No wonder the liberal reporters are depressed...
Posted on 07/20/2003 8:05:58 AM PDT by Brian S
Sun July 20, 2003 10:31 AM ET By Elizabeth Lazarowitz
NEW YORK (Reuters) - Stocks may be set adrift as investors' lofty expectations for a turnaround in the economy and corporate earnings meet reality in another monster week for corporate earnings reports.
The height of the second-quarter earnings period has brought Wall Street back down to earth after a supercharged springtime rally. Many analysts expect there will be little in the near term to help the market regain its momentum.
Few will argue that earnings aren't improving. And, by some accounts, expectations for the third quarter have even begun to brighten a bit in recent weeks.
But corporate America's second-quarter performance may not turn out to be quite as spectacular as some had anticipated. Corporate leaders aren't exactly falling over themselves to herald a stellar second half of the year.
Signs of a stable economy and solid second-quarter earnings may not be enough to propel the market further, given its strong springtime run, said Peter Gottlieb, president of Gottlieb Investment Management Corp.
"Investors are coming to the reality that earnings may not be as good as people had hoped for and the rise in stock prices may have been a bit premature," Gottlieb added.
Economic reports on leading indicators, durable goods, new and existing home sales and weekly jobless claims could catch the attention of investors searching for signs the economy is on the mend. But corporate earnings will remain at center stage in the week ahead.
EARNINGS HEAT UP
The summer earnings season will heat up to a sizzle this week in what will stack up to be the busiest five days for second-quarter earnings. About a third of the companies in the Standard & Poor's 500 index .SPX> are set to issue results. By the end of business next Friday, about two-thirds of them will have reported second-quarter earnings overall.
Among those scheduled to issue earnings this week are blue-chip companies like 3M Co., Merck & Co., Boeing Co., Eastman Kodak Co., SBC Communications Inc. and International Paper.
A number of marquee technology names are also expected to release their quarterly scorecards, including Texas Instruments Inc., Sun Microsystems Inc., Veritas Software Corp., JDS Uniphase Corp. and Qualcomm Inc.
On average, operating earnings of the nation's leading 500 companies are expected to rack up a 6.9 percent gain in second-quarter profits. So far, of the 158 S&P 500 companies that have issued results, about 66 percent have beat expectations, according to Thomson First Call.
But disappointing results from companies like International Business Machines Corp. and Nokia Corp. and other negative news, like another big round of layoffs at blue-chip commercial jet manufacturer Boeing Co., have made investors a bit uneasy, said Todd Clark, head of listed trading at Wells Fargo Securities.
"What we had was an overextension on the way up, thinking that the economic growth was going to be pretty strong, and now what we've gotten are some sobering comments" from corporate America, Clark said. "Equities had pretty much priced in perfection, and obviously, we're not at perfection."
So far this year, the S&P 500 is up about 13 percent, the blue-chip Dow Jones Industrial Average .DJI> is up 10 percent, and the Nasdaq Composite Index .IXIC> is up a whopping 28 percent.
For the week, the Dow edged up 0.75 percent, while the Nasdaq fell 1.47 percent and the S&P 500 lost 0.48 percent.
CORPORATE CAUTION
Corporate managements are reluctant to be too rosy in their forecasts, considering the legal risks and the perceived benefit of keeping the bar low, said Jeff Kleintop, chief investment strategist at PNC Advisors.
"You're going to get some good results, but I think the guidance is going to be relatively lackluster, and that will probably keep the market flat," Kleintop said.
The recent run-up in bond yields is yet another reason giving stock investors pause, as rising interest rates make equities look relatively less desirable and spark fears further gains could deflate the mortgage refinancing boom.
While some analysts argue that rates are still historically low and therefore not a concern, others say it could potentially be a sore spot for stocks.
Among this week's key economic data is private research group The Conference Board's June index of leading indicators, which economists in a Reuters poll predicted would show a 0.2 percent gain.
The government is expected to report that orders for big manufactured items, or durable goods, rose 1 percent in June, the poll showed.
Wall St Week Ahead appears weekly. Comments or questions can be e-mailed to: elizabeth.lazarowitz@reuters.com)
...as defined by a single reporter from Reuters. Whatever, Lizzy.
No wonder the liberal reporters are depressed...
I can certainly understand being driven to distraction, Grampa Dave. I haven't been able to accomplish anything all week and the Wasp's nest looks like it's been hit by a couple of white tornadoes!!! (wait! If potato doesn't have an "e" on the end, why does tornadoe?)
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