After an inauspicious start to the new year, investors are hoping for good news next week in the form of solid fourth-quarter earnings. About 144 companies are scheduled to release results in the coming week, including Intel ( INTC), Apple Computer ( AAPL), Alcoa ( AA) and Nortel ( NT). Meanwhile, a report on retail sales and the producer price index for December could attract attention after the minutes of the Federal Reserve's last policy meeting raised concern about inflation and a faster pace of interest rate hikes. Stocks fell last week, with the Dow down 1.7% at 10,604 and the Nasdaq down almost 4% to 2089. The S&P 500 was off by 2% at 1186. The performance worried some analysts who believe that the first five days in January can set the tone for the market for the rest of the year. Still, there have been 20 times in the past 53 years when the market declined in the first five days, and stocks ended the year in positive territory 50% of the time, according to the Stock Trader's Almanac. "I tend not to put too much stock into those things," said Dave Briggs, head trader at Federated Investors. "So many people are tuned into these seasonal patterns that they tend to be discounted further ahead. We had the January effect in December." James Altucher, managing partner of Formula Capital and a contributor to TheStreet.com's sister site RealMoney,
agrees. "I would not base a yearlong allocation on this so-called 'early warning system,'" he wrote. Altucher said trading in the entire month of January may hold more predictive value, but only if the market is up. Since 1956, the market has been up in January on 30 occasions, and 86% of the time, stocks continued rising over the next 11 months. In the 18 occasions when January was negative, he said, the remainder of the year was positive nine times and negative nine times.
Peter Cardillo, chief market strategist at SW Bach, believes corporate earnings will "recharge the rally" next week. Dow component Alcoa is scheduled to report a 41 cents-per-share profit on Monday compared with 34 cents last year. Nortel Networks and Genentech ( DNA) also are on tap Monday. On Tuesday, Intel is due to report, followed by Apple Computer on Wednesday and Sun Microsystems ( SUNW) on Thursday. Analysts expect Intel to earn 31 cents a share on revenue of $9.4 billion. The company raised its sales estimate for the quarter last month, citing strong demand for servers, chipsets and notebook computers. Apple is expected to post a profit of 48 cents a share compared with just 16 cents last year, as sales of the firm's iPod music player remained strong. Sun should earn a penny after losing 3 cents a share last year. On average, analysts expect earnings to rise a respectable 15.2% in the fourth quarter. But Briggs said he isn't expecting much reaction from investors. "I don't think we'll rally sharply, but don't think we're going to fall apart either," he said. While earnings will probably take center stage, a handful of economic reports also could influence trade. Import and export prices and the producer price index, due Thursday and Friday, respectively, will be particularly significant after the Fed said earlier this week that inflation could become a problem unless interest rates continue to go up. The PPI is expected to fall 0.1%, while the core rate is seen climbing 0.2%. Retail sales for December also will be closely watched. Economists are looking for a gain of 0.7%, or 0.4% excluding autos. Last month, nonfarm payrolls increased by 157,000, slightly below the consensus estimate of 175,000. In addition, wages rose a meager 0.1%, suggesting that fears of inflation might be overblown. Other reports of note next week include wholesale inventories on Monday, the trade balance and Treasury budget on Wednesday, and business inventories and industrial production data on Friday.