NEW YORK (
) -- With stocks mostly pricing in good earnings results and quantitative easing, economic data, notably a read on GDP, and the weekend G20 meeting on currency will set the tone for the markets in the coming week.
Stocks were volatile in the past week, on the back of sharp swings in the dollar and a wave of profit booking amid strong earnings reports.
was the highlight of the week's quarterly earnings reports, beating already high expectations. Package delivery company
raised its outlook, while airline companies
and American Airlines parent
also received a stamp of approval from the market for stronger performance.
More than 85% of the 132 S&P 500 companies that have reported so far have managed to beat expectations, according to data compiled by
. But stocks have run up more than 15% since July lows on the back of earnings expectations and quantitative easing and investors are now looking for new catalysts, according to market experts.
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The rest of earnings season, even if the numbers continue to top Wall Street's projections, seems unlikely to provide sufficient momentum.
According to Andrew Neale, portfolio manager at Fogel Neale Partners, companies have been successful in squeezing profits through efficiency gains but have failed to demonstrate improvements in top-line growth. He says investors are unwilling to pay for stocks that do not outperform on revenues, citing
as an example. "IBM has a PE of 12 and a historic PE of 14. But no one will pay up for the stock until revenue grows," said Neale.
Meanwhile, the currency markets will absorb news from the weekend meeting of G20 finance ministers.
In a statement
G20 vowed Saturday to avoid potentially debilitating currency devaluations
and reduce trade and current account imbalances.
But only time will tell whether that pledge translates into real actions that lessen current tensions.
On Friday, Peter Cardillo of Avalon Partners said he did not expect the G20 meeting to have any large outcome beyond "goodwill statements." He added that forex markets are likely to have a "wild week" as currency wars continue.
A flood of economic reports could still provide some fodder for investors.
watchers will be looking for any deviations in the economic data that could impact the Federal Reserve's move on quantitative easing.
Keith Hembre, chief economist at First American Funds, says that there is no question the Fed will act on quantitative easing soon. "I think it is highly unlikely that any of the data that is coming out next week will cause them (the Fed) to question their outlook on inflation and labor," he said.
The biggest report will be the advance estimate for third-quarter GDP out on Friday. Consensus expects the economy to expand 2% in the third quarter, according to
. "Two percent will be supportive of a small quantitative easing. Anything above that will call into question the Federal Reserve's decision on QE2," said Cardillo.
Existing-home sales on Monday and new-home sales on Wednesday should also get attention. Existing-home sales are expected to rise to a 4.25 million annual rate in September from 4.13 million pace in August, while new-home sales are expected to rise to a 295,000 annual rate from a 288,000 clip in the prior month.
Tuesday will bring consumer confidence numbers. The consumer confidence index is expected to climb slightly to 49 from 48.5.
On Wednesday, the Commerce Department is expected to say that durable goods orders rose 1.7% in September after falling 1.3% in the prior month.
The market-moving weekly jobless claims numbers will be out on Thursday. Initial claims are expected to rise by 3,000 to 455,000 after dropping 23,000 in the previous week.
Big steel, oil and consumer names will report earnings next week and will be on the watchlist. Prominent reports on Monday include
, which will report after the closing bell.
will release earnings.
is among the Dow components set to report.
might be an interesting mid-cap to watch. The company's results might point to trends in small-business lending.
Wednesday brings earnings from oil majors
, consumer products major
Procter & Gamble
and industrials major
will report after the bell.
More blue-chip names will report Thursday morning, including
will be among the key earnings to close the week.
--Written by Shanthi Venkataraman in New York
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