What a Week: Mood Swings

The price of a barrel of light, sweet crude oil ended the week up 6.7%, closing Friday at $55.47.

Fourth-quarter earnings season is strong overall, but investors are hearing companies provide weaker guidance than they are used to, which is dampening traders' spirits.

According to Thomson First Call, 68% of the 197 companies in the S&P 500 that have reported earnings are beating estimates. Thomson says 15% have matched estimates and 17% have come in below. The average over the past two years is 67% beat, 14% match and 19% miss estimates. Thus far, earnings are reflecting 9.9% year-over-year aggregate growth for the quarter.

Technology companies are beating estimates by the largest margin -- an average of 8%, says Thomson's John Butters, noting that Apple(AAPL Quote) and Microsoft(MSFT Quote) earnings particularly boosted that average.

But technology companies' earnings guidance for the first quarter of 2007 is similar to the overall earnings guidance so far, which is "pretty negative," says Butters. The ratio of negative-to-positive preannouncements (including companies not in the S&P 500) for the first quarter is 3 to 1. The average over recent quarters has been just under two negative to one positive.

Overall guidance for companies within the S&P 500 is even weaker, at six negative preannouncements to one positive, says Butters.

The soft guidance has shoved Thomson's first-quarter earnings growth estimates lower -- to 5.8% from 8.7% at the beginning of the year.

The market welcomed strong earnings reports from industrial farm-equipment maker Caterpillar(CAT Quote), whose stock soared 2.5% Friday and 2.8% for the week. Shares of its competitor Deere(DE Quote) jumped 1.2% Friday as well.

Other marquee reports this week included Ford(F Quote), which threw the proverbial kitchen sink at investors with its largest loss ever on Thursday. The company reported a $12.7 billion loss, but the stock wouldn't go down. Investors bet that this was the bottom for Ford, as it surged 2.4% Friday.

Microsoft also boosted investor confidence in the technology sector as its earnings beat estimates. Investors cautiously bought into the notion that the Vista operating system will lead to more revenue for the company and more economic growth in tech. Microsoft's shares gained 0.5% Friday, but remain down 1.6% on the week.

Next week is likely to be just as volatile as this one. The market will see its expectations and fears either proven or denied. The FOMC concludes its policy meeting on Wednesday. Among a slew of other reports, the government takes its first stab at fourth-quarter GDP growth, and Friday brings payrolls data and average hourly earnings. If the Fed is hawkish, the markets will start to err even further on the side of rate hikes and inflation fears. If the Fed remains status quo and growth is strong, the market could rally ... depending on its mood, of course.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting