Nothing but upgrades and higher earnings estimates so why did the market fall for 5 straight sessions before rising on Friday?
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The SOX never tested the higher end of its recent trading range so it may yet rise as expected in this report:
Stocks May Rise After Big Sell-Off
story.news.yahoo.com
NEW YORK (Reuters) - The stock market should chug higher this week after days of selling pounded share prices to enticing levels.
But heightened worries over questionable accounting practices may put the brakes on any swing to the upside.
"The market is certainly ripe for some recovery, but the Enron hearings are continuing and it's an environment where I am sure many investors are happy to stay away for now," said Rick Meckler, president of investment firm LibertyView Capital Management, which oversees $1 billion. "I think any recovery will be muted."
Enron Corp.'s blockbuster bankruptcy and controversial finances have planted concern about accounting methods deep within the investment community. Its swift descent from energy-trading giant to scandal-ridden penny stock has spurred heated congressional hearings and shattered confidence in Corporate America's bookkeeping.
"There is still a high level of anxiety that some very significant companies are going to come under question," said Ned Riley, chief investment strategist at State Street Global Advisors. "Up until recently, there has been an awful lot of trust and confidence that management was reporting that which was real."
The accounting fears managed to overshadow upbeat economic numbers and some good news on the earnings front last week, hitting acquisitive companies with complicated financial statements like Tyco International Ltd. , General Electric Co., AOL Time Warner Inc. and Cendant Corp. But analysts expect investors to battle their Enron-inspired fears and step back into the market for cheaper stocks this week.
"Normally over 90 percent of the time late in recession and early in recovery -- and I think we are in that period now -- you see a consecutively higher stock market close," Robert Robbins, chief investment strategist at SunTrust Robinson Humphrey, said. "We have departed from the norm. We seem to have an extraordinary factor that's done it, and I think it's unsustainable."
The week's economic data -- retail sales, business inventories, the U.S. Producer Price Index (news - web sites) and consumer confidence -- may show the economy is starting to perk up.
Investors also are pinning their hopes on upbeat news from companies slated to report quarterly results this week, including Dell Computer Corp. and Hewlett-Packard (news - web sites) Co.
The stock market, riddled with fears other companies are using shady methods to inflate numbers, managed to snap a five-session losing streak on Friday. Late-day bargain hunting helped put an end to the longest string of losses in the market since last September in the wake of the assaults on the United States.
A TURNING POINT FOR EARNINGS?
More stock analysts are raising earnings estimates than cutting them for the first time in 15 months -- a hint the worst of the market drops may be over.
Upward revisions to annual earnings rose to 51 percent of the total in the week ended Jan. 25, according to research firm Thomson Financial/First Call. Not since the first week of November 2000 had estimate increases outnumbered reports slashing forecasts.
"I think the market fundamentally has all of the ingredients to sell at a much higher level than it's selling at today," Riley said. "Fundamentally and economically, the news is brightening. It appears that at least we are on a mild recovery path."
Better earnings numbers may surface sometime this year, but corporate profits are still a sore spot on Wall Street. Profits are on track to have fallen 17.1 percent in 2001, the worst annual decline on record for First Call. If profits fall again in the first quarter, as analysts expect, investors face the first five-quarter decline since the recession of 1970.
More than 80 percent, or more than 410, of the companies in the Standard & Poor's 500 have reported quarterly earnings so far, and a few more results will straggle in next week. Companies slated to post their results include Applied Materials Inc., MetLife Inc. , Network Appliance Inc., Brocade Communications Systems Inc., Viacom Inc. and Analog Devices Inc.
A HUNT FOR HINTS OF RECOVERY
A drop in claims for unemployment benefits and strong sales from retailers this week failed to inspire the market, but analysts are encouraged as more and more reports show hints of strength in the economy, which has been mired in recession since last March.
"Against this negative backdrop, you have some positives that have been, for the time being, overwhelmed and can rise to the surface," Robbins said.
The Commerce Department (news - web sites) will release its January retail sales report on Wednesday and offer Wall Street a hint of how consumer spending is holding up. Analysts polled by Reuters expect overall retail sales to have slipped 0.3 percent in January after a dip of 0.1 percent in December. They expect sales in January excluding autos to have gained 0.4 percent after a decline of 0.1 percent in December.
Consumer spending, which accounts for two-thirds of economic activity, held up well in the fourth quarter. That strength could help businesses work off bloated inventories and encourage them to invest again in new equipment.
The Producer Price Index -- a measure of costs at the factory door and farm gate -- will be released by the Labor Department (news - web sites) on Friday. Economists are expecting the overall PPI (news - web sites) to have risen 0.3 percent in January from a drop of 0.7 percent in December. The core PPI, excluding volatile food and energy prices, is expected to have inched up 0.1 percent in January after a dip of 0.1 percent in December.
Investors will also be eyeing reports on business inventories, industrial production, jobless claims and consumer confidence -- hoping for more hints the economy is on the path to recovery. |
