If there are some more Wells Fargos ( WFC) in the mix next week, investors could be very happy. Last week, Wells Fargo, along with falling oil prices, helped buoy a market that had gotten to incredibly low levels by releasing a better-than-expected earnings report. Over the five trading sessions, the Dow Jones Industrial Average jumped 4.5% to 11,496.57, the S&P 500 gained 1.7% to 1260.68, and the Nasdaq Composite added 2% to 2282.78. "We think the bounce can continue," says Ryan Detrick, chief technical strategist at Schaeffer's Investment Research. "This could be the first quarter in four that we beat overall expectations." Detrick notes out that the 1220 to 1225 range was a double bottom for the S&P 500 in the summer of 2006, and "it sparked a tremendous rally" in the last half of that year, so an echo of that is possible here. The earnings come fast and furious next week across all major sectors, led by a raft of Dow components. Those include Bank of America ( BAC) and Merck ( MRK) on Monday, Caterpillar ( CAT) and DuPont ( DD) on Tuesday, AT&T ( T), Boeing ( BA), McDonald's ( MCD) and Pfizer ( PFE) on Wednesday and 3M ( MMM) on Thursday. Investors will be watching to see if the financial-sector-inspired momentum can continue, but the markets will have to get past earnings releases from a number of companies that have been the subject of concern lately. For example, on Tuesday, reporters Wachovia ( WB) and Washington Mutual ( WM) are expected to show some ugliness on their balance sheets. Other financial companies reporting earnings include UnionBanCal ( UB) on Monday; KeyCorp ( KEY), Regions Financial ( RF) and SunTrust ( STI) on Tuesday; SLM Corp. ( SLM) Wednesday; MBIA ( MBI), Genworth Financial ( GNW) and Sovereign Banc ( SOV) on Thursday; and T. Rowe Price ( TROW) on Friday.
"There's been a lot of concern" in the sector, "and some of it's been alleviated by Wells Fargo and JPMorgan ( JPM), and maybe Citigroup ( C)," says Robert Pavlik, chief investment officer at
Oaktree Asset Management. "But those are big money-center banks, and you'll have to see how some of the smaller players in that industry are doing." "I think there will be a differentiation between financial companies that managed their subprime exposure well and those that didn't," adds Scott Wren, senior equity strategist at Wachovia Securities. The tech sector also has a big week, particularly with some high-profile recent misses (think Google ( GOOG) and Microsoft ( MSFT)). Apple ( AAPL) and Texas Instruments ( TXN) come out on Monday; Broadcom ( BRCM), STMicroelectronics ( STM) and Yahoo! ( YHOO) report on Tuesday; and Qualcomm ( QCOM) makes its announcement on Wednesday. "There were high expectations relative to other sectors" for technology, Detrick says. Tech-company earnings "better be impressive" for the stocks do well, he predicts. Biotech and Big Pharma also make an appearance, as Schering-Plough ( SGP) reports on Monday, and Bristol-Myers ( BMY), Elan ( ELN) and Eli Lilly ( LLY) come out on Thursday. The energy and commodities space, one of the brightest areas these days, will see some action. Reports come from Halliburton ( HAL) on Tuesday, ConocoPhillips ( COP) and Freeport-McMoRan ( FCX) on Wednesday, and Newmont Mining ( NEM) Thursday. "The profits in the energy sector will be good, but I think the market's starting to anticipate that the global economy is going to slow, which could stifle demand," Wren says. A group that suffers from the high energy prices will clock in as well -- the airlines. US Airways ( LCC), UAL Corp. ( UAUA) and JetBlue ( JBLU) report on Tuesday, Northwest ( NWA) announces on Wednesday, and Southwest ( LUV) reports on Thursday.
Rounding out the long list of major earnings releases is UPS ( UPS) on Tuesday, PepsiCo ( PEP) Wednesday and Ford Motor ( F) on Thursday. Of course, oil-related companies aren't all that will affect the markets next week. Crude itself will be watched to see whether it could slide any further, after falling nearly $20 below its all-time high amid rising inventories, greater supply from Nigeria and the prospect of weekend talks between the U.S. and Iran. "In the big picture, we're still in a long-term uptrend," says Tom Bentz, director and senior energy analyst at BNP Paribas Commodity Futures. "You're starting to see more crude show up, and with the combination of more crude and less demand, we're starting to see inventories build." He adds that from a technical standpoint, support is around $127, and "pretty significant support" in the $122 to $123 area. "I think it's going to hold." The economic front is much quieter, though a few key releases will still catch some attention. Notably, the Fed's beige book report comes out on Wednesday. It's the anecdotal compilation of economic conditions, and many market observers think it's one of the most relevant and accurate indicators about the economy because it in essence "takes the pulse" of the situation. Also, the real estate sector will be in focus, with existing-home sales data coming out Thursday, and the new-home sales version on Friday. Isolated patches of encouraging data have come out of the sector, but the trend continues to head largely downward. Consumer sentiment also gets a read, with revised Reuters/University of Michigan consumer sentiment data for July coming out on Friday. "The outlook's improving, and I think the market's going to come around to realizing the world is not going to come to an end," says Wren. "We've played it pretty defensively for the last two years, but we felt like the middle of this year was probably going to be an inflection point for the market and the economy." "We're getting less defensive and more cyclical now," he says. Detrick agrees. "There's some real fear coming in, so on a longer-term basis, we think this is the time to start accumulating shares," he says. "We could have a potential for a nice end-of-year rally." But many people are still cautious about the near-term outlook. "I'm just watching and waiting," Pavlik says. "I probably have a little more cash -- and like many portfolio managers I've been talking to, I'm suspicious of the recent recovery. There are still a lot of concerns."