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Coming Week: Holiday Cheer

Gregg Greenberg

With visions of bulls dancing in their heads, Wall Street traders expect the market's good cheer to continue in the coming week.

"It looks like the stampede to the upside is not quite over, even though the market is grossly overbought," says Randy Diamond, sales trader at Miller Tabak. "A reversal of trend could be two days or two weeks away, but with all of the performance chasing into year-end, it's too dangerous to pick a top."

The Dow Jones Industrial Average continued its march higher Friday after a Labor Department report that the November consumer price index was unchanged from the prior month, easing concerns about inflation. The blue-chip average finished at a record 12,445.52.

For all of last week, the Dow added 138 points, or 1.1%. The S&P 500 was higher by 17 points, or 1.2%, and the Nasdaq collected 20 points, or 0.8%, over the five sessions.

"It does not look like people are locking in gains and shutting down for the year yet. People are still buying stocks," says Brian Williamson, equity trader at Boston Company Asset Management. "It looks like that trend will continue into next week when we have some big economic numbers coming out."

Those big numbers include a key inflation report, housing data and durable goods orders before the market breaks for Santa.

The data reports start Monday with the current-account deficit for the third quarter. Economists surveyed by Thomson First Call expect a slight widening of the deficit to $223 billion from $218.4 billion the prior quarter.

The November producer price index will be released on Tuesday. Economists are predicting the PPI will rise 0.5% after falling 1.6% in October. The core PPI, which excludes food and energy, is expected to rise 0.2%.

"The PPI loses some of its significance because the CPI is already out," says Jason Schenker, economist at Wachovia. "We expect only modest inflationary pressure on the PPI because of natural gas and metals prices."

Tuesday's other data highlights include housing starts and building permits for November. Economists project home starts totaled 1.55 million on an annualized basis, up from 1.48 million in October. Building permits are expected to decline to an annualized rate of 1.53 million from 1.55 the month prior.

Thursday's key data will be the leading indicators number for November, which is expected to be flat after rising 0.2% in October. The October Philadelphia Fed index also will be released, and it's projected to come in at 6, up from 5.1 the month before.

Final figures for the third-quarter gross domestic product also will be released Thursday. GDP growth is expected to remain at 1.8%, with the chain deflator staying at 2.2%.

Among Friday's data are November durable orders, which are anticipated to show a rise of 1.2% after falling 8.3% in October. Based on last week's jump in industrial production figures as well as an increase in aircraft orders, Wachovia's Schenker is looking for a "moderate bounce back" in durable goods.

Last week, the Federal Reserve said that November production at utilities, factories and mines rose 0.2%, ahead of forecasts for no change.

Personal income and spending for November also will be released Friday. Economists project that income rose 0.4%, on par with October, while spending climbed 0.3%, compared with 0.2% growth the prior month.

Earnings Gifts

Before the holiday slowdown, investors will be unwrapping profit reports from several big-name companies, including Oracle(ORCL), Morgan Stanley (MS) and Research in Motion(RIMM).

Software giant Oracle will report its fiscal second-quarter results on Monday, and analysts expect the company to post earnings of 22 cents a share on revenue of $4.15 billion. Comparable earnings a year ago were 19 cents.

Morgan Stanley will step up to the plate on Tuesday, and investors will be looking for a strong showing from the investment bank following blowout reports from rivals last week. According to First Call, analysts expect Morgan Stanley to post earnings of $1.75 a share, up from $1.68 a share last year, on revenue of $8.31 billion.

Also reporting Tuesday will be Circuit City Stores(CC). The electronics retailer's stock tumbled last week after rival Best Buy (BBY) posted weaker-than-expected earnings, blaming margin issues amid increased competition. Market watchers will be on the lookout for similar issues at Circuit City.

Among the other earnings reports Tuesday are Darden Restaurants(DRI) and Palm(PALM).

On Wednesday, retailers Bed Bath & Beyond(BBBY) and Family Dollar(FDO) are slated to report earnings, as well as FedEx(FDX) and Nike(NKE).

Thursday's earnings highlights include reports from General Mills(GIS), Red Hat(RHT), ConAgra (CAG) and Solectron(SLR).

BlackBerry maker Research in Motion will send out its third-quarter results Thursday afternoon. The company previously projected earnings of 88 cents to 95 cents a share; analysts expect EPS of 94 cents. Wall Street expects revenue of $814 million; the company's own guidance called for a top line of $780 million to $820 million.

Tibco Software(TIBX) and Shuffle Master(SHFL) also will announce results on Thursday.

The lone company on Friday's schedule is Walgreen(WAG). Wall Street expects the drugstore chain to deliver earnings of 41 cents a share and revenue of $12.54 billion before traders take off for the holiday.