Updated from 6:01 p.m. EDT
Update includes Capmark's bankruptcy filing.
NEW YORK (
) -- Investors could be in for another slog of soggy momentum, as a diverse array of blue-chip names report earnings in the coming week.
Despite mostly positive results so far, stocks have produced lackluster performance.
"People are still nervous," says Jordan Smyth, managing director for Edgemoor Investment Advisors. "They're still waiting for the 'all clear' signal."
> > Bull or Bear? Vote in Our Poll
While Smyth says about 150 companies from the
index are due to report next week -- and about 80% of firms that have so far reported have beaten expectations -- investors appear to be locking in gains from a months-long run-up. Smyth says that's because investors are hearing mixed interpretations of even positive news. For instance, the impressive climb in existing-home sales reported on Friday was tarnished by bearish commentators attributing it to a rush to grab government incentives before they expire, rather than true organic growth.
One signal that things are clearer, if not "all clear," will be revenue growth absent from many of those Street beats last quarter. Companies have stayed in the black by cutting costs -- including jobs -- through the downturn and into the emerging recovery. For instance,
beat the average analyst forecast on Friday, but its profit and revenue still dropped from year-ago levels.
Until investors see evidence that consumers are adding to growth by spending, and not lowering costs by being laid off, stocks will gain only on a "selective basis," says Alan Gayle, senior investment strategist for RidgeWorth Investments.
"The market wants more reinforcement that the economic recovery is translating into better earnings," says Gayle, who began adding equities back into the RidgeWorth portfolios in March. "Investors are going to be pricing through these earnings numbers very carefully to look for growth and sustainability."
On deck next week are some big energy names, including
on Thursday, and
In the technology sector,
reports Monday, while
plans to issue results on Wednesday and
will report on Thursday.
In the financial realm, two big ratings outfits will be reporting results, with
, which owns Standards & Poors, on Monday, and
is set to report on Tuesday, the investment bank
on Wednesday and Germany's
on Thursday. Finally, from the auto sector there's also
on Tuesday and
on Friday, as well as the consumer-sensitive
Procter & Gamble
One cause of concern for banks and financial service firms has been the health of the commercial real estate market, and investors will be watching the reaction to
Sunday's bankruptcy filing
by Capmark, one of the nation's top commercial real estate lenders.
The market will be looking to see whether durable goods orders moved back into positive territory last month. Those data are set to be released by the Commerce Department on Tuesday, while new-home sales figures will add some housing market clarity on Wednesday. Gayle says the big economic data point will be the gross domestic product figures to be released on Thursday. Investors expect the GDP to show the first period of growth in over a year, marking the "unofficial" end to the Great Recession.
Still, Mark Kollar, CEO of Kollar Financial Strategies, in Rosemont, Ill., says the long lag between stock recovery and improvements in the real economy has caused his firm to become "pretty conservative" recently. Although some data points related to earnings, housing or employment appear to be improving, he believes those numbers have been finessed to show a rosier picture than that on the ground.
Kollar calls the 9.8% unemployment rate "baloney," estimating it is truly closer to 20%. He says one of his employed clients' situations became worse as well. He lost a $250,000 line of credit as banks restrict lending operations.
"We've already recovered so much of this loss from earlier in the year in March," Kollar says of his clients' stock investments, later adding, "This is all going to come to a halt, and when it does, it's going to be a real contraction."
Others are more optimistic about where the market is headed, with the
Dow Jones Industrial Average
dancing back and forth over the 10,000 mark and the S&P 500 flirting with 1100. They note that with all the cash sitting on the sidelines, awaiting a good chance to get into the market, there are sure to be more gains ahead.
However, the bears appear to be dominating the market for the time being, with the Dow retreating each time it made some headway last week. Ultimately, the index closed the week down 0.2%.
"The bar continues to be raised," says Gayle. "We've come back from the brink, but it's that old Jerry Maguire saying: 'Show me the money!' We're at that point where investors are looking at these companies and saying, 'Show me the money.' Less bad is not a good enough story anymore."
-- Written by Lauren Tara LaCapra in New York