Concerns Over Earnings May Sideline Investors
Nagging worries about corporate earnings and oil prices are set to keep stocks under pressure, dissuading investors from diving back into the market.
Disappointing reports from some blue-chip companies last week added to the choppy trading and violent swings, pushing the Dow Jones industrial average below the 10,000 mark. The Standard & Poor’s 500 index is down nearly 5% this month, with one trading week left. Assuming there’s no change this week, the loss for the month will be the largest since December 2002, when the S&P; 500 shed about 6%.
“This is going to be another tortuous week because we will see a market that’s trend-less and friendless,” said Hugh Johnson, chief investment officer at First Albany Corp. “We’ve got so many crosscurrents.”
Markets will be hit with a slew of data, which could reinforce the view that June was a weak month.
“We know what happened to the economy in June -- it slowed -- and there’s no economic number next week that’s going to change that view,” Johnson said.
Existing-home sales for June, due out today, are expected to come in at a seasonally adjusted annual pace of 6.67 million units, down from 6.8 million in May, according to a Reuters poll.
New-home sales for June, due out Tuesday, are forecast to be at a seasonally adjusted annual pace of 1.28 million units, down from 1.37 million the previous month.
And durable goods orders for June, due Wednesday, are forecast to have risen by 1.9%, after May’s revised rate of a 1.8% decline.
The focus for the week is likely to be the first estimate of second-quarter U.S. gross domestic product. A Reuters poll forecasts growth of 3.6%, compared with 3.9% in the first quarter.
Through it all, Wall Street probably will remain jittery about oil prices. On the New York Mercantile Exchange, crude oil for September delivery ended last week at $41.71 a barrel, as dealers worried about potential disruptions of supply.
“Oil is a wild card and it will weigh on stocks if it continues to move higher,” said Paul Cherney, chief market analyst at Standard & Poor’s. High oil prices generally dampen stock prices because of their effect on corporate profits.
To ratchet up the nervous tension, security concerns surrounding the Democratic National Convention in Boston could keep up the pressure. Unprecedented security arrangements have been put in place, made even stricter after nonspecific threats from terror groups intent on disrupting the U.S. election.
As for corporate earnings, S&P; 500 companies are expected to report second-quarter earnings growth of 23%, compared with first-quarter growth of 24.5%, according to Reuters Estimates.
But the market will be nervous if companies are wary about prospects for 2005.
“It’s a difficult time in the market,” Cherney said, “and a lot of people will be content to stay on the sidelines.”
From Reuters
Today
* National Assn. of Realtors reports on sales of existing homes for June.
* Second-quarter earnings reports released by Kellogg Co., American Express Co., BellSouth Corp., Boston Scientific Corp., Humana Inc., International Paper Co. and Tyson Foods Inc.
Tuesday
* Commerce Department reports on new-home sales for June.
* Conference Board releases its consumer confidence index for July.
* Second-quarter earnings reports released by Verizon Communications Inc., Dominion Resources Inc., Anthem Inc., DuPont Co., GlaxoSmithKline, Lockheed Martin Corp., Medco Health Solutions Inc., PeopleSoft Inc., Safeway Inc. and United States Steel Corp.
Wednesday
* Commerce Department reports on durable goods orders for June.
* Federal Reserve releases its “beige book,” a survey of regional economic conditions.
* Quarterly earnings reports released by Norfolk Southern Corp., LandAmerica Financial Group Inc., Lubrizol Corp., Electronic Data Systems Corp., Anheuser-Busch Cos., Aventis, Boeing Co., Cardinal Health Inc., Comcast Corp., ConocoPhillips, MetLife Inc., Time Warner Inc., Royal Caribbean Cruises Ltd., Sony Corp. and Unilever.
Thursday
* Labor Department reports on weekly jobless claims.
* Freddie Mac reports on mortgage rates.
* Quarterly earnings reports released by AES Corp., NCR Corp., Aetna Inc., Bristol-Myers Squibb Co., Exxon Mobil Corp., Georgia-Pacific Corp., Gillette Co., International Steel Group Inc., Metro-Goldwyn-Mayer Inc., Northrop Grumman Corp., Raytheon Co., Royal Dutch Petroleum Co. and Waste Management Inc.
Friday
* Commerce Department reports on gross domestic product.
* Four quarter earnings report released by Archer Daniels Midland Co.
* Quarterly earnings report released by ChevronTexaco Corp.
