Sunday April 11 3:33 PM ET
U.S. Earnings Season Starts On Wrong Foot
By Jennifer Westhoven
NEW YORK (Reuters) - Compaq Computer Corp. (NYSE:CPQ - news)'s surprise earnings warning has
thrown a monkey wrench into Wall Street's outlook this week would be a pleasant one, with solid profit
report cards and only meek inflation.
Compaq Computer Corp., the world's largest personal computer maker, said late Friday it expects a
first-quarter profit of about 15 cents a share, about half of Wall Street's expectations of 31 cents a
share.
''This is going to be a tough, tough thing for tech stocks,'' said Hugh Johnson, chief investment officer at
First Albany Corp. '' The initial reaction will be negative for the tech group, but I think the market will
quickly sort out the group.''
Compaq's stock tumbled in after-hours trading Friday, sliding to $26 after closing $1.31 higher at $30.94
on the New York Stock Exchange.
But reports from other top technology companies, or favorable economic reports, could temper the
Compaq-inspired weakness.
Among the biggest tech companies to report this week are computer chip-maker Intel Corp.
(Nasdaq:INTC - news) due Tuesday, PC-maker Apple Computer Inc. (Nasdaq:AAPL - news)
Wednesday, and Friday, Sun Microsystems Inc. (Nasdaq:SUNW - news), known mostly for its
workstations and servers that run corporate networks.
The Dow Jones industrial average closed rose 341.33 points last week, ending Friday at 10,173.84, just
below Thursday's record close of 10,197.70. The Nasdaq gained nearly 100 points for the past week,
closing at a new high of 2,593.05 Friday. The Standard & Poor's 500 Index, a broader market gauge,
also closed at a record high 1,348.35, a gain of 54.63 points for the week.
''Interest rates are acting better and the market is feeding on that. If we get nice earnings, a good
number for retail sales and low inflation, all that would mean the potential to stay above 10,000 would be
pretty good,'' said Gary Campbell, chief investment officer at Commerce Bank of St Louis, Mo.
Tuesday, two important economic reports land in traders' laps.
The Consumer Price Index for March will be closely eyed to see if the recent bounce in crude oil prices
could lead to inflation, but Wall Street expects a tepid showing.
Economists polled by Reuters are expecting the CPI to rise 0.3 percent for the month, with the
less-volatile core rate inching up just 0.2 percent.
Retail sales for the month are also on deck. Economists in a Reuters poll, on average, were expecting a
0.3-percent rise overall and a 0.5-percent rise ex-autos, with some extra optimism creeping in after
many individual chain stores came out with better-than-expected sales last week.
The optimism is light, however, due to a complicated switch to include the Easter holiday in the sales
calendar plus the opinion that any increase would likely not bother the Federal Reserve, which is
constantly on the lookout for excessive growth.
''Right now, the outlook is picture perfect. At some point it's going to have to break, but it's perfect,
especially for the stock market. For bond traders, it's kind of boring,'' said James O'Sullivan, a bond
trader at J.P. Morgan.
Any major developments in the crisis in Yugoslavia, of course, could change all that.
''The market has been paying attention to what's going on in the Balkans, but the thinking is that is has
not yet erupted into a major economic disruption for the U.S. market or for our primary international
trading partners,'' said Campbell.
|
