Earnings Season in the Offing, All Hands Head to the Hamptons

Next week promises to be a big week, but expect today to be thin and perhaps not so choppy.
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Earnings season heats up next week, and much of today's market action will reflect investors' attempts to game how stocks will react.

It is nearly universally accepted that the second quarter was a good one, and that companies will beat estimates handily. The problem is that some people worry those high expectations are working like a big fat whisper number on the market. The whole market could end up looking like

Yahoo!

(YHOO)

yesterday, hitting the whisper and then going down because the good news has already been discounted.

"There's not a lot of room for error," said Jim Herrick, managing director of trading at

Robert W. Baird

in Milwaukee, who worries that at current levels a good earnings season has already been discounted.

For every trader thinking hard about how to game next week, though, there's another one heading out to the Hamptons. It's summer, it's Friday, there's been a good rally recently and nobody knows how next week, with all the earnings and a couple of big economic reports, is going to pan out. Why not go to the beach?

Thin trading makes for volatile markets. For the open, at least, it looks like stocks are heading higher. At 9 a.m. EDT, the

S&P 500

futures were up 4.7. They closed near fair value yesterday, so that indicates a good open. The 30-year was up 4/32 to 89 26/32, putting the yield at 5.99%.

Tokyo stocks continued doing what they've done since the

Nikkei

hit 18,000 a week ago -- not much of anything. Trading is expected to be rangebound for at least the next week or so, as investors get used to the thinner air the market's propelled itself into in this year's 30% run. The Nikkei slipped 29.92 to 17,937.73.

Hong Kong stocks were basically flat, with investors continuing to fret about more share placements. The

Hang Seng

dropped 3.73 to 14,222.57.

European markets were higher. In Frankfurt, the

Xetra Dax

was up 49.11 to 5656.26. The

CAC

was up 38.27 to 4669.83. In London, the

FTSE

was up 20.4 to 6577.7.

Friday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

Allstate

(ALL) - Get Report

is acquiring

American Heritage Life Investment

(AHL)

for $32.25 a share in stock or cash, a premium over American Heritage's closing price of 26 15/16. The deal is expected to be completed by year's end.

Mergers, acquisitions and joint ventures

Abbott Laboratories

(ABT) - Get Report

agreed to buy

Perclose

(PERC)

in a stock swap valued at $680 million.

Meanwhile, Abbott reported second-quarter earnings of 42 cents a share, in line with the

First Call

14-analyst estimate and up from the year-ago 38 cents.

AlliedSignal

(ALD)

has bought

Johnson Matthey Electronics

for $655 million and sold its

Laminate Systems

business to

Rutgers

of Germany for about $425 million.

KN Energy

(KNE)

is buying

Kinder Morgan

for $506 million in stock. Under the deal, KN Energy will issue about 41.5 million shares of KN Energy stock in return for all of the outstanding shares of Kinder Morgan.

The Swedish newspaper

Dagens Industri

reported that Sweden's

Volvo

(VOLVY)

, a truck maker, rejected an unoffical takeover bid by

DaimlerChrysler

(DCX)

of $17 billion as too low,

Reuters

reported. Volvo sold its car division to

Ford

(F) - Get Report

in January.

Miscellany

Qualcomm

(QCOM) - Get Report

will replace

Transamerica

(TA) - Get Report

in the

S&P 500

on a date yet to be announced. Dutch firm

Aegon

(AEG) - Get Report

is acquiring Transamerica.

Compass Bancshares

(CBSS)

will replace Qualcomm in the

S&P MidCap 400 Index

.

Business Week's

Inside Wall Street column, penned by Gene Marcial, talks up

Cabletron Systems

(CS) - Get Report

as a potential buyout target, with a global telecom giant playing the role of acquirer; mentions

24/7 Media

(TFSM)

, which some pros think is ripe to be taken over by

DoubleClick

(DCLK)

; and singles out

Manpower

(MAN) - Get Report

as a good global-recovery play.

Glaxo Wellcome

(GLX)

has received approval from the

European Commission

to market its HIV/AIDS treatment Ziagen across all of the nations of the

European Union

.

Analyst actions