Earnings to drive stocks after ugly data
Monday, 19 July 2010
NEW YORK, July 18 (Reuters): After ugly economic data and an unexpected downturn in sentiment on quarterly earnings, Wall Street will face a tough time battling back from the latest sell-off.
Technology and banking results will once again shape investor mindset in the week ahead. But it'll be a tough job to shift back into a positive mode after stocks dropped nearly three per cent drop Friday.
Minutes of the Federal Reserve's June meeting got the market seriously worried this week after officials said they were more concerned with the pace of the economic recovery.
A raft of disappointing data didn't help, prompting questions this week on whether the economy had merely hit a soft patch or was primed for a double-dip recession.
"It doesn't mean the market can't rally, but the structural problems are there and there is no doubt about it," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
From a technical perspective, the picture is even less certain. The Standard & Poor's 500 Index is stuck in a tight range after it failed to hold its 50-day moving average, now near 1,090, after closing above it for two days.
The Nasdaq Composite, meanwhile, failed in its attempt to break its 200-day moving average, but has support around its 14-day moving average at 2,171.
At Friday's close, the three major US stock indexes were each down about one per cent for the week: The Dow Jones industrial average lost one per cent, while the S&P 500 slid 1.2 per cent and the Nasdaq shed 0.8 per cent.
The coming week's earnings will include results from 12 Dow components, as well as earnings from financial powerhouses Goldman Sachs Group Inc and Morgan Stanley along with tech bellwethers Apple Inc, Texas Instruments Inc and Qualcomm Inc.
For the second quarter, earnings are expected to increase 28 per cent from the year-ago period, according to data.
The week's major economic indicators will zero in on the housing sector, which is still struggling in the wake of the worst recession since the 1930s. In the second quarter, banks repossessed a record number of US homes as US unemployment stayed high, according to RealtyTrac, a real estate data company.
On Tuesday, Wall Street will get data on housing starts for June, which are expected to show a slight decline to a seasonally adjusted annual pace of 580,000 units from 593,000 in May, according to economists.
Another snapshot of the housing market will be provided Thursday with existing home sales for June. The forecast calls for a drop of 8.1 per cent in June existing home sales versus the 2.2 per cent decline in May, the poll showed.
But investors will focus on earnings next week. Close attention will be paid to revenue for signs of improvement, in light of the contrasting results from Intel Corp and Google Inc.
"That's been the problem. They've been meeting or exceeding on cost cutting and not on demand for their products," said Terry Morris, senior vice president and senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania.
"That has got to end pretty soon because the market was expecting sales to start improving and it's not materialising."
According to data through July 16, 48 companies in the S&P 500 Index have reported earnings for the second quarter, with 75 per cent having topped analysts estimates, 13 per cent in line with expectations and 13 per cent below expectations.
Technology and banking results will once again shape investor mindset in the week ahead. But it'll be a tough job to shift back into a positive mode after stocks dropped nearly three per cent drop Friday.
Minutes of the Federal Reserve's June meeting got the market seriously worried this week after officials said they were more concerned with the pace of the economic recovery.
A raft of disappointing data didn't help, prompting questions this week on whether the economy had merely hit a soft patch or was primed for a double-dip recession.
"It doesn't mean the market can't rally, but the structural problems are there and there is no doubt about it," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
From a technical perspective, the picture is even less certain. The Standard & Poor's 500 Index is stuck in a tight range after it failed to hold its 50-day moving average, now near 1,090, after closing above it for two days.
The Nasdaq Composite, meanwhile, failed in its attempt to break its 200-day moving average, but has support around its 14-day moving average at 2,171.
At Friday's close, the three major US stock indexes were each down about one per cent for the week: The Dow Jones industrial average lost one per cent, while the S&P 500 slid 1.2 per cent and the Nasdaq shed 0.8 per cent.
The coming week's earnings will include results from 12 Dow components, as well as earnings from financial powerhouses Goldman Sachs Group Inc and Morgan Stanley along with tech bellwethers Apple Inc, Texas Instruments Inc and Qualcomm Inc.
For the second quarter, earnings are expected to increase 28 per cent from the year-ago period, according to data.
The week's major economic indicators will zero in on the housing sector, which is still struggling in the wake of the worst recession since the 1930s. In the second quarter, banks repossessed a record number of US homes as US unemployment stayed high, according to RealtyTrac, a real estate data company.
On Tuesday, Wall Street will get data on housing starts for June, which are expected to show a slight decline to a seasonally adjusted annual pace of 580,000 units from 593,000 in May, according to economists.
Another snapshot of the housing market will be provided Thursday with existing home sales for June. The forecast calls for a drop of 8.1 per cent in June existing home sales versus the 2.2 per cent decline in May, the poll showed.
But investors will focus on earnings next week. Close attention will be paid to revenue for signs of improvement, in light of the contrasting results from Intel Corp and Google Inc.
"That's been the problem. They've been meeting or exceeding on cost cutting and not on demand for their products," said Terry Morris, senior vice president and senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania.
"That has got to end pretty soon because the market was expecting sales to start improving and it's not materialising."
According to data through July 16, 48 companies in the S&P 500 Index have reported earnings for the second quarter, with 75 per cent having topped analysts estimates, 13 per cent in line with expectations and 13 per cent below expectations.