Investors face an intense regimen of earnings and economic data over the coming week, with the tone of 2003's final quarter of trading hanging in the balance.
The major averages rose in the week just ended, with the
Dow Jones Industrial Average
advancing 102 points, or 1%, to 9674.68. The
rose 35 points, or 1.8%, to 1915.31, while the
climbed 8 points, or 0.8%, to end the week at 1038.06.
Of chief importance over the next five sessions is the barrage of third-quarter earnings reports. Investors will have to dust off their calculators and notebooks to keep track of the bombardment of reports, and more significantly, what company executives say concerning future prospects.
"I'm very optimistic," said Daniel Morgan, fund manager at Noble Financial Group. "This will be a huge week, mainly because it's been a fairly positive preannouncement season so far, which leads us to believe most numbers will come in at least in line with expectations."
In fact, the negative-to-positive ratio of preannouncements is now at 1.6 for the quarter and has been improving as the earnings season approaches, according to Thomson First Call.
On average, companies in the S&P 500 are currently expected to post profit growth of 16.2% in the quarter ended in September, though the number could conceivably reach 20% if results beat current estimates by a wide margin, analysts say.
Giri Cherukuri, senior trader at OakBrook Investments, believes "most people will be holding on or adding to positions if they see a confirmation of strong earnings."
But while upbeat quarterly earnings are undoubtedly vital for stocks to continue moving higher, investors are expected to pay even closer attention to company guidance.
"It won't depend on the actual numbers as much as it will hinge on what is said in the conference calls. I don't expect any earth-shattering news, but a large proportion of companies should point to better things," said Morgan.
But Cherukuri also noted that managers could start to do some window-dressing in some areas, such as IT, while locking in gains for the year in other sectors as soon as they get third-quarter earnings.
The week's key earnings kick off in the always-riveting tech sector. Microprocessor giant
reports its earnings on Tuesday and is expected to say profit more than doubled in the third quarter. Also reporting are
post results on Wednesday, along with online broker
, biotech concern
and software maker
The tech plot thickens on Thursday, with reports from
, online auction site
Advanced Micro Devices
, Internet advertising agency
also deliver their earnings this week, as well as GM's
. Airlines will also be in focus, with results from
Other noteworthy names include
Johnson & Johnson
Markets will have loads of economic data to digest as well. The consumer price index, one of the main gauges of inflation in the U.S. economy, will be released on Thursday. Economists see the figure gaining 0.3%, the same pace as the one registered in August. The so-called core CPI, excluding food and energy prices, is also expected to have risen a modest 0.1%. Those numbers will be coupled with readings on September industrial production and capacity utilization, both of which are expected to have picked up steam from the previous month.
"Investors will be looking for a confirmation the economy is still growing, but that inflation is subdued," said Cherukuri at OakBrook Investments.
Business inventories for August are also due out on Thursday, along with first-time unemployment claims for the week ended Oct. 11, which are seen rising to 390,000 from the prior week's decline to 382,00. On the same day, the Federal Reserve Bank of Philadelphia will report a survey on manufacturing in the region in October. Economists see a rise to 16.4 from 14.6 in the previous month.
Those figures will be followed by a preliminary reading on the University of Michigan's October consumer sentiment index on Friday. The indicator is forecast to have climbed to 88.5 from 87.7 a month earlier. Also on Friday, the government will report its Treasury budget figures for September, following the $42.5 billion it reached in August. And investors will get a sense of how hot the housing market still is with September housing starts and building permits due out on the same day.
On Wednesday, the Department of Commerce will announce September retail sales, which are seen falling 0.2% following a 0.6% gain the previous month. Excluding auto figures, sales are expected to have risen 0.4%, compared with a 0.7% advance the previous month. The October New York Empire State index will also be awaited on Wednesday, along with the