WEEKLY OUTLOOK, April 25
By Jody Osborne, Optionetics.com
4/25/2005 7:00 AM EST
Although economic data was mixed last week, stocks still managed to post gains. While the major market indices mostly benefited from strong earnings reports, the week was full of volatility. For example, the Dow ($INDU) tested support at 10K before seeing a huge advance on Thursday—adding 0.7 percent to close at 10,157.71. The S&P 500 ($SPX) tacked on 0.83 percent to 1,152.12 and the Nasdaq ($COMPQ) saw the largest gains, adding 1.26 percent to 1,932.19.
This past week was supposed to provide a clearer picture on inflation, but it actually got more blurry. A benign Producer Price Index was offset by a disappointing Consumer Price Index the following day. At the same time, oil prices picked back up, and there continues to be mixed results on the strength of the manufacturing sector. The Empire State index was very disappointing, whereas the Philly Fed Survey saw a substantial increase. This coming week will see several key reports, with a list of these releases listed below:
Monday: Existing Home Sales
Tuesday: ICSC-UBS Same-Store Sales, The Conference Board Consumer Confidence Survey, New Home Sales
Wednesday: MBA Purchase Applications, EIA Petroleum Status Report, Durable Goods Orders
Thursday: Jobless Claims, GDP, Help Wanted Index
Friday: Employment Cost Index, Personal Income and Outlays, University of Michigan Consumer Sentiment Survey, NAPM-Chicago
Consumer sentiment will be watched closely to see if high fuel prices and a weak stock market are taking a toll on spending. The Fed wanted to slow down economic growth, which is why they have been raising interest rates, but they hope growth has not slowed too much. We’ll get an idea of how economic growth fared in the first quarter Thursday when the GDP report is released. Expectations are for growth of 3.6 percent in the first quarter, just slightly below the 3.8 percent seen in the last quarter of 2004. One key report will be the personal-consumption expenditure price index, which is expected to show a gain of about 2.1 percent on an annualized basis. This is important because the Fed views this report as the best measure of inflationary pressures.
Though there has been a lot of attention on the economy, earnings news has been the story the past few weeks. In fact, last week’s results were much better than expected, part of the reason why stocks moved higher. The lsit below details some of the reports on tap this coming week:
Monday: Altera (ALTR), Cendant (CD), Chubb (CB), CNet Networks (CNET), Kimberly Clark (KMB), Providian (PVN), SBC Communications (SBC), Sepracor (SEPR)
Tuesday: Abgenix (ABGX), Aflac (AFL), Amazon.com (AMZN), American Express (AXP), Atmel (ATML), BP Plc (BP), Checkpoint Systems (CKP), Corning (GLW), DuPont (DD), Level 3 (LVLT), Lockheed Martin (LMT), Martha Stewart (MSO), RF Micro Devices (RFMD), Schlumberger (SLB), Taiwan Semi (TSM), TMP Worldwide (TMPW), USG Corp (USG), VISX (EYE), Vignette (VIGN)
Wednesday: Akamai (AKAM), Ask Jeeves (ASKJ), Baker Hughes (BHI), Becton Dickinson (BDX), Biogen (BGEN), Boeing (BA), Chiron (CHIR), Cirrus Logic (CRUS), Colgate-Palmolive (CL), ConocoPhillips (COP), JDS Uniphase (JDSU), Jefferson Pilot (JP), LSI Logic (LSI), Phelps Dodge (PD), RJ Reynolds (RJR), Sanmina (SANM), Siebel Systems (SEBL), Starbucks (SBUX), Verizon (VZ), XM Satellite (XMSR)
Thursday: Adaptec (ADPT), Aetna (AET), Alcatel (ALA), Applied Micro Circuits (AMCC), Barrick Gold (ABX), Black & Decker (BDK), Bristol-Myers Squibb (BMY), Business Objects (BOBJ), Daimlerchrysler (DCX), Dow Chemical (DOW), Eastman Chemical (EMN), Elan (ELN), Flextronics (FLEX), Gateway (GTW), GlaxoSmithKline (GSK), Ingram Micro (IM), KLA-Tencor (KLAC), Microsoft (MSFT), Microstrategy (MSTR), Millennium Pharmaceutical (MLNM), Nextel Comm (NXTL), Northrop Grumman (NOC), Unocal (UCL), Waste Management (WMI)
Friday: Anadarko Petroleum (APC), Anglogold (AU), Archer Daniels Midland (ADM), Cardinal Health (CAH), Chevron Texaco (CVX), Clear Channel (CCU)
Thomson First Call reports that with nearly half of the S&P 500 components reporting, nearly two-thirds have bested expectations. The expected rate now for the SPX is 12.1 percent, well above the initial 7.6 percent expected before earnings started to be released. Those announcing are beating estimates by an average of 6.5 percent, which is well above the average 3.1 percent margin that companies normally beat estimates by.
Last week, the Dow bounced off support at 10K, but has resistance near 10,400, which is where its 200-day moving average resides. The SPX is trading just below resistance at 1,160 and its 200-day moving average. The Naz has to overcome the 2K level, which is approximately 3 percent overhead. As is always the case, traders will be looking at how corporate America views the future. If earnings are strong and projections are better than expected, maybe the stock market can continue to push toward resistance.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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