they help weed out weaker competitors, leaving more playing room for the stronger ones. In the meantime, opportunistic investors will have opportunities to own pieces of these great businesses at very attractive prices. (For further reading, see The Impact Of Recession On Businesses)

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