PREVIEW
Flood of Earnings Reports Is Expected
A tidal wave of earnings reports will flow this week from household names and some of the bluest of the blue chips: fast-food chain McDonald’s Corp., financial services bellwether Merrill Lynch & Co., auto makers General Motors Corp. and Ford Motor Co., and computer sector giants IBM Corp., Intel Corp. and Microsoft Corp. (See accompanying chart).
Investors also will sift through a slew of reports on the U.S. economy. These include data on business inventories, consumer prices, housing starts, industrial production, international trade and weekly unemployment statistics, as well as the leading economic indicators, a key forecasting gauge.
“We will continue to get data pointing to economic recovery. We need corporate [earnings] numbers to show the same,” said Michael Kayes, chief investment officer of Eastover Capital Management, which oversees $300 million.
This week’s economic reports:
* Today, the National Assn. of Home Builders is scheduled to issue its index for April, which measures the sentiments of home builders about home sales and home buyer traffic.
* Tuesday, the Commerce Department reports on housing starts for March, which are expected to slow to an annualized figure of 1.686 million from 1.769 million in February.
Also, industrial production numbers for March, which are expected to support recent data suggesting a mild rebound in that key sector, will be released.
Also, the Labor Department will report the consumer price index for March, expected to be up 0.5%, after February’s gain of 0.2%, according to economists polled by Reuters. Excluding volatile food and energy prices, the March core CPI is seen up 0.2% after rising 0.3% in February.
* Wednesday, the Commerce Department discloses the U.S. trade deficit in goods and services for February. It probably widened to $29 billion from $28.5 billion in January.
Also, Federal Reserve Chairman Alan Greenspan will testify on the U.S. economy and monetary policy to the Joint Economic Committee of Congress.
* Thursday, Wall Street will watch for the March index of leading economic indicators, which economists expect to rise 0.3% after a flat February reading.
Reuters
*
State Lawmakers to Urge Restrictions for Auditors
Corporations would be required to change auditing firms every four years under legislation expected to be proposed today by California lawmakers in response to the Enron and Andersen accounting scandals.
The measures also would restrict consulting work by auditing firms. Critics say the firms’ dual role as consultants can create conflicts of interest for auditors, which are supposed to maintain their objectivity.
Lawmakers touted their bills as consumer protection legislation needed to restore investor confidence. They said California investors need better information and protections to make wise decisions.
Most of the proposed bills are unnecessary or should be handled nationally instead of creating piecemeal regulations in 50 states, said Mike Ueltzen, past president of the California Society of Certified Public Accountants.
Assemblyman Lou Correa (D-Anaheim) said that California can be a national leader. It’s not uncommon for businesses to face both state and federal rules, he said.
Other proposed legislation would require accountants to keep audit working papers for seven years, and bar accountants from taking jobs with former clients for two years after leaving their accounting firms. The restrictions would apply only to auditors registered in California.
Associated Press
*
McDonald’s to Report on Social Responsibility
Stung by unfavorable attention it has attracted as a symbol of rampant globalization, McDonald’s Corp. is touting its record of promoting animal welfare, protecting tropical rain forests and hiring disadvantaged workers.
Today, the world’s largest fast-food chain plans to issue a 45-page document on a broad range of issues, including relationships with employees, suppliers, the environment and local communities in the 121 countries where it operates.
The report provides a detailed look at McDonald’s 50-year history of social responsibility, with topics ranging from fair wage practices to job training and education, transportation and community outreach such as its Ronald McDonald House charities.
“We understand that people have questions about the brand, and we have an obligation to talk about the business in a much broader way than just how much money we’re making,” Chief Executive Jack Greenberg told Reuters. “I think we recognize this obligation of being more open and more transparent about issues that are of increasing importance.”
In the last year, Oak Brook, Ill.-based McDonald’s has faced lawsuits from vegetarians charging it failed to report its use of beef extracts in its french fries, a federal investigation surrounding a promotional contractor that is accused of bilking customers out of millions in prize winnings, and concern over beef safety abroad, where sales in Europe and Japan have suffered amid cases of “mad cow” disease.
Greenberg said he hopes the report will serve as a benchmark against which McDonald’s will measure itself in similar periodic audits. Available on the Internet this morning at www.mcdonalds.com/corporate/social, the report was prepared using guidelines provided by Global Reporting Initiative, a Boston-based group developing international standards for social reporting.
Reuters
*
Bombardier Says It Won’t Revise Wage Offer
Bombardier Inc., the world’s third-largest civil aircraft maker, said it was not revising the wage offer rejected by about 8,000 workers at its Montreal-area plants who plan to paralyze jet production with a strike set for today.
Officials with Local 712 of the International Assn. of Machinists and Aerospace Workers, which represents the Bombardier aerospace employees in Montreal, said the strike is set to begin with the first production shift this morning.
One of Canada’s largest industrial groups, Bombardier is the world’s leading maker of regional jets and the global No.1 maker of passenger trains. Most of its profit comes from its aerospace division, mainly because of the popularity of its regional jet family.
It also manufactures snowmobiles, all-terrain vehicles and personal watercraft.
A strike over higher wages and retirement provisions would shut down production of the Canadair Regional Jets of 50, 70 and 90 seats at the three plants affected. Production of the Challenger business jet also would be halted.
Reuters
*
IMF to Issue Outlook for Global Economy
Prospects for the world economy appeared bleak after Sept. 11. The situation has brightened, given a surprisingly strong U.S. rebound.
The International Monetary Fund will release an updated “World Economic Outlook” on Thursday that will serve as the basis for discussions among finance officials at their weekend meetings.
Michael Mussa, who for a decade was the IMF’s chief economist, agrees that prospects have improved after last year’s global slowdown, the most severe in a decade.
“The world economy will see a significant recovery of growth in 2002 and 2003,” he forecasts. But he warns this outlook could be derailed by “a major terrorist outrage on the scale of Sept. 11” or a sustained jump in oil prices caused by Mideast tensions.
Barring such calamity, Mussa predicts a global growth rate of 2.75% this year, and 4.5% in 2003.
Associated Press
*
Daily New York Sun to Hit Newsstands
The first new daily paper in New York in nearly two decades hits stands this week, bidding for a slice of the city’s readership amid the worst advertising recession since World War II.
The New York Sun, to be sold starting Tuesday in over 4,000 locations in all five boroughs, revives the name and slogan--”It Shines for All”--of a paper that was founded in 1833 and folded in 1950.
The original Sun was considered the first mass daily that changed the face of the American press with its mix of more fast-paced general news and its price of only one penny.
The new Sun will carry a price of 50 cents to compete with the city’s most widely read tabloids, but contain content to woo readers of the most respected dailies.
However, concerns about ad spending have inevitably raised questions about the Sun’s future.
Despite the odds, the new Sun is being backed by a group of U.S. investors and Canada-born press baron Conrad Black, who seem confident there is still room for one more daily in the most competitive newspaper market in the world.
Reuters
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Quarterly Earnings Preview
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