Wall St Week Ahead - No sweeping the earnings clouds away
In April 8 NEW YORK item headlined "Wall St Week Ahead - No
sweeping the earnings clouds away," please read in paragraph
14, "Another retailer, Office Depot , will report its
earnings on Thursday, April 19." instead of "Another retailer,
Office Depot , will report its earnings on Friday"
(corrects release date).
A corrected version follows:
NEW YORK, April 8 (Reuters) - For a moment, it looked like
the clouds had parted over Wall Street, but the forecast calls
for more rain this week with the torrent of disheartening
earnings news expected to continue.
As the trickle of quarterly report cards from Corporate
America begins to grow into a flood, stocks could end the
shortened week -- with the U.S. financial markets closed on
Friday in observance of the Good Friday holiday -- under water.
In recent days, stocks plummeted amid the rising chorus of
companies confessing their profits will take a hit in the
quarters ahead, due to the slowing economy.
"Not all of the confession period is over," said Stanley
Nabi, managing director of Credit Suisse Asset Management,
which oversees more than $100 billion. "Many companies may come
out and lower expectations for the entire year and this is
going to weigh down on the market."
Technology bellwether Motorola Corp. is on the
earnings calendar this week, and the company -- after no less
than two warnings for the period already -- is expected to set
a bleak tone for the high-tech corporate profit picture.
The growing threat of recession also has Wall Street on
edge. Investors will be watching for government data on
wholesale prices and retail sales for clues to how aggressive
the Federal Reserve will be in lowering interest rates to stave
off an economic meltdown.
WALL STREET TAKES WILD RIDE
The market took a roller-coaster ride last week, slumping
under the weight of a slew of high-tech profit warnings from
the high-tech sector, and then skyrocketing on Thursday after
personal computer giant Dell Computer Corp. said it
stood by its first-quarter forecasts.
The Dell news could hardly have been called "upbeat," but
it was enough to send investors on a furious buying spree. The
Nasdaq Composite Index <.IXIC> jumped 8.9 percent to rack up
its third-largest percentage gain ever, just two days after it
sank to its lowest level in more than two years. The Dow Jones
industrial average <.DJI> made its second-biggest point gain
ever.
The euphoria did not last long. The major stock market
indexes finished the week lower, bringing the Nasdaq down about
30 percent for the year and the Dow off 9 percent for the year
to date.
Adding to the clouds gathering over Wall Street was news
that PG&E Corp.'s unit, Pacific Gas & Electric Co., had
filed for bankruptcy protection. Pacific Gas & Electric, which
is California's largest investor-owned utility, owes about $9
billion to creditors, including billions in bank loans.
EARNINGS CLOUD HOVERS
The quarterly earnings season heats up this week. Few
analysts are holding out hope for many rosy reports.
"Until it's conceded that the earnings declines will be
more significant than is now being acknowledged, I think the
bottom of the market will not be reached," Nabi said.
Trucking company Roadway Express is scheduled to
issue its report on Tuesday, along with the world's
second-largest mobile-phone maker, Motorola Inc. . Other
high-tech firms will follow with their reports, including
Internet media company Yahoo! Inc. on Wednesday and
Juniper Networks , one of the Nasdaq market's
heavyweights, on Thursday.
Also on Thursday's roster of quarterly results: blue-chip
broadcaster and corporate powerhouse General Electric Co.
; Dow Jones & Co. , the publisher of The Wall
Street Journal, and Pier 1 Imports , the retailer that
specializes in furniture, housewares and accessories from
exotic places. Another retailer, Office Depot , will
report its earnings on Thursday, April 19.
Despite the overwhelming feeling of gloom about the
earnings picture, there is some hope. Gloomy earnings after the
latest parade of bleak corporate profit forecasts should come
as little surprise to investors by now and the market could
begin to show some resiliency to the constant stream of bad
announcements, some analysts said.
"Many stocks are already priced more or less for disaster,
and if warnings are not severe, stocks are actually trading
higher," said Charles Payne, head analyst at Wall Street
Strategies. "We probably could trade in a very narrow range ...
another week where we'll be down three to four days and then
have one big up day."
FEDERAL RESERVE TO THE RESCUE?
Wall Street has been rife with speculation about what the
Federal Reserve's next move will be with regard to interest
rates, and a number of economic reports due this week could
yield some clues. The Fed is widely expected to cut rates in an
effort to jump-start economic growth, but whether it will slash
rates again before its May 15 meeting is open to question.
On Thursday morning, the government will release the
Producer Price Index (PPI), which is expected to show an
overall reading of unchanged in March and a 0.1 percent gain in
the core rate, which excludes volatile food and energy prices,
according to a Reuters survey of economists.
Retail sales figures, also set for release on Thursday, are
expected to be flat for the month of March and to rise 0.1
percent excluding automobiles, according to the poll.
"It would add to the speculation about an interim move if
we get a lower core rate of PPI and the retail sales are soft,"
said Tony Dwyer, chief market strategist at Kirlin Holdings.
Last Friday, a report showing an unexpected drop in
employment in March stirred up worries about a potential
recession and fostered talk about an interim Fed rate cut. Jobs
were lost last month at the sharpest rate in almost a decade,
with March marking the first time jobs were cut from payrolls
since last August.
Out of the 25 primary dealers of U.S. government
securities, 24 predict key short-term interest rates will get
cut by half a percentage point by mid-May. They put the odds of
a cut ahead of the meeting at nearly one in two, according to a
Reuters survey.
"It would add to the speculation about an interim move if
we get a lower core rate of PPI and the retail sales are soft,"
said Tony Dwyer, chief market strategist at Kirlin Holdings.
Hopes the Fed will rescue the economy, however, may be
overshadowed until the corporate profit outlook clears.
"Clearly there is a sense of a frustration with earnings
that isn't going to abate," Dwyer said. "We're in a bottoming
process (in the market) and it takes time."
REUTERS
Rtr 12:58 04-09-01 |
