Stocks Expected to Rise With Earnings Flood
By Brendan Intindola
Reuters
NEW YORK (Jan. 20) - The earnings dam will burst this week, unleashing a flood of numbers and business forecasts that are likely to buoy a stock market desperate for signs of an economic recovery.
"The story is going to be the earnings side of the equation, not the economic data side," said Charles Blood, director of financial markets analysis at Brown Brothers Harriman, New York.
"This week is going to bury us under earnings reports. I say (stocks will move) higher because we have a little pullback here and it sets the stage for the bull market to resume."
The week will bring earnings news from about 155 companies in the Standard & Poor's 500 index, including nearly half of the 30 blue-chip names in the Dow Jones industrial average, according to market research firm Thomson Financial/First Call.
Earnings are supposed to be down about 22.5 percent -- the worst in a decade -- but investors are more focused on corporate forecasts.
And because the stock market is closed on Monday in observance of Martin Luther King Jr. Day, the numerous announcements will be compressed into four days rather than five in the usual trading week.
The long list of American multinationals announcing results in the coming week include: International Paper Co., Merck & Co. Inc., ExxonMobil Corp., Philip Morris Cos. Inc., McDonald's Corp., Boeing Co. and Merrill Lynch & Co. Inc.
At the conclusion of the shortened week, just over half of the S&P 500 will have released earnings, giving investors pointers for the future.
"By the end of the week, the major trends in fourth-quarter earnings will be apparent, and the guidance issued during post-announcement conference calls will provide a glimpse into the earnings environment in 2002," said Joseph Kalinowski, the equity strategist of market research firm Thomson Financial/First Call.
GREENSPAN ON THE HILL, LEADING INDICATORS
Alan Greenspan, chairman of the Federal Reserve, will give investors a reason to look beyond the earnings deluge when he ascends the Capitol steps on Thursday, to testify before the Senate Budget Committee on the state of the U.S. economy.
His comments precede by nearly a week the Fed's next meeting on Jan. 29-30 to consider lowering interest rates. If the Fed cuts rates, it would be the 12th reduction in nearly 13 months.
Among the economic indicators scheduled for release this week are leading indicators for December on Tuesday, weekly chain-store sales figures on Wednesday, weekly jobless claims on Thursday and existing home sales on Friday.
"The issue: 'Is the economy bottoming?' We think it has. Everyone needs to be on the lookout for signs the economy is doing better. So, although it has a little bit of a lag, the leading indicators will provide some of that," Blood said.
LEAVING BEHIND A ROUGH WEEK
For the week that ended on Friday, stocks dropped, marking the close of the second straight losing week of the year. So far in 2002, the Dow Jones industrial average is down 2.5 percent, the Nasdaq Composite is off 1.1 percent and the benchmark Standard & Poor's 500 has declined 1.8 percent.
A combination of results and forecasts have weighed on the market. On Friday, International Business Machines Corp. and Microsoft Corp. failed to offer the optimism the market craves. The disappointing news from IBM, also known as Big Blue, and Microsoft drove down both the Dow average and the Nasdaq.
Those companies "are not seeing any big signs of recovery and they're uncertain about the future," said David Memmott, head of listed block trading at Morgan Stanley. "People are kind of hoping for better news. But most likely, we're still in the end of an economic downturn."
So far, with 107 Standard & Poor's 500 companies reporting quarterly results, earnings have edged out Wall Street's lowered forecasts by an average of about 3 percent. Sixty-six companies, or nearly 62 percent of those reporting, have exceeded analysts' expectations.
In the tech-heavy Nasdaq 100 index, of the 19 companies reporting, earnings are exceeding analysts' expectations by nearly 16 percent on average.
10:07 01-20-02
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