Tell me if this sounds familar:
Wall St. Seen Confident in Coming Week
Jan 21 12:42pm ET
By Elizabeth Lazarowitz
NEW YORK (Reuters) - Wall Street investors seem to have shaken the profit-warning blues and are expected to
remain chin-up this week, giving stocks a boost, as the corporate earnings season revs up to full-speed.
Corporate America has already largely confessed to the sins of weaker profits committed before the backdrop of
slowing growth, and Wall Street appears ready to forgive and forget -- at least for now.
"Most of the bad news is already in most of these stock prices," Peter Gottlieb, portfolio manager at First Albany
Asset Management, said.
The tap opens on the flood of earnings reports this week -- with a substantial batch of blue-chip companies set to
issue their quarterly results -- and analysts say investors will be largely able to shrug off any negative surprises.
Unlike recent reporting periods, this one has seen the damage from profit concerns at individual companies largely
contained instead of spilling across sectors and weighing on the broader market, analysts said.
There could even be some good news -- particularly from the slew of pharmaceutical companies expected to issue
statements about their profits, as well as many U.S. oil companies, which saw their profits get a boost from
sky-high oil and natural gas prices.
Among the Dow's 30 stocks, drug giants Johnson & Johnson and Merck & Co., oil heavyweight Exxon Mobil,
and SBC Communications, the nation's No. 2 local phone company, are next-at-bat on the earnings roster.
Traders will be closely watching for results from the high-tech world, including high-speed communications
equipment makers Corning Inc. and JDS Uniphase.
TECH STOCKS STRIKE BACK
Last week, technology stocks got a shot in the arm after computer giant International Business Machines painted a
rosy outlook for the quarters ahead.
Fears about high-tech sector's profit outlook may have been a bit overblown, John Forelli, portfolio manager at
Independence Investment Associates said in a research report.
"The downward earnings revisions in the tech sector have bottomed out, and with that, so have stock prices,"
Forelli said. "The Nasdaq is ready for action."
Stocks ended last week -- shortened to four days with the stock market closed on Monday for Martin Luther King
Jr. Day -- with modest gains.
Technology stocks lead the way, pushing the Nasdaq up 5.5 percent for the week and giving the tech-laden index
a 12 percent increase year-to-date.
Nevertheless, the market's rosier mood comes on the heels of one of the worst seasons for corporate confessions
ever, with a record 687 companies warning they would miss analysts' quarterly earnings forecasts, according to
market tracker First Call/Thomson Financial.
That number is 91 percent above the 359 warnings issued over the same period last year and could go even higher,
First Call research director Chuck Hill said, adding that it remains to be seen whether earnings can make a
comeback in the second half of this year as many analysts are predicting.
"If, in fact, the second quarter does turn out to be the bottom, and we sense that in the next few weeks, then I think
the (stock market) rally that's under way is probably the start of a sustainable up-market," Hill said.
The calendar of economic data is light next week, but financial markets will be keeping their eyes peeled for federal
budget, wage inflation, and durable goods figures as they ponder what the Fed's next move will be.
On Thursday morning, the government issues its Employment Cost Index (ECI) for the fourth quarter of last year.
The ECI measures inflation in wages, the threat of which has been a thorn in the Fed's side amid tight labor market
conditions.
U.S. economists on average predicted ECI rose 1.1 percent in the fourth quarter of 2000, up from 0.9 percent
gain in the previous quarter, according to a Reuters survey.
The government is also expected to issue figures on orders for durable goods -- things like refrigerators and
washing machines -- last month. Economists anticipate a 1.7 percent drop in December orders following
November's 2.5 percent gain.
The numbers could give clues to whether consumer spending -- one of the main drivers behind the U.S. economy's
blockbuster decade-long economic expansion -- has slowed.
Monday afternoon, Wall Street gets a look at the Federal budget for December, which economists on average
expected to be up $33.29 billion vs. November's $23.69 billion drop.
EYES ON THE FEDERAL RESERVE
There could be a bit of nail-biting on Wall Street on Thursday when Federal Reserve Chairman Alan Greenspan
testifies before the Senate Budget Committee. Although fiscal issues will be the topic of discussion, traders will be
watching for any hints of the Fed's next decision on interest rates.
The Fed's next policy-setting meeting is scheduled for Jan. 30-31, and the U.S. central bank is widely expected to
lower interest rates by at least a quarter of a percentage point to help pep up business activity. Earlier this month,
the Fed surprised the financial markets with a 50 basis-point cut.
"People are looking for them to send a signal that they are easing," said First Albany's Gottlieb. "The biggest worry
is not inflation but is recession, and a Fed (interest rate) cut would certainly help to at least mitigate those
concerns." |
