Microsoft (NSDQ: MSFT) reported that earnings fell by 29 percent in the last quarter, and Amazon.com’s (NSDQ: AMZN) profits were off by 10 percent. Capital One Financial (NYSE: COF) took a $276 million loss in the quarter as credit card delinquencies ticked higher.

At least one industry should thrive in coming months, with the Consumer Assistance Recycle and Save Act of 2009, better known as Cash for Clunkers, going into effect today. The program will be providing vouchers of $4,500 for consumers to put toward the purchase of more fuel efficient vehicles when making a trade-in.

Under the terms of the program, if, over the past year, you’ve owned a drivable car manufactured in the last 25 years that gets less than 18 miles per gallon (MPG) and kept it continuously insured, you’re eligible for the voucher.

These vouchers can only be applied to new passenger cars with a fuel economy of at least 22 MPG or trucks and SUVs (including minivans) that get at least 18 MPG and have a sticker price of less than $45,000. To qualify for the full credit amount, there are also phase-in MPG improvements versus your old vehicle.

Envisioned as an aide to the ailing domestic auto industry as well as a way of furthering the Obama administration’s environmental goals, it will be interesting to see how effective the program actually is because the vouchers are an either/or proposition.

Under the terms of the program the old vehicles must be destroyed, leaving them with no trade-in value. In many cases, unless you do happen to drive a beat up, 25-year-old junker, consumers would be better off taking the actual trade-in value of the vehicle than the credit.

There’s also the issue of weak consumer confidence as well because, despite the credit, I would expect many potential buyers to be leery of taking on a car payment in the current economic environment.

I don’t expect the program to create the volumes need to really benefit auto manufacturers, but if the program is even moderately successful, given the requirement that the older vehicles must be destroyed, it could be a boon for the auto recycling industry.

Dealers won’t handle the destruction of the vehicles themselves; rather, they’ll be sold to recyclers. And the prices paid by the scrap yards for vehicles are very much a function of supply-and-demand; the greater the supply, the lower the price.

Recyclers have been generating fairly impressive earnings in the current economic environment, with consumers spending more to keep older vehicles on the road when in the past they simply would have traded them in. That’s helping earnings at replacement parts retailers such as O’Reilly Automotive (NSDQ: ORLY) as well as recyclers such as LCK Corp (NSDQ: LKQX) as more consumers as asking for aftermarket parts to reduce repair costs.

O’Reilly is one of our favorite parts retailers, having generated a better than 20 percent gain since its addition to the Louis Rukeyser’s Wall Street Portfolio. And LCK Corporation is our favorite recycler, having seen earnings improve substantially in the first quarter, which we expect to carry over to the second.

The company has grown quickly through acquisition, leaving it the clear leader in its field. Despite that, it’s done an excellent job of controlling costs and landing contracts to be the preferred vendor for insurance companies requiring service centers to use recycled parts for collision repairs.

The Cash for Clunkers program will help LCK broaden its parts inventory at extremely low cost, with improved margins likely to give a boost to third quarter revenues.

The Data

The data releases were a bit sparse this week, with just a few worth mentioning.

The Conference Board’s Leading Economic Index (LEI) was the big news this week with a 0.7 percent improvement, its third consecutive monthly gain.

The index improved at a 4.1 percent annual rate in the first half of the year, the fastest pace since the first quarter of 2006, signaling expected economic improvement in the second half of the year. Based on the confluence of data, the current consensus among economists is for a gradual improvement this fall.

Seven of the index’s 10 components posted improvement in June: interest rates remained low; building permits, stock prices, weekly manufacturing hours, deliveries and orders for consumer goods and materials were up; and weekly initial claims for unemployment were down.

The pace of improvement in the indicators slowed, moderating the increase on the LEI, plus money supply contracted along with orders of non-defense capital goods. Consumer expectations also weakened marginally in the month.

Initial jobless claims rose slightly, bouncing from 524,000 to 554,000. The data is still skewed due to the altered timing of auto manufacturing slowdowns, so you can’t read too much into the increase. Continuing claims once again declined, falling to 6.225 million from 6.313 million.

The real estate data continued to show improvement, with existing home sales posting an increase of 3.6 percent in June, the third consecutive monthly increase. That sets an annual sales pace of 4.89 million units, pulling total inventory down to a 9.4-month supply.

Inventory is still much too high for a meaningful improvement in prices, but the Federal Housing Finance Agency reported a 0.9 percent increasing in home prices in June. A strong 2.7 percent increase in the Pacific region and a 1.4 percent increase in the South Atlantic drove the improvement, though the index is still more than 10 percent off of its peak.

Although real estate markets may not be improving significantly, they at least appear to be stabilizing along with the broader economy.