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More Bull and Bear Battling Looms

With money and earnings warnings both continuing to flow into the market, it looks like the heated tug of war between the bears and bulls will continue into the week starting Sept. 22.

"I think that there are some pretty dramatic cross currents," says Jon Olesky, head of block trading at

Morgan Stanley

. "We still find the underlying liquidity of the market to be just fantastic. There are still some areas of the market that enjoy terrific sponsorship. You've got charts on some of the oils and drillers that are completely vertical."

On the other hand, Olesky says that recent earnings warnings have given the market pause. "We've had a disturbing parade of preannouncements," he says. "The cross section of the warnings has been unusually dramatic. There's some sense that this has been very disappointing in terms of fundamentals."

But the market's impression of the current preannouncement season may be a little over-pessimistic, according to Chuck Hill, director of research at

First Call

. As of Thursday, there were 127 companies that preannounced -- on track for the usual 300 or so that do. So far 58% making preannouncements said that their earnings this quarter will be below analysts estimates. In contrast, in the first and second quarters this year, 62% and 63% of the companies had negative preannouncements.

It's similar to the second-quarter of 1996, when warnings ran at the normal level but perception was negative. Only a blow-out quarter from

Intel

(INTC) - Get Intel Corporation Report

pulled the market out of its funk.

Currency and trade concerns will also be focus of the market, as analysts sift through the weekend's

G7

summit.

"The G7 meeting will be interesting material for the week," says Gail Dudack, market strategist at

TheStreet Recommends

UBS Securities

. "The market may start off the week with more of a global focus."

The bond market will also be looking at the G7.

"We'll open the week reacting to the outcome of the G7 meeting," says Dana Johnson, head of capital research at

First Chicago Capital Markets

. "I would expect the dollar to be a little higher. That should help the fixed income market, but it will be constrained by anticipation of the two- and five-year auction." The Treasury will auction $15.5 billion in two-year notes on Tuesday and $11.5 billion in five-year notes on Wednesday. There's normally some pressure on the bond market ahead of Treasury auctions.

In terms of major data, the field is clear until Thursday when the August

durable goods

and

existing home sales

come out. Durable goods hasn't gotten much attention lately. The bond market will view home sales with interest, though, after the September

National Association of Home Builders

housing index pointed to a strong housing market while the August

housing starts

pointed to a weak one.

************

The big earnings announcements for the week will come early on. (All estimates from

First Call

.)

Cabletron

(CS) - Get Credit Suisse Group AG Report

reports second-quarter earnings before the bell on Monday. Consensus expectations are for the company to earn 36 cents per share.

Also reporting Monday,

Micron Technology

(MU) - Get Micron Technology, Inc. Report

with its fourth quarter earnings. It's expected to earn 46 cents per share.

3Com

(COMS)

reports first-quarter earnings after the close on Tuesday. Expectations are for it to earn 48 cents per share.