Briefing.Com daily commentary
Trading Topics
Daily commentary updated for July 7, 1997.
The key questions for the stock market in the week ahead are: 1) will there be any profit-taking after the
Wednesday-Thursday run?, and 2) how will the market react to the start of earnings season? A couple of major stock splits
also happen this week.
Sentiment Strong, PPI Friday Looks Good
The Dow jumped about 175 points in the final two trading days of last week, sparked by the announcement of unchanged Fed
policy on Wednesday and the employment data on Thursday. This increased confidence that the economy is strong enough to
support profit growth, but that inflation and interest rates are not rising. Now, after that run, some profit-taking may hit,
perhaps even Monday. But, the underlying confidence in the economic situation is strong.
This week, the only major economic release is PPI on Friday. And while market expectations are for a comforting unchanged
level, Briefing forecasts -0.3%. Anywhere in this range will sustain the mantra that "inflation is under control." No problem
on the economic front in sight.
Earnings Reports Starting: Banks & Technology
More risky to the market is the reaction to the earnings reports as they come out. Earnings start coming out in earnest
this week, and as usual, technology companies and banks will dominate the early reports.
The market has rallied sharply since last quarter's numbers, and there was not the typical pre-earnings season setback
caused by earnings warnings. This reduces the likelihood of the recent phenomenon of the rally that starts around
the middle of earnings month (July), as the previous fears dissipate. This quarter, there simply weren't any fears exhibited.
There is thus the possibility that expectations are so high, that earnings reports in line with expectations will lead to selling. Buy
the rumor, sell the fact. That, after all, is how the market reacted to Micron and Oracle earnings reports recently. This is by no
means certain, but the reaction to upcoming reports should be closely watched. At this point, it seems the sentiment is
bullish enough to withstand the earnings report. See, Market View for further discussion.
This Week's Major Earnings Reports
Monday: Student Loan Association (SLM)
Tuesday: Advanced Micro (AMD), Motorola (MOT), International Paper (IP), SunTrust Banks (STI)
Wednesday: Barnet Banks (BBI), Pairgain Technology (PAIR), Seagate (SEG)
Thursday: Atmel (ATML), Compaq (CPQ), EFII, Fannie Mae (FNM), Dallas Semi (DS), Vitesse Semi (VTSS)
Friday: Alcoa (AA), JP Morgan (JPM)
For further earnings reports, please see Earnings Calendar and Tech Earnings Calendar.
Splits
Finally, there are a few important stock splits this week, including: Presstek (PRST) 2-1 on Monday, Caterpillar (CAT)
2-1 on Friday, and Schlumberger (SLB) 2-1 on Friday. Intel splits 2-1 on Monday, July 14. See Splits Calendar for complete
list of splits. |
