Earnings Flood Could Lift Stocks
By Brendan Intindola
NEW YORK (Reuters) - Expect stocks to rise this week with the flood of earnings reports as investors anticipate signs of growth after the end of weeks of pre-announcement confessions from earnings laggards.
Investors' hopes for a turnaround in the earnings slump have grown in recent days with bullish news from Microsoft Corp. (NasdaqNM:MSFT - news) and General Electric Co. (NYSE:GE - news) that sparked the biggest market rally in two months.
One-third of the Standard & Poor's 500, or 181 companies, are slated to report quarterly results this week, and at least 15 of the Dow 30 will unveil their earnings scorecards, according to Thomson Financial/First Call. As of late last week, 57 of the S&P 500 have reported so far, and two Dow components have announced their results.
Arnold Berman, technology strategist at brokerage Wit SoundView, said he expects a repeat of the only two ``really good rallies'' in an otherwise dismal 2001. They occurred in January and April when the confession season of earnings disappointments gave way to the reporting of actual results.
``We are going through that all over again,'' Berman said. ''It is a transition from all bad news to news that is mostly bad, or even mixed. Any change from the horrible to the miserable tends to be good for stocks.''
Last week, stocks rose -- giving the Dow its first weekly gain after seven straight weeks of declines. The Dow Jones industrial average (^DJI - news) rose 2.8 percent, the Nasdaq Composite Index (^IXIC - news) increased 4 percent and the benchmark Standard & Poor's 500 Index (^SPX - news) gained 2.1 percent. Year to date, the Dow is down 2.3 percent, the Nasdaq is off 15.6 percent and the S&P 500 is down 7.9 percent.
WILL BIG BLUE SEE GREEN?
Microsoft's forecast of improving quarterly sales at midweek was a key part of the Dow's gain in the previous five trading days. The mood was further improved by positive news from General Electric (GE.N), which reported record quarterly results. Microsoft is scheduled to report quarterly results after the market's close on Thursday.
Last week, Yahoo! Inc. (NasdaqNM:YHOO - news), one of the most visited Web sites, and Motorola Inc. (NYSE:MOT - news), the world's No. 2 mobile phone maker, posted results that inched past analysts' lowered estimates.
This week, investors will be looking closely at another pair of Dow components, parsing earnings statements for signs that sagging earnings are headed higher -- Intel Corp. (NasdaqNM:INTC - news) earnings are schedule to hit the market after the closing bell on Tuesday, and International Business Machines Corp. (NYSE:IBM - news) will report 24 hours later.
``Intel and International Business Machines are probably the two I would look at as the most important,'' Berman said.
EARNINGS' SUPER TUESDAY
Citigroup Inc. (NYSE:C - news), the No. 1 U.S. financial services company, is scheduled to report its results on Monday.
Tuesday will be the heaviest reporting day of the quarterly earnings period.
The Tuesday wave brings quarterly report cards for Apple Computer Inc. (NasdaqNM:AAPL - news), Caterpillar Inc. (NYSE:CAT - news), Eastman Kodak Co. (NYSE:EK - news), General Motors Corp. (NYSE:GM - news), International Paper Co. (NYSE:IP - news), Johnson & Johnson (NYSE:JNJ - news), Merrill Lynch and Co. Inc. (NYSE:MER - news), and Pfizer Inc. (NYSE:PFE - news).
On Wednesday, look for the earnings of Coca-Cola Co (NYSE:KO - news), Boeing Co. (NYSE:BA - news), Ford Motor (NYSE:F - news), EMC Corp. (NYSE:EMC - news), and Philip Morris Cos. Inc. (NYSE:MO - news).
Thursday brings results from Microsoft Corp. (MSFT.O), Allstate Corp. (NYSE:ALL - news), Delta Air Lines Inc. (NYSE:DAL - news), Gateway Inc. (NYSE:GTW - news) and Sun Microsystems Inc. (NasdaqNM:SUNW - news).
Set to report on Friday are Merck & Co. Inc. (NYSE:MRK - news) and Gillette Co. (NYSE:G - news).
``I think we are getting neutral here on earnings, and maybe even slightly positive,'' said Dan Ascani, president and director of research of Global Markets Strategists Inc. ``But that is really more because expectations are coming in line with reality, not because earnings are getting better.
``Expectations are the name of the game,'' he said.
OH, AND SOME DATA, TOO
While the market's psyche will be fixated on earnings this week, there are a few economic indicators that could influence trade.
On Monday at 8:30 a.m. EDT (1230 GMT), May business inventories will be announced, with the market expecting on average a decline of 0.1 percent versus a previous reading of unchanged.
The June Consumer Price index will be released on Wednesday at 8:30 a.m. EDT (1230 GMT) with the overall index, a reading of retail-level inflation, expected to rise 0.1 percent. The core CPI, excluding volatile food and energy components, is forecast to rise 0.2 percent. In May, the overall CPI rose 0.4 percent and the core CPI gained 0.1 percent. dailynews.yahoo.com |
