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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Dealer who wrote (39026)	7/14/2001 11:54:04 PM
From: Dealer	Read Replies (1) \| Respond to of 65232

The Coming Week: Investors Will Be Watching Earnings, and Looking Out for Bombs... By Kristen French Staff Reporter 7/14/01 6:08 PM ET Wall Street goes head to head with second-quarter earnings season in the coming week, with a formidable list of corporate reports in the offing. Topping the list: Intel (INTC:Nasdaq - news - commentary), IBM (IBM:NYSE - news - commentary), J.P. Morgan (JPM:NYSE - news - commentary) and Ford (F:NYSE - news - commentary). And that's just the start. As earnings season begins in earnest, investors will be listening for talk of a recovery. Even though hundreds of corporations have already taken down their guidance, there's still plenty of room for negative surprises. Any companies that were going to miss estimates by a long shot should have let the market know by now -- but there's always the potential for stragglers to come to the party. And Wall Street's expectations for a turnaround have come down considerably. Investors are now finding inspiration in mediocre reports, and are rewarding companies that manage to meet or slightly top the consensus projection. "The last two days mark an important psychological turning point for the market," said Phil Dow, director of equity strategy at Dain Rauscher. On Wednesday, the major indices posted their strongest gains in more than three months after Microsoft (MSFT:Nasdaq - news - commentary) raised its fourth-quarter revenue forecast and General Electric (GE:NYSE - news - commentary) beat earnings estimates. And Friday brought a follow-through on that rally. Last week, the Dow Jones Industrial Average rose 2.3%, the S&P 500 gained 2.1% and the Nasdaq Composite climbed 3.9%. It wouldn't take much to set stocks back. "Bombs from two of [the heavy-hitters] could stop things in their tracks," said Michael Lyons, vice president of investment banking at Morgan Stanley Dean Witter. One strategist thinks the market will remain in a tight trading range until the end of summer, when the outlook for next year can be cleared up. "We'll trade around events, but we need clarity on 2002 expectations," said Tobias Levokovich, senior institutional U.S. equity market strategist at Salomon Smith Barney. "We probably won't see a rally until the fourth quarter in anticipation of a 2002 recovery." Federal Reserve Chairman Alan Greenspan will weigh in on the economic recovery in the middle of the week, when he issues his semiannual testimony before Congress. The speech, on Wednesday morning, tends to move the equities markets -- in either direction -- depending on whether the chairman's remarks are construed positively or negatively, and investors will be listening closely to his outlook on the economy. A couple of economic reports for June also hit next week, including industrial production (definition \| chart \| source) Tuesday and the consumer price index (definition \| chart \| source) and housing starts (definition \| chart \| source) on Wednesday. Plus, Kansas City Fed President Thomas Hoenig will be closely watched when he speaks Wednesday afternoon, as he voted for less aggressive rate cutting at the May 15 Fed meeting. But earnings remain the principal concern, say strategists. Rumors have been circulating for weeks that IBM would lower its targets for the second quarter, especially after data-storage outfit EMC (EMC:NYSE - news - commentary) warned. "EMC said the storage market is very competitive. We know that the PC market is soft, the dollar is strong, and Europe is slow," Levokovich said. "All of these things hurt IBM." Shares of Big Blue ended Friday's session up 1.2% to $108.53. In short, after so many quarters of promises from corporate America, investors are sure to be focusing on the fine print.