Investors to Focus on Earnings, Fed Report
Earnings season gets in full swing this week, when investors will comb through scores of corporate reports to check the U.S. economy’s pulse.
At the same time, investors hope oil prices will slip further from the record $58.28 a barrel hit early last week.
And they will pay attention Tuesday to the Federal Reserve’s minutes from its March 22 policymakers’ meeting, looking for hints on the pace and size of future interest rate increases.
The dollar will bear watching before release of U.S. international trade-deficit data Tuesday. Economists believe that the nation’s February trade deficit widened to $59 billion from $58.27 billion a year earlier, according to a Reuters poll.
A wider trade gap could hit the dollar, which in turn might scare foreign investors into pulling money out of U.S. assets such as stocks and bonds.
But Wall Street’s biggest preoccupation will be earnings.
This week the market will be “anticipating a decelerating rate of growth,” said Jerome Jacobs, senior strategist at Putnam Investments. It “has the right level of skepticism priced in.”
Some big names are scheduled to report earnings this week, including Apple Computer Inc. on Wednesday, PepsiCo Inc. on Thursday and Dow components Citigroup Inc. and General Electric Co. on Friday.
Last year’s earnings bonanza, when low interest rates and tax cuts helped create heady growth of about 20%, will almost certainly not extend into this year, analysts said.
Consensus expectations are for first-quarter earnings growth of about 8%, according to Reuters Estimates. Some strategists are forecasting a number closer to 9%, but expectations of a double-digit increase are scarce.
Wal-Mart Stores Inc., the world’s largest retailer, warned last week that first-quarter earnings could fall short of its previous forecast as cold and wet weather hurt sales of more profitable seasonal items such as clothes and lawn and garden equipment. The company, however, is not scheduled to report its fiscal first-quarter earnings until May.
After Friday’s closing bell, Ford Motor Co. cut its 2005 earnings forecast. That sent its stock down 3% in after-hours trading. Shares of rival General Motors Corp. also fell after hours. Ford and GM report results the week of April 18.
When the Federal Open Market Committee releases minutes from its March 22 meeting Tuesday, analysts will look for confirmation of recent warnings on inflation by some Fed officials.
“It is all in the language and whether the Fed is tipping its hat on a more aggressive stance on interest rates, which is what the talk on the Street has been,” said Tim Ghriskey, chief investment officer of Solaris Asset Management.
The Fed has raised interest rates seven times since last June -- each time by 25 basis points. But many analysts now think a 50-basis-point rise could be on the horizon. The committee next meets May 3.
Among the week’s economic indicators will be March retail sales, due Wednesday; economists polled by Reuters expect a gain of 0.7%. On Friday, Wall Street will get a preliminary reading from the University of Michigan on April consumer sentiment, which economists see slipping to 91.5 from 92.6.
From Reuters
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The Week Ahead
Monday
* Quarterly earnings reports due from Circuit City Stores Inc. and Genentech Inc.
Tuesday
* Commerce Department reports on international trade for February.
* Treasury reports on federal budget for March.
* Federal Reserve reports minutes from March 22 meeting.
* Quarterly earnings reports due from Abbott Laboratories, Ameritrade Holding Corp., Gannett Co. and Media General Inc.
Wednesday
* Commerce Department reports on retail sales for March.
* Quarterly earnings reports expected from Advanced Micro Devices Inc., Apple Computer Inc. and Harley-Davidson Inc.
Thursday
* Commerce Department reports on business inventories for February.
* Labor Department reports on weekly jobless claims.
* Freddie Mac, the mortgage company, reports on mortgage rates.
* Quarterly earnings reports due from Dow Jones & Co., Fifth Third Bancorp, PepsiCo Inc., Southwest Airlines Co., Sun Microsystems Inc., E.W. Scripps Co., New York Times Co. and UnitedHealth Group Inc.
Friday
* Federal Reserve reports on industrial production for March.
* University of Michigan issues its preliminary report on consumer sentiment.
* Spring meetings of the World Bank and the International Monetary Fund, through April 17.
* Quarterly earnings reports expected from Citigroup Inc., General Electric Co., KeyCorp, Knight-Ridder Inc., Mattel Inc., Tribune Co. and Wachovia Corp.
