The Coming Week: Cisco, WorldCom to Weigh In; Productivity Number Due
By Betsy Riley
Staff Reporter
2/4/01 12:30 AM ET
On Thursday, the market ended up getting some lift out of the FOMC minutes from its December meeting, but that was followed up with a painful selloff on Friday. The bloodletting was fueled by a mixed jobs report, which showed that while unemployment hit a high not seen since September 1999, nonfarm payrolls grew by 268,000 when only 83,000 had been expected.
So, how do you follow up that kind of skittish market behavior? How about with a nap?
This week, earnings releases are winding down and major economic news is on the lighter side, so investors can take this time to reflect, regroup or sit in the lotus position and meditate. OK, well, maybe not the whole week. They'll definitely want to peek at the screen a couple of times.
Drumroll, Please
Investors likely will snap to attention on Tuesday, when Cisco Systems(CSCO:Nasdaq) releases its second-quarter results. The networking company is known for beating estimates by a penny, but the Street's a little concerned this time.
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Another heavyweight scheduled to report is WorldCom(WCOM:Nasdaq). On Thursday, the long-distance telephone company will post its fourth-quarter earnings, which are expected to come in at 41 cents a share. The stock has suffered in the past year, falling more than 50% in the telco and tech selloff. It's also been affected by warnings or worries from such related companies as AT&T(T:NYSE) and Sprint(FON:NYSE).
The economic news that will have the biggest effect on the market next week is the productivity and unit labor costs report for the fourth quarter. The productivity number, which measures the changes in workers' output per hour, is expected to increase by only 2.3%. The unit labor costs figure measures the labor cost per unit of output. The market likes to see increased productivity and slower unit labor costs (this implies that inflation is in check); it dislikes the opposite.
Dow said the market should respond favorably to any productivity increase above 2%.
On Monday, the Purchasing Managers' Non-Manufacturing Index for January comes out. It's the sister gauge of the Purchasing Managers' Index. Both indices signal expansion when they're above 50 and contraction when below. The nonmanufacturing number measures service-sector activity. The number's been on the slide since September, when it came in at 62. Last month, it was down to 53.
Earnings to watch for that day are PepsiCo(PEP:NYSE) and Computer Sciences(CSC:NYSE). PepsiCo's fourth-quarter results are expected to come in at 33 cents a share, while Computer Sciences' third quarter is supposed to hit 66 cents a share.
Then Thursday sees the reappearance of the weekly initial jobless claims number, which is considered a good gauge of labor market conditions and a good indicator of the tone of the market. Last week, the report showed that the number seeking unemployment benefits for the first time rose to 346,000 for the week ended Jan. 27. It's at its highest level since the end of last year. Economists had expected 15,000 fewer. The four-week moving average fell to 327,000 from 335,500.
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