Investors look to earning reports in coming week

by Rex Crum, MarketWatch
June 18, 2011

SAN FRANCISCO — Earnings reports from Oracle Corp, Micron Technology Inc. and FedEx Corp., and concerns about possible negative pre-announcements from other companies about quarterly results are seen as impacting investors in the coming week.

The market will be looking for any signs of more stability after a rough few months.

In the just-completed week, the Dow and the S&P 500 broke six-week losing strings. The Dow Jones Industrial DJIA +0.36% rose 0.4% to close the week at 12,004; the S&P 500 SPX +0.30% broke even at 1,271. The Nasdaq Composite Index COMP -0.28% shed 1% to finish the week at 2,616, its fifth straight losing week.

The erratic nature of the market “highlights how hair-trigger things have gotten,” said Pete Sorrentino, vice president and senior portfolio manager at Huntington Funds in Cincinnati. “Everyone’s willing to hit the “sell” trigger.”

Sorrentino said he expects there will be a fair amount of “pre-announcement anxiety” involving the financial sector, with new rounds of cost cutting putting pressure on banks’ earnings. Sorrentino also said that market continues to be “haunted” by weak housing and unemployment numbers.

“Basically, we’ve had almost all economic data roll over and come in below consensus expectations,” said Hank Smith, chief investment officer of Haverford Investments, in Radnor, Pa. “The immediate question is if the market is overreacting to this.”

Among the economic data slated for the week is a report on first-time jobless claims for the week ended Saturday. Those numbers, to be released Thursday, are expected to rise from 414,000 the prior week. New -home sales for May also come out Thursday and are expected to show a drop from 323,000 in April.

The market will get a look at how the Federal Reserve views the economy on Wednesday when the Fed’s Open Market Committee meets on interest rates. The FOMC is expected to leave the interest rate unchanged at between 0% and 0.25%.

Among companies set to report earnings are Adobe Systems Inc. ADBE -1.07% and cruise line operator Carnival Corp. CCL +1.47% on Tuesday; FedEx Corp. FDX +0.59% and Bed Bath & Beyond Inc. BBBY -1.65% on Wednesday; and Oracle Corp. ORCL +1.25% and semiconductor maker Micron Technology Inc. MU -0.45% on Thursday.

In addition to those reports, Smith said investors will be looking for any notable pre-announcements that could shake the market further after several weeks of losses punctuated by disappointing economic data such as a recent uptick in the unemployment rate.

“If we get a spate of negative pre-announcements for the second quarter, this pullback we are in could turn into a full-blown correction,” Smith said.

Smith added that a psychological point that could help the market would be a sign of improvements in the financial situation in Greece. The country named a new finance minister on Friday, and Germany and France took steps to ensure the stability of the euro.

“The market is reacting to the violence [in Greece] and that’s having more of an impact than the debt refinancing there itself,” Smith said. “If the violence and rioting subsides, that will be very important.”

Not all money managers and analysts are skeptical.

“If I were leaning one way, I’d expect a better week,” said Don Hodges, chairman of Hodges Capital Management in Dallas. “Personally, I think we’re just going through one of those negative periods here and around the world. This is the time to start identifying value and pick it up, when the pessimism is knee deep.

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