Corporate Earnings May Push Stocks Higher
Saturday, October 04, 2003
NEW YORK — Stocks are expected to rise next week as investors focus on the start of the third-quarter earnings reporting season, which has generated a good buzz.
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The market should build on its gains this week as corporate profits may be better than expected, analysts say. With very few earnings warnings in the run-up to the reporting period, it could turn into a good quarter.
"Earnings ought to be driving the bus next week," said Phil Orlando, chief portfolio manager at Federated Investors. "I think stocks will continue to run."
Dow Jones industrial average (search) stalwart General Electric Co. (GE), whose businesses range from television broadcasting to jet-engine manufacturing, posts its third-quarter earnings Friday.
"Next week might be a little bit slow as far as earnings are concerned," said Ozan Akcin, chief market strategist at Puglisi & Co. But "they certainly pick up the week after that, though.
"I will say things are looking really, really good. Our calculations are that the consensus is expecting 14 percent year-on-year growth for the third quarter ... I'm pretty sure we're set to surprise on the upside."
With very few companies warning that third-quarter earnings may not hit expectations, the outlook for corporate earnings is bright.
"We've just gone through the confessional season and arguably it should have been extraordinarily brutally ugly as the September/October confessional season ordinarily is," Orlando said. "But it was extraordinarily quiet. You look at the companies who stepped forward and guided lower and they were few and far between."
U.S. stocks surged on Friday, rising for the third straight session, as a report showing that employers added new jobs in September for the first time in eight months propped up investors' optimism about the U.S. economic rebound.
The technology-laced Nasdaq Composite Index (search) jumped 44.35 points, or 2.42 percent, to 1,880.57, according to the latest data, while the the blue-chip Dow climbed 84.51 points, or 0.89 percent, to 9,572.31. The broader Standard & Poor's 500 (search) Index gained 9.61 points, or 0.94 percent, to 1,029.85.
The surge Friday helped push stocks up for the week. The S&P 500 gained 3.3 percent for the week, notching its best weekly gain since April. The Dow advanced 2.8 percent for the week and the Nasdaq shot up 4.9 percent, their biggest weekly percentage gains since May.
Next week's data may pale in comparison to the Labor Department's report Friday, analysts said.
The number of workers on U.S. payrolls outside the farm sector grew by 57,000 in September, the first time since January that jobs were created and sharply contrary to Wall Street economists' forecasts for a 30,000-job loss.
The gain was not big enough to bring down the unemployment rate, which was unchanged at 6.1 percent in September. But analysts said it was encouraging after seven straight monthly declines in jobs.
"Next week has a good base to start with, considering the employment report and at least a modest shift in the bear's attitude toward the sustainability of the economic recovery," said Ned Riley, chief investment strategist at State Street Global Advisors in Boston. "Starting the month with such an encouraging trend on the employment side is a pretty good foundation to carry the markets higher, particularly over next week and the rest of the year."
Weekly jobless claims will be released Thursday, when the Labor Department's report on September import-export prices also will be issued. Thursday also is the day when the Federal Reserve Bank of Chicago will release the Midwest Manufacturing Index for August.
"When we start to look at economic data for next week," Riley said, "the most important number will still be the employment claims on Thursday, simply to either verify or to maybe nullify the impact of the fairly upbeat labor report on Friday."
On Friday, two key reports will merit investors' attention: The Commerce Department (search) will release its August international trade data. And the Labor Department (search) will release the U.S. Producer Price Index, which measure prices of goods at the wholesale level, for September. |
