All eyes will be on earnings in the coming week, and unfortunately for investors, the news isn't expected to be good.
components and 128
companies are due to release first-quarter numbers next week. Analysts are currently expecting profits to climb 8.3% in the quarter, but a big part of that will come from the energy sector, where profits should be up more than 170% from last year. Excluding this group, Thomson Financial/First Call predicts that earnings will grow just 1.6%.
"People aren't just going to be looking at earnings, they'll also be listening to what companies have to say about the future," said Charles White, portfolio manager at Avatar Investors. "I think we're still in the same position that we've been in for a long time now, which is that companies don't have any visibility yet."
As a result of this uncertainty, White said, the market will probably remain mired in its recent trading range for some time, with a low of 800 on the S&P and a high of around 940. The S&P ended Friday's session at 867.
Joseph Kalinowski, chief investment strategist at Ehrenkrantz King Nussbaum, said investors are well-prepared for a negative earnings season because corporate confessions have been so bad recently. In fact, he noted that negative preannouncements have outpaced positive ones by a ratio of 3 to 1 -- "the most severe since 9/11."
But while poor first-quarter numbers may already have been priced into the market, Kalinowski said investors may not be expecting big earnings reductions for the second quarter and beyond. Earnings are currently slated to grow 6.8%, or 5.1%, in the second quarter, excluding the energy sector. For the third and fourth quarters, however, profits are expected to climb 13% and 22%, respectively.
"We know the numbers are coming down, but we're looking closely at the rate of deterioration," he said.
will kick off the week's earnings results on Monday, followed by
Johnson & Johnson
Advanced Micro Devices
will chime in, while Thursday will bring results from
Meanwhile, investors also will be listening for any new developments related to the war.
"It seems that the first stage of the war is coming to a close, but the next important thing is the rebuilding
effort and creating a democracy," Kalinowski said. "While geopolitical risk has subsided somewhat, I certainly wouldn't say it's over and done with."
Over the last week, stocks declined as fundamental concerns overshadowed more positive news out of Iraq. On Wednesday, coalition troops took positions in downtown Baghdad, and Iraqi residents celebrated by tearing down statues of Saddam Hussein. On Friday, troops reportedly took control of Iraq's third-largest city, Mosul, and speculation was rife that Saddam Hussein's home city of Tikrit would be the site of his regime's last major stand.
Although the economic data next week probably will elicit a smaller response from investors than any war news or earnings reports, some reports bear watching. On Tuesday, the
will release figures on industrial production and capacity utilization. Industrial production is expected to fall 0.2% in March after rising 0.1% in February.
Housing starts and the consumer price index are slated for Wednesday, and Thursday will bring the Philadelphia Fed survey and weekly jobless claims. The CPI for March is expected to rise 0.4% after a 0.5% rise in February.