Wall Street Braces for the Quarterly Warnings on Earnings

It’s that time again, when companies move to avoid lawsuits by warning investors of any potential for shortfalls in earnings.

As the first quarter wanes, Wall Street will be occupying itself with preannouncements from companies expecting to perform below analysts’ expectations.

Meanwhile, in early Tokyo trading today, Japanese stocks rose as investors continued to shrug off worries about the volatility of the U.S markets. Auto and electronics shares led the gains as the dollar rose against the yen, improving earnings prospects for exporters. The Nikkei 225-share index was up 148.20 points, or 0.73%, at 20,339.05.

On Wall Street, there are also worries that a rising long bond yield that could siphon money out of stocks and into bonds.

“Over the next two weeks, we’ll be seeing the preannouncements, which are by their very definition negative,” said Larry Wachtel, analyst at Prudential Securities. “We had 100 warnings before the last quarter, and they put everyone on red alert.”

Profit warnings more often than not are issued by high tech companies because of their quirky and volatile nature, analysts say.

“People are confused as to what that 37% decline in the semiconductors between last July and January of this year was all about,” said Hugh Johnson, chief investment officer at First Albany Corp.

“There are clear-cut signs that the growth rate of spending on computers and peripherals has slowed. You see the early signs that orders are slowing in the fact that for two straight months the book-to-bill reading came in under 1.”

Michael Metz, chief investment strategist at Oppenheimer & Co., said that earnings expectations will have to be brought down as April approaches, especially in the techs.

“You see it already in some companies that are saying that pressures from competitors are rising and that this is negatively impacting margins,” he said. “You will see this spread to almost every other manufacturing area.”