Heading into the second week of September, there are two components of the market on the minds of participants. The first is the knowledge that we're one week closer to October, and that means we're hitting preannouncement season, the time when companies swallow hard and let the market know that things, well, went a little funny during the last quarter.

It's typically a jittery time, as it certainly was in mid-June, prior to the strong second-quarter earnings period.

And then there's oil.

For the next couple of weeks, the two factors are likely to double-team the market into a perpetual state of agitation. Companies have begun to warn of earnings shortfalls for the coming quarter. The steady rally in energy prices means companies that use raw energy materials are paying higher costs than they have in the past, and, so far, having been unable to pass on those price increases to the consumer, they're seeing profit margins erode.

Such announcements next week, if there are any, are likely to be concentrated in sectors affected by higher energy prices. So far, preannouncement season (and it is early) has been fairly tame. Just 65% of preannouncements for the third quarter have been negative, compared with 80% historically. However, the most high-profile announcement was from


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, which cut earnings estimates, blaming rising raw materials costs.

"Any company that's sensitive to oil prices" is one to watch, said Joseph Kalinowski, equity strategist at earnings tracker


. "That's transportation, trucking, airlines and chemicals ... it's going to eat into their bottom line."

Going and Going

The market struggled last week in the face of steadily rising energy prices. Although


announced Sunday it was boosting production by 800,000 barrels a day, previous production increases haven't been able to satiate demand, and prices have continued only higher, lately flirting with $35 a barrel.

Anticipation of Sunday's OPEC meeting in Vienna produced a similar result -- oil prices sold in anticipation of a bump up in production, but demand remains strong. Companies are likely to contend with higher energy costs for at least another quarter.

Richard Berner, economist at

Morgan Stanley Dean Witter

, said Friday that energy's importance to today's economy is diminished. The hit those rising costs cause on the

S&P 500 Index will be less destructive than in the past.

However, as the DuPont preannouncement indicates, the hit is likely to come sooner or later.

That is just what the market will be watching for, both in the continued shifting in the price of oil, the release of the

Producer Price Index

on Thursday and news out of the chemical and basic materials sector.



cut its estimates on

Dow Chemical

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last week for the same reason as DuPont's warning -- higher raw materials costs.

Higher energy prices act as a tax on consumers and companies, who have to divert costs to a commodity. Berner contends that there are mitigating factors that should offset the strain caused by higher energy prices. For one, as supply increases and demand decreases, prices will drop; also, higher productivity could cushion the blow for companies.

But John Maack, director of equities at

Crabbe Huson

in Portland, Ore., points to rising energy prices as part of larger concerns about rising costs that previously weren't an issue. Recent labor actions indicate that workers are more loudly demanding a larger slice of the profits.

"The focus has been on energy, but energy is one symptom of a growing problem," Maack said. "Wages are going up, care costs are going up, energy is going up. It's a difficult time; all these companies are complaining about the same thing: Costs are going up and they don't have the pricing power to offset that."

Dips in Chips

One sector (away from energy) that's been the focus of recent earnings discussion has been the semiconductor sector, which was hit with two high-profile downgrades last week -- one of


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and the other of

Micron Technology

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Like energy, the discussion has focused on a simple issue -- supply and demand. Analysts are concerned that demand for the commodity DRAM (dynamic random access memory) has topped out and will slide in coming months. For much of 2000, analysts surmised that suppliers would not be able to meet demand -- as


reported earlier this week -- but now some believe that demand won't materialize at all.

However, this thesis is not universally supported. Negative calls last week were balanced out by a strong earnings report from

National Semiconductor


, as well as last month's strong earnings report from

Applied Materials

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"I don't think the semiconductor cycle is over," said Brian Gilmartin, portfolio manager at

Trinity Asset Management

. Last week "was more of a correction after a strong August. I'm not all that concerned about what happened

last week. Obviously, a major preannouncement by a tech company will not help next week, but I don't think that will happen."

But it's on the market's mind. Worrying season has begun.