It's showtime for the financial markets this month, as every speck of speculation that has pushed floundering public companies to the top of year-to-date winners lists will be proved right or wrong on their earnings release dates.
It's not the numbers and words on paper that traders will be scrambling to ingest starting this week, as executives disgorge reports on their achievements over the past three months. No, it will be voices on the conference calls, declaring whether sales and earnings for the entire second half of the year look strong or weak.
With many hundreds of iffy stocks bid to one-year highs since the autumn lows, you can bet that companies that merely declare that their business has "stabilized" will no longer be greeted with 10% pops in the next day's trading, as they were in April and May. Investors have already wagered on stability, at minimum. At this point, only firm declarations of sunny skies and a return to 5% to 10% growth or better in the calendar third and fourth quarters will do.
If recent government reports on industrial decline and rising unemployment are accurate, the public's breathless recent move to bet on black in Wall Street's roulette wheel could be premature. But the Bush administration has so many ways to fix the wheel in its favor that bulls simply cannot be counted out.
"It's a classic battle of wind vs. tide," said one investment (and boating) veteran in an interview last week, suggesting that bears counting on ebbing economic growth are tussling with bulls attempting to sail forward on powerful gusts of government fiscal and monetary policy. Mr. P, the hedge fund manager who comments for this column anonymously from time to time, said in mid-June that he had switched from crazed bull to cautious bear. Now he's ready to go further, projecting the possibility, though by no means the certainty, of new lows for the market in the summer. An
index at 670, he says, cannot be counted out. He is particularly concerned about the potential for labor strikes over the summer in the automobile and telecommunications industries to put a crimp in business output and consumer confidence.