Here is how the Street.com sees the upcoming week. Any highlights are mine.
The Coming Week: Readying the Towel
By Kristen French
06/22/2002 21:54
As the major indices continued to hurtle toward their September lows,
some on Wall Street are hoping for a bout of capitulation. That's
semi-technical jargon for a swan-dive selloff that precedes a roaring
rally.
The last time the phenomenon was felt in market was on Sept. 21. Just
10 days after the terrorist attacks on U.S. ground, panic selling dropped
the major indices to three-year lows, drawing buyers back in and leading
to a widespread rally that lasted through early spring.
"We've had oversold readings for the past five weeks," said Richard
Dickson, technical analyst at Hilliard Lyons, who looks at things like put
and call options activity and market volatility. "They're reaching greater
and greater extremes. What a lot of people are looking for is some kind
of capitulation, or panic selling. It would be nice to see that, but when
everyone is looking for that, we probably won't get it," he said.
While economic and earnings data generally show that the U.S. economy
and corporate America are on the mend, economists are expecting a
slower recovery following weaker data on personal consumption and
trade, among other things, released over the past several weeks.
Meanwhile, with second quarter preannouncement season entering its
peak period, fresh headlines about illicit corporate behavior erupting
almost daily, and news of terrorist attacks and geopolitical turmoil
continuing to surface, market psychology stinks, said Charlie Crane,
market strategist for Victory SBSF Capital Management.
On Friday the Nasdaq Composite closed down 1.6% to 1441, just 18
points above its Sept. 21 low of 1423. The S&P 500 finished the session
off 1.7% to 989, 22 points above its Sept. 21 low. The Dow Jones
Industrial Average continues to hold up better. The blue-chip index fell
1.9% Friday to 9.254, well above its September low of 8236.
And despite a powerful Monday rally, the three major indices lost ground
last week. The Nasdaq Composite fell 4% to end at 1441. The S&P 500
dropped 2% to 989. The Dow finished down 2% to 9254.
Dickson expects the Nasdaq and the S&P 500 will hit bottom just a notch
south of their Sept. 21 lows. The Nasdaq could fall to 1200 or 1300, if it
has volume behind it, he said. The S&P 500 will probably hit a low of
between 945 and 950.
Road Map
The biggest areas of concern for the economic recovery are business
spending, which has lagged behind the rest of the recovery, and
consumer confidence, which has been hurt by the weak stock market,
concerns about corporate earnings, anxiety over executive missteps and
the threat of terrorism.
With that in mind, Wednesday's durable goods orders report for May and
the Conference Board's consumer confidence report for June, due
Tuesday, are the most important pieces of data to watch next week,
economists said. Weekly jobless claims also matter, as economists look
for firming in the job market after weak jobs report were released for April
and May.
While the durable goods orders report is volatile, it provides the best
reading on fixed investment.
"Obviously it's volatile, and one month won't do it, but several months of
strength in a row, plus revision to past months" might indicate spending
is actually picking up, said Peter Hooper, chief U.S. economist at
Deutsche Bank. Consensus estimates call for a 0.6% increase. "That's
consistent with what we're hearing from sector analysts, that firms still are
not in a strong spending mood," said Hooper.
Economists are expecting the Conference Board's consumer confidence
index to slip to 109.6 from 109.8. Last week the University of Michigan's
consumer sentiment index came in at 90.8 for June, a substantial drop
from 96.9 in May. Economists expect an updated reading, due Friday, to
yield the same number.
Seen as something of a nonevent, the Federal Reserve's policy making
board, the Federal Open Market Committee, meets Tuesday and
Wednesday of next week to determine the direction of interest rates. Few
economists expect any change to rates -- currently at a 40-year low of
1.75% -- or to the committee's neutral position on the economy, which
holds that the risks of inflation are balanced with the risks of economic
weakness.
"Everyone from the chairman on down has gone out of their way to say
we can be deliberative about raising interest rates," said Wayne Ayers,
chief economist at Fleet Boston Financial. At the end of last month, most
economists were pegging August as the target month for the Fed's first
rate hike, but over the past few weeks the consensus has pushed that
out to September, October or November.
Other data out next week include existing and new home sales for May,
on Tuesday and Wednesday, the final first quarter reading on gross
domestic product, personal income and outlays for May, and the Chicago
purchasing manager's index.
Meanwhile, earnings warning season enters peak season next week.
Most warnings are concentrated in the final week of the quarter and the
first week after the quarter ends. Despite a steady stream of warnings
from high-profile technology companies last week, including Oracle
ORCL , Apple AAPL , Advanced Micro Devices AMD and Nokia NOK
, there are fewer negative preannouncements as a percentage of the
total this quarter than last. The ratio of negative to positive warnings is at
1:2, down from 1:6 last quarter.
"Tech is not the only sector putting out bad news, but tech and telecom
are dominating the bad news on the profit front as they have for a couple
of quarters now," said Charlie Crane.
Big companies reporting earnings next week include FedEx FDX ,
chipmaker Micron Technology MU , handheld maker Palm PALM and
Nike NKE . |
