April shower of earnings is due
12 Dow components to report
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By Steve Gelsi, CBS.MarketWatch.com
Last Update: 4:41 AM ET April 12, 2003
NEW YORK (CBS.MW) -- A cloudburst of corporate earnings reports next week as well as closely watched economic data may loosen the grip that the conflict with Iraq has had on Wall Street.
An even dozen components of the Dow Jones Industrial Average will post their latest profit statements in the first four days.
Financial markets will be closed on Good Friday.
A total of 144 companies from the S&P 500 are due out with earnings report.
Overall, the first quarter is expected to show growth of 8.3 percent in corporate profits vs. a loss of 11.5 percent last year, according to Thomson First Call, the Boston-based tracker of corporate earnings.
Optimism isn't high for any big surprises on the upside, but companies may offer a few positive comments on any possible upturns now that the uncertainty over Iraq is starting to clear.
Options trader Bernie Schaeffer said Wall Street is finally starting to move past its obsession with Iraq.
"For the first time in weeks, investors seem to be focused on earnings and the economy instead of bombs and Baghdad," Schaeffer said. "As U.S. troops mop up the last of Saddam's regime, we're noticing a growing disparity in sentiment on Wall Street. The percentage of bulls is increasing while the percentage of bears shrinks . . . Sooner or later, something has to give."
On Friday, the Dow Jones Industrial Average ($DJ: news, chart, profile) ended the week at 8,203, down 74 points, or 0.89 percent from its week-ago close of 8,277.15. The Dow is down about 1.6 percent for the year.
The Nasdaq ($COMPQ: news, chart, profile) closed out the week at 1,358, down 11 points, or 0.8 percent from its week ago level of 1,369. The Nasdaq is up about 1.75 percent so far this year.
The S&P 500 ($SPX: news, chart, profile) finished the week at 868, down 10 points, or 1.1 percent from its week-ago level of 878. The index is down about 1.3 percent for the year.
Economic data
Economic data will continue to flow next week, with industrial production on Tuesday and the Consumer Price Index on Wednesday taking center stage.
Prudential Financial is forecasting a drop of 0.3 percent in industrial production in March, and a rise of 0.2 percent in the Consumer Price Index.
Also on tap are business inventories on Monday; housing starts on Wednesday, and the Philadelphia Fed survey on Thursday.
Economics are mixed on the outlook for the U.S.
Donald Straszheim of Straszheim Global Advisors sees the end of the Iraq war as "only a minor economic plus" in the face of negatives such as high debt, overcapacity and tech excesses.
He's projecting gross domestic product growth of 1.5 percent in the first half of the year and 2 percent in the second half.
"(There'll be) no double dip, but (it's) too slow to drive big earnings, inspire business leaders or investors," he said. "Further cuts in rates by the Fed we believe would provide little lift."
Washington-based economist Jack Albertine foresees a "shallow recession" in the next nine months and blames companies' concerns about new regulations on accounting practices as a big reason.
"You're not going to get businesses investing because they are preoccupied with new accounting rules and not spending enough time taking care of business," he said. Listen to Albertine interview.
Earnings parade
Dow component earnings parade begins Monday with IBM (IBM: news, chart, profile) and Citigroup (C: news, chart, profile), which are expected to post net income of 80 cents per share and 77 cents per share, respectively.
On Tuesday, Microsoft's (MSFT: news, chart, profile) profit target is 24 cents per share, General Motors (GM: news, chart, profile) is in line to report net income of $1.55 per share; Johnson & Johnson (JNJ: news, chart, profile) is expected to report earnings of 68 cents per share and Intel (INTC: news, chart, profile) is line to post net income of 12 cents per share.
On Wednesday, Coca-Cola (KO: news, chart, profile) is due to post earnings of 37 cents per share; JP Morgan (JPM: news, chart, profile) is targeted to report earnings of 51 cents per share; Caterpillar's (CAT: news, chart, profile) target is 25 cents per share and Altria's (MO: news, chart, profile) benchmark is $1.06 per share.
On Thursday, United Technologies (UTX: news, chart, profile) is in line to post earnings of 98 cents per share and Honeywell (HON: news, chart, profile) is expected to report earnings of 33 cents per share.
Friday action
U.S. stocks slid into the red Friday on low volume as optimism from a surprising jump in retail sales in March was offset by concerns over three Dow components and the start of earnings season next week.
The Dow Jones Industrial Average ($DJ: news, chart, profile) gave up 17 points, or 0.2 percent, to close at 8,203. Early in the session, the index had rallied more than 100 points before reversing course.
The Nasdaq ($COMPQ: news, chart, profile) shed 6, or 0.5 percent, 1,358.
The S&P 500 ($SPX: news, chart, profile) declined 3, or 0.4 percent to 868.
Volume on the New York Stock Exchange was light with 1.1 billion shares changing hands, about 20 percent below average volume of 1.4 billion.
Peter Cardillo, chief strategist at Global Partners, said initial bullishness in the session may have ebbed on uncertainty surrounding a flurry of earnings releases due next week, as well as bearishness surrounding Boeing and Wal-Mart.
Don Selkin, director of equity research at Joseph Stephens, said Friday marks the third reversal of the week after similar stock retreats on Monday and Wednesday.
He said if the Nasdaq doesn't pace the Dow on the way up in terms of percentage gains, traders have been shifting into sell mode.
He added that bellwether Microsoft, with its dominating position in the Nasdaq and as a Dow component, also pulled the indexes down.
"This action is horrible -- it's bizarre because we had good economic data," Selkin said.
Microsoft (MSFT: news, chart, profile) fell 1.6 percent to $24.20 after First Albany downgraded the stock to "buy" from "strong buy" on concerns the software behemoth may have more trouble renewing maintenance contracts than originally thought, which could negatively impact revenue growth rates in fiscal 2004.
Separately, Microsoft's patent quarrel with Lucent (LU: news, chart, profile) also heated up as the software giant filed a lawsuit against the former AT&T unit. See full story.
Wal-Mart (WMT: news, chart, profile) fell $1.60 to $52.98 after the No. 1 retailer drew a downgrade to "hold" from "buy" based on concerns over valuation. Analyst Wayne Hood the stock is trading at "a whopping" 27 times 2003 estimates, exceeding even rival Kohl's "lofty" multiple of 25.9.
Boeing (BA: news, chart, profile) shares dipped 62 cents to $26.47 after the aerospace giant said it will take a noncash pretax charge of $1.2 billion, or $1.23 a share, against first-quarter earnings as a result of the slump in the commercial aviation and space sectors.
The world's largest aerospace company said $931 million will be accounted for as goodwill for past acquisitions while $251 million is to bolster its Boeing Capital Corp. finance unit.
Also entering into the overall mix Friday are earnings from Dow component General Electric (GE: news, chart, profile), which matched profit targets but fell just shy of revenue goals for its first quarter. Shares dipped 2 cents to $27.36. See full story.
Iraq developments, which have figured prominently into market moves in recent months, appeared to be mildly positive with reports of more surrenders and the endgame in military action continuing. See full story.
The U.S. Commerce Department said retail sales rose an adjusted 2.1 percent in March, well above economist forecasts of a 0.8 percent rise. It was the largest jump since October 2001. See full story.
"It is tempting, given our bullish view on the economy, to proclaim these numbers as the start of the great revival, but in truth they probably represent little more than a rebound from the weather-depressed February numbers," said Ian Sheperdson of High Frequency Economics. "Still, the data look great, and appearances count."
A higher-than-expected producer price index of 1.5 percent in March, partly on more expensive energy costs, seemed to have little effect. See full story.
A psychological boost came from the latest April preliminary University of Michigan Consumer Sentiment Index. The number came in at 83.2, better the expected figure of 79.5. Expectations for the future also increased.
"While consumer sentiment in the past has not been a particularly good predictor of household's actual spending behavior, today's number is likely to nurture market expectations that the consumer sector retains underlying momentum stripping out the recent short term effects of the war and bad weather," said Peter Buchanan of CIBC World Markets.
In bond action, Treasury securities remained under pressure but yields had nosed down from the three-week highs scored on a trio of economic reports pointing to improved U.S. growth. Stock averages had pared part of their advance. A benchmark 10-year note was recently yielding 3.97 percent, up from 3.91 percent Thursday. It was priced at 99 8/32, down 16/32.
May crude is down 26 cents at $27.20 a barrel on the New York Mercantile Exchange even after losing $1.39 a barrel on Thursday.
Analysts blame the decline on the coalition's takeover of Iraq's Kirkuk oil fields as well as OPEC's view that the global market is oversupplied.
June gold futures are up 20 cents at $327.50 as traders shifted into buying mode in the midst of weakening equities.
Sector action
Network stocks ($NWX: news, chart, profile) stocks rose 1.5 percent on a boost from Juniper Networks (JNPR: news, chart, profile).
Shares jumped 8 percent to $9.09 after it reported that first-quarter revenue rose a higher-than-expected 29 percent that sales could also grow this quarter. See full story.
Cisco Systems (CSCO: news, chart, profile) rose 1.3 percent to $13.21.
Foundry Networks (FDRY: news, chart, profile) rallied 15 percent to $9.21 after indicating that first quarter earnings and revenue would exceed current forecasts.
Baker Hughes (BHI: news, chart, profile) shares pulled down the oil sector with a fall of 1.9 percent to $29.80 after the company warned of a profit shortfall. See full story.
Biotech stocks ($BTK: news, chart, profile) fell 1.2 percent. Gold and silver stocks ($XAU: news, chart, profile) fell 0.2 percent.
Money flows into stocks
Funds investing primarily in U.S. stocks took in $2.5 billion in new money during the week ending Wednesday, Trim Tabs said after the bell on Thursday.
International equity funds had outflows of $1.6 billion.
In comparison, the S&P 500 Index declined 1.7 percent during the week and the U.S. dollar was virtually unchanged versus the euro.
Bond funds had inflows of $1.7 billion the latest week, adding to inflows of $2.4 billion the week before.
In individual stock action, shares of Apple (AAPL: news, chart, profile) fell 8 percent to $13.20 after reports that the PC maker is in talks to buy Vivendi Universal's Universal Music Group for as much as $6 billion as part of an overall bid to ramp up online music sales. See full story.
BJs (BJ: news, chart, profile) surged 5.6 percent to $13.85 on reports the discount retailer may be bought by Wal-Mart.
Shares of AOL Time Warner (AOL: news, chart, profile) fell 35 cents to $12.30 after The Wall Street Journal reported that the company's initial public offering of shares in Time Warner Cable might not take place until the third quarter, later than planned.
Fox (FOX: news, chart, profile) rebounded 45 cents to $23.05, the day after the stock led the Big Board in volume on the long-awaited deal for its corporate parent News Corp. (NWS: news, chart, profile) to take control of GM Hughes (GMH: news, chart, profile) in a deal worth about $6.6 billion.
State Street (STT: news, chart, profile) tacked on 7 cents to $32.72 after the company said Thursday it will slash up to 1,800 jobs, or 8.1 percent of its work force, in an effort to reduce operating expenses by $125 million. The job cuts will be made "at all levels of the organization," according to the Boston-based bank. State Street will take a pretax charge of between $125 million and $175 million charge in the first quarter. The charge will reduce earnings per share by 25 cents to 35 cents a share, the bank said. Analysts had expected the bank to report earnings of 46 cents a share, according to First Call.
Steve Gelsi is a reporter for CBS.MarketWatch.com in New York. |
