An initial flurry of corporate earnings, including results from three high-profile technology firms, will likely set the tone for the market in the week ahead.
are all scheduled to release results after the close of trade Wednesday, and analysts expect the news to be good.
"Earnings will take center stage and I think we'll probably head a little bit higher over the next week or so," said Peter Cardillo, chief strategist at Global Partners Securities.
Analysts are expecting earnings to rise by 22.4% in the fourth quarter, the best performance since the first quarter of 2000. Although several firms warned they would miss estimates this week, the confessional season has been surprisingly benign, with just 1.3 negative outlooks released for every positive forecast, according to Thomson First Call.
While the market has already priced in a lot of good news, Cardillo said "momentum remains on the upside." Despite a disappointing performance on Friday, the
moved higher this week, marking the seventh-straight week of gains. The
has risen for five consecutive weeks and touched a 30-month high.
Art Hogan, chief market analyst at Jefferies, said there's so much liquidity in the market that a significant correction seems unlikely over the near term. But he does believe that stocks are "priced for perfection" and that firms must offer some upbeat guidance next week to keep the rally going.
"We've built into stocks some lofty expectations for guidance and we need to see that come to fruition," he said.
A plethora of firms will release earnings next week, including
Bank of America
on Thursday and Dow component
on Friday. But results from the tech sector probably will garner the most attention.
Prudential analyst Steve Fortuna believes Apple could surpass analysts' expectations next Wednesday because he said holiday demand for its iPod and iBook products was very strong over December. "As a result of strong consumer demand trends, we believe Apple could post modest upside to our $1.89 billion revenue estimate," he said, adding that the chances for an upside earnings surprise are even greater. Apple is expected to post a 14-cent profit in its fiscal first quarter.
As for Yahoo!, Pacific Crest analyst Steve Weinstein said he is very confident in his above-consensus revenues and profit estimates "and we believe there is significant upside potential." Analysts expect Yahoo! to earn 11 cents in the fourth quarter.
Results from Intel might not be as surprising, but Fulcrum Global Partners said the firm is likely to be "incrementally more positive regarding IT budgets growing in 2004." Intel is expected to report a fourth-quarter profit of 25 cents a share.
After a discouraging employment report Friday, investors also will be keeping a close eye on economic reports next week. On Tuesday, import and export prices will be released, followed by the producer price index, trade balance and
beige book on Wednesday. Economists expect the December PPI to rise 0.2% after a 0.3% decline in the prior month. The core rate, which excludes food and energy, is slated to rise 0.1%.
Thursday will bring the consumer price index, retail sales and the Philadelphia Federal Reserve survey. Retail sales are projected to rise 0.7%, or 0.4% excluding autos, and the CPI is expected to climb 0.2%, with the core rate up 0.1%, after a rare decline in the previous month. On Friday, investors can look forward to the release of business inventories for November, the Michigan consumer sentiment survey for early January and data on industrial production.