Earnings, Greenspan Statements Expected
The earnings season moves into full swing this week with a swamp of reports scheduled, including second-quarter updates from Microsoft Corp., General Motors Corp. and Ford Motor Co.
Fed Chairman Alan Greenspan could steal the show, however, when he gives his semiannual testimony to Congress.
After the recent interest rate hike to 1.25%, the focus will be on any indication of the pace of future rises. Many in the market are predicting another tightening in August and say the federal funds rate will rise to 2% by the end of the year.
“If the market is fearing the Fed will have to move more aggressively, that will be negative for stocks, but if the Fed reassures that it has got inflation under control, that will be good for stocks,” said Ian Morris, an economist at HSBC.
But many analysts are skeptical that anything this week can shake the stock market out of its range-bound territory. So far this year, the Dow Jones industrial average is down about 2% and the Standard & Poor’s 500 index has shed less than 1%.
“The institutional base is sitting on the sidelines waiting for something to happen,” said Larry Wachtel, senior vice president and market analyst at Wachovia Securities. “It’s a grinding market, and I see more of the same next week.”
Investors have been met with a mixed start to the reporting season, with profit warnings from technology companies and a slowdown in retail sales damping the mood on Wall Street.
Though second-quarter earnings growth for S&P; 500 firms is expected to be 21%, according to Reuters estimates, investors are worried about slowing profit growth as the year wears on.
“What’s murky is the third and fourth quarters,” Wachtel said. “The good second quarter is already known, but the guidance going forward is unknown. Valuation isn’t cheap, so that’s why we are left in this void.”
Among the stocks in focus will be Boeing Co., whose sleek new 7E7 Dreamliner will be in the spotlight this week when one of the world’s biggest air shows opens near London.
From Reuters
Some key events this week:
Today
* Farnborough Air Show opens outside London.
* Treasury reports on federal budget for June.
Tuesday
* Federal Reserve Chairman Alan Greenspan delivers monetary report to Senate Banking Committee.
* Commerce Department reports on housing starts for June.
* Ford, Motorola Inc. , Sun Microsystems Inc., Texas Instruments Inc. issue quarterly reports.
Wednesday
* Greenspan delivers monetary report to House.
* OPEC ministers meet in Vienna.
* AMR Corp., Fannie Mae, General Dynamics Corp., General Motors, J.P. Morgan Chase & Co., Lucent Technologies Inc., Merck & Co., Pfizer Inc., Nextel issue quarterly reports.
Thursday
* Senate Commerce Committee holds hearing on media concentration and votes on FTC nominations.
* Labor Department reports on weekly jobless claims.
* Freddie Mac reports on mortgage rates.
* Conference Board releases its index of leading economic indicators.
* AT&T; Corp., SBC Communications Inc., Black & Decker Corp., Caterpillar Inc., Coca-Cola Co., Eli Lilly & Co., Sears, Roebuck & Co., Starwood Hotels & Resorts Worldwide Inc., United Parcel Service Inc., Viacom Inc., Amazon.com Inc., Microsoft issue quarterly reports.
