trading_alert
23.07.2001, 11:42
Investors Hold Ground in Earnings Storm
By Denise Duclaux
Reuters
NEW YORK (July 22) - Wall Street is expected to wrap up the week little changed as investors juggle disappointment over a pile-up of dour profit forecasts with an urge to dabble in a market at compelling lows.
''I have never seen in recent years as much frustration as I see now in investors,'' said Stanley Nabi, managing director of Credit Suisse Asset Management, whose North American unit oversees about $110 billion. ''Everybody knows that this market is going to recover somewhere along the way. Everybody knows we are in a valley and we are going to come out, it's just a question of how we are going to come out.''
Roughly 2,300 corporate earnings reports will pound Wall Street this week, marking the most hectic week of the reporting season, according to research firm Thomson Financial/First Call. But many investors have surrendered hope for a speedy pick-up in corporate profits after software titan Microsoft Corp. warned last week of sluggish results in a prolonged economic slump.
Economic data will offer little balm to investors aggravated by harsh profit outlooks. Many economists had been bracing for the nation's first quarterly contraction in gross domestic product (GDP) in eight years. But an advance reading of GDP due on Friday is now expected to show fractional annualized growth on the quarter after the Commerce Department last week reported a narrower-than-expected trade deficit.
''Investors are looking at what is going on in the market, what is going in with the earnings reports and they are not getting a whole lot of warm fuzzies from management -- obviously the economic data is choppy as well,'' said Jeff Kleintop, chief investment strategist at PNC Advisors, which oversees about $65 billion. ''They are content to sit on the sidelines.''
EARNINGS GRAB THE SPOTLIGHT - AGAIN
Roughly 1,500 profit reports flooded Wall Street last week and dashed hopes for an imminent bounce in corporate profits. Microsoft unleashed a sluggish forecast, while financial services giant American Express Co. pounded Wall Street with news of steep layoffs and charges against earnings.
''There is this focus on the future and the push-out of the eventual recovery and that's the problem here,'' said Barry Hyman, an investment strategist at Ehrenkrantz King Nussbaum. ''It's no longer the second half of 2001. It's sometime in 2002 and that is what the focus has been. It's nice to see earnings possibly meet or beat expectations, but the trend is to focus on the forecasts and the forecasts are not great.''
Analysts have cut their lower profit-growth expectations for companies in the Standard & Poor's 500 index to a drop of 17.9 percent, according to First Call. That marks the worst quarterly performance since the third quarter of 1991, when the economy was stuck in a recession.
And the outlook for fourth-quarter profits has dropped. At the beginning of July, analysts had expected S&P 500 companies to show profit growth of 5.2 percent for the fourth quarter. The forecast has now dropped to 2.7 percent growth.
''Companies have gotten wise to the fact that trying to predict what is going to happen in the next quarter or two is just not a great strategy,'' Kleintop said. ''We are in a period where I almost like to call it the twilight zone. We have no visibility. They finally learned it's too painful and difficult to call a turn, so let's just continue to say things look bad and will continue to look bad.''
On Monday, American Express, telecommunications giant AT&T Corp., consumer products maker Colgate-Palmolive Co. and chip maker Texas Instruments Inc. are slated to report quarterly results.
On Tuesday, diversified manufacturer Honeywell International Inc., telecommunications equipment maker Lucent Technologies Inc. and fast-food chain McDonald's Corp. are scheduled to post earnings.
On Wednesday, computer maker Compaq Computer Corp. and fiber-optic cable company Corning Inc. are slated to announce results. On Thursday, fiber-optic parts maker JDS Uniphase Corp. and wireless technology company Qualcomm Inc. will join the earnings flood.
ECONOMIC DATA OFFER LITTLE SUPPORT
The government releases its first estimate for second-quarter gross domestic product on Friday. Economists in a recent Reuters survey predicted, on average, that GDP growth slowed to 0.9 percent in the second quarter from a meager 1.2 percent in the first three months of 2001.
A weak figure could fuel hopes of further interest-rate cuts hinted at by Federal Reserve Chairman Alan Greenspan in testimony on monetary policy before the House Financial Services Committee last Wednesday.
A Reuters poll following Greenspan's testimony found that all of Wall Street's 25 primary dealers predicted another quarter-point rate cut at the next policy meeting on Aug. 21.
''If GDP came in bad then bad news might become good news,'' Kleintop said. ''We would see a shift to looking to interest rates again. Greenspan gave us some thought that he stands ready to do more if needed. So maybe then we would see 50 basis points being priced in at the August meeting.''
Analysts predict the second-quarter employment cost index (ECI), due on Thursday, will have risen by 1.0 percent, a modest pace, and slightly slower than the 1.1 percent clip in the first quarter.
On Thursday, durable goods orders for June are expected to fall 0.8 percent on the month against an increase of 3.0 percent in May. The University of Michigan final consumer sentiment index is set for release on Friday.
REUTERS
Take care
t_a
By Denise Duclaux
Reuters
NEW YORK (July 22) - Wall Street is expected to wrap up the week little changed as investors juggle disappointment over a pile-up of dour profit forecasts with an urge to dabble in a market at compelling lows.
''I have never seen in recent years as much frustration as I see now in investors,'' said Stanley Nabi, managing director of Credit Suisse Asset Management, whose North American unit oversees about $110 billion. ''Everybody knows that this market is going to recover somewhere along the way. Everybody knows we are in a valley and we are going to come out, it's just a question of how we are going to come out.''
Roughly 2,300 corporate earnings reports will pound Wall Street this week, marking the most hectic week of the reporting season, according to research firm Thomson Financial/First Call. But many investors have surrendered hope for a speedy pick-up in corporate profits after software titan Microsoft Corp. warned last week of sluggish results in a prolonged economic slump.
Economic data will offer little balm to investors aggravated by harsh profit outlooks. Many economists had been bracing for the nation's first quarterly contraction in gross domestic product (GDP) in eight years. But an advance reading of GDP due on Friday is now expected to show fractional annualized growth on the quarter after the Commerce Department last week reported a narrower-than-expected trade deficit.
''Investors are looking at what is going on in the market, what is going in with the earnings reports and they are not getting a whole lot of warm fuzzies from management -- obviously the economic data is choppy as well,'' said Jeff Kleintop, chief investment strategist at PNC Advisors, which oversees about $65 billion. ''They are content to sit on the sidelines.''
EARNINGS GRAB THE SPOTLIGHT - AGAIN
Roughly 1,500 profit reports flooded Wall Street last week and dashed hopes for an imminent bounce in corporate profits. Microsoft unleashed a sluggish forecast, while financial services giant American Express Co. pounded Wall Street with news of steep layoffs and charges against earnings.
''There is this focus on the future and the push-out of the eventual recovery and that's the problem here,'' said Barry Hyman, an investment strategist at Ehrenkrantz King Nussbaum. ''It's no longer the second half of 2001. It's sometime in 2002 and that is what the focus has been. It's nice to see earnings possibly meet or beat expectations, but the trend is to focus on the forecasts and the forecasts are not great.''
Analysts have cut their lower profit-growth expectations for companies in the Standard & Poor's 500 index to a drop of 17.9 percent, according to First Call. That marks the worst quarterly performance since the third quarter of 1991, when the economy was stuck in a recession.
And the outlook for fourth-quarter profits has dropped. At the beginning of July, analysts had expected S&P 500 companies to show profit growth of 5.2 percent for the fourth quarter. The forecast has now dropped to 2.7 percent growth.
''Companies have gotten wise to the fact that trying to predict what is going to happen in the next quarter or two is just not a great strategy,'' Kleintop said. ''We are in a period where I almost like to call it the twilight zone. We have no visibility. They finally learned it's too painful and difficult to call a turn, so let's just continue to say things look bad and will continue to look bad.''
On Monday, American Express, telecommunications giant AT&T Corp., consumer products maker Colgate-Palmolive Co. and chip maker Texas Instruments Inc. are slated to report quarterly results.
On Tuesday, diversified manufacturer Honeywell International Inc., telecommunications equipment maker Lucent Technologies Inc. and fast-food chain McDonald's Corp. are scheduled to post earnings.
On Wednesday, computer maker Compaq Computer Corp. and fiber-optic cable company Corning Inc. are slated to announce results. On Thursday, fiber-optic parts maker JDS Uniphase Corp. and wireless technology company Qualcomm Inc. will join the earnings flood.
ECONOMIC DATA OFFER LITTLE SUPPORT
The government releases its first estimate for second-quarter gross domestic product on Friday. Economists in a recent Reuters survey predicted, on average, that GDP growth slowed to 0.9 percent in the second quarter from a meager 1.2 percent in the first three months of 2001.
A weak figure could fuel hopes of further interest-rate cuts hinted at by Federal Reserve Chairman Alan Greenspan in testimony on monetary policy before the House Financial Services Committee last Wednesday.
A Reuters poll following Greenspan's testimony found that all of Wall Street's 25 primary dealers predicted another quarter-point rate cut at the next policy meeting on Aug. 21.
''If GDP came in bad then bad news might become good news,'' Kleintop said. ''We would see a shift to looking to interest rates again. Greenspan gave us some thought that he stands ready to do more if needed. So maybe then we would see 50 basis points being priced in at the August meeting.''
Analysts predict the second-quarter employment cost index (ECI), due on Thursday, will have risen by 1.0 percent, a modest pace, and slightly slower than the 1.1 percent clip in the first quarter.
On Thursday, durable goods orders for June are expected to fall 0.8 percent on the month against an increase of 3.0 percent in May. The University of Michigan final consumer sentiment index is set for release on Friday.
REUTERS
Take care
t_a