Politics, Earnings and Oil May Affect Stocks

Record crude oil prices, a tidal wave of quarterly earnings reports and anxiety ahead of the presidential election may pin stocks down this week.

A steady stream of economic data -- including the government’s first read on third-quarter gross domestic product and reports on durable goods and Midwest manufacturing activity -- will also provide investors with grist for trading.

This is the last full week of trading before the Nov. 2 presidential election. President Bush and Democratic challenger Sen. John F. Kerry are neck and neck in many opinion polls, sparking uncertainty in the markets.

“I think that the magnifying glass that the election is putting on a lot of these issues is going to keep the market trading in this range,” said David Legeay, senior vice president and director of portfolio management for McDonald Financial Group. “But I don’t really see a catalyst even after the election to move the market up significantly.”

There is also some worry that there will be no clear winner after election day, leaving the markets wallowing in uncertainty.

“The election may be more nerve-racking than the Yankees and Boston games,” Howard Silverblatt, equity market analyst at Standard & Poor’s. “We’re assuming we’ll wake up with a winner on Nov. 3, but the situation in Florida opened up the floodgates and now there may be litigation over the results.”

In 2000, it took weeks to determine the winner of the presidential election because of voting irregularities in Florida.

Politics aside, investors can expect another extremely busy week of earnings reports from key companies.

“Obviously earnings are going to a big part” of the week, Legeay said. “I would expect more of the same, which is mixed and volatile earnings, with particular attention paid to the guidance. There’s a big concern on the Street about where earnings are going in the future.”

So far, earnings haven’t offered the market a clear direction. Of the 245 S&P; companies that have reported, nearly 26% have missed on revenue, while nearly 47% have exceeded Wall Street expectations on earnings per share, according to data from Reuters Estimates.

Wall Street will also keep a close eye on oil, which climbed to a fresh high of $55.50 a barrel Friday on the New York Mercantile Exchange. If oil stays above $50 a barrel for a sustained period, there is concern that it will cut into corporate earnings and consumer spending.

“We’ve got bubbling oil prices again,” said Bryan Piskorowski, market analyst at Wachovia Securities. “With that still in the mix, it’s a day-to-day hurdle for the market.”