Barrage of Earnings, Economic Reports Due
Wall Street will count on quarterly results of companies including General Electric Co. and Intel Corp. this week to help reinforce expectations for a recovery in the economy and corporate profits to propel stocks higher.
Investors betting that a sustainable recovery is in the cards already have driven the market sharply higher in recent sessions.
Though the market’s steady trek up has stirred fears that stock prices may have climbed too far too fast, many analysts are optimistic that a solid earnings season will help allay those concerns.
“There is room for this market to go higher,” said Rich Nash, chief market strategist at Victory Capital Management, adding that he expected fourth-quarter earnings to increase 25% to 26%.
Analysts polled by earnings tracking company Thomson First Call expect fourth-quarter operating earnings at the companies in the Standard & Poor’s 500 index to climb 22.1%. That would follow a 21.4% gain in the third quarter.
A barrage of economic data in the days ahead also will garner a bit of attention from Wall Street, as investors search for signs that the rebound is gathering steam.
A report on retail sales will help give clues to the health of consumer spending, which drives two-thirds of U.S. economic growth.
Weekly unemployment claims figures will be in focus, particularly after Friday’s disappointing payrolls report.
In addition, the consumer and producer price indexes will offer the government’s latest inflation estimates and may yield clues to how long the Federal Reserve is willing to keep interest rates low.
Along with results from semiconductor giant Intel, earnings reports are due from technology heavyweights Apple Computer Inc. and Sun Microsystems Inc. Results also are on tap from Internet media company Yahoo Inc.
Financial services companies also are likely to gain attention, with quarterly scorecards due from Bank of America Corp., FleetBoston Financial Corp. and Wachovia Corp., among others.
“The most important thing to the equity markets in coming weeks is going to be earnings, and earnings look like they’re going to be very strong,” said Benjamin Pace, managing director at Deutsche Bank Private Wealth Management.
The optimism over earnings is likely to overshadow most everything else, including the unrelenting decline of the dollar, which hit a new low against the euro Friday.
Though a softer dollar makes U.S. exports more competitive overseas, it also bites into the value of dollar-denominated assets, prompting worries that foreign investors will return to their own markets.
In economic news, the government is scheduled to issue the producer price index for December on Wednesday. Economists in a Reuters poll forecast that the overall PPI would rise 0.2% overall and, excluding volatile food and energy prices, the core PPI would edge up 0.1%.
The consumer price index for December, due Thursday, is expected to show a gain of 0.2% overall and an increase of 0.1% not counting food and energy.
The December retail sales report also is due Thursday. Economists surveyed by Reuters predicted that retail sales would gain 0.9% overall and 0.4% excluding automobiles.
