Wall St Week Ahead-Earnings flood seen lifting stocks
By Brendan Intindola
NEW YORK, July 15 (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. <MSFT.O> and General Electric Co. <GE.N> 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> rose 2.8 percent, the Nasdaq
Composite Index <.IXIC> increased 4 percent and the benchmark
Standard & Poor's 500 Index <.SPX> 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 MORE 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. <YHOO.O>, one of the most visited
Web sites, and Motorola Inc. <MOT.N>, 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. <INTC.O>
earnings are schedule to hit the market after the closing bell
on Tuesday, and International Business Machines Corp. <IBM.N>
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. <C.N>, 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. <AAPL.O>, Caterpillar Inc. <CAT.N>, Eastman Kodak
Co. <EK.N>, General Motors Corp. <GM.N>, International Paper
Co. <IP.N>, Johnson & Johnson <JNJ.N>, Merrill Lynch and Co.
Inc. <MER.N>, and Pfizer Inc. <PFE.N>.
On Wednesday, look for the earnings of Coca-Cola Co <KO.N>,
Boeing Co. <BA.N>, Ford Motor <F.N>, EMC Corp. <EMC.N>, and
Philip Morris Cos. Inc. <MO.N>
Thursday brings results from Microsoft Corp. <MSFT.O>,
Allstate Corp. <ALL.N>, Delta Air Lines Inc. <DAL.N>, Gateway
Inc. <GTW.N> and Sun Microsystems Inc. <SUNW.O>.
Set to report on Friday are Merck & Co. Inc. <MRK.N> and
Gillette Co. <G.N>.
"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.
((-- Brendan Intindola, Wall Street Desk, 646 223-6111))
REUTERS
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