NEW YORK — Wall Street's focus will shift to corporate earnings in the week ahead, with hopes that the negative outlooks that stymied the market in September will dissipate and that a few positive surprises will push stocks higher.
More than 100 companies are scheduled to release their third-quarter earnings reports this week, the first full week of earnings season, which will last through mid-November. Despite the numerous warnings and negative outlooks that generated plenty of press, analysts expect the companies in the Standard & Poor's 500 to report a 10 percent to 15 percent increase in profits from a year ago.
However, it's not how much profits increase, but whether a company beats Wall Street forecasts that determines a stock's direction after an earnings report. Many analysts saw last month's spate of negative outlooks as a chance for many companies to adjust those projections ahead of time, creating the possibility of a positive surprise — or at least diffusing the bad news over a month's time.
Technology and financial stocks will be under scrutiny during the week ahead as a number of major firms report their quarterly earnings. Investors will watch closely for future guidance, especially in the struggling tech sector, hoping for better fortunes in the fourth quarter and 2005.
Last week, a lower-than-expected jobs creation figure for September capped a disappointing week on Wall Street. Oil prices climbed above $53 per barrel, setting another record high, and the first two Dow components to report earnings, Alcoa Inc. and General Electric Co., matched Wall Street expectations but saw their stock bid lower.
For the week, the Dow dropped 1.35 percent, the S&P fell 0.83 percent and the Nasdaq was down 1.14 percent. The major indexes have fallen in two of the last three weeks.
While Wall Street digests the first full week of earnings, only a few important economic reports are due out. On Thursday, the Commerce Department will report on the nation's trade deficit. Economists expect the deficit to reach $51.3 billion in August, up slightly from the $50.1 billion reported in July. A larger number could be cause for concern, since it would show that consumers are purchasing cheaper foreign goods at the expense of domestic businesses.
On Friday, the Labor Department is expected to release its reading of the Producer Price Index, the measure of wholesale prices and costs, for September. Economists expect a 0.1 percent increase for the month, up from a 0.1 decrease in August. So-called core PPI — which excludes volatile food and energy costs — is expected to rise 0.2 percent, up from the 0.1 percent loss in the prior month.
Dow component Intel Corp., which fell sharply last month after it warned about a soft third quarter, will report its earnings Tuesday after the session. The consensus among Wall Street analysts is for earnings of about 27 cents per share, compared with 25 cents a year ago. The stock has fallen from a high of $34.24 on Jan. 8 to a closing price of $20.55 Friday as corporate technology spending dropped off during the year. With inventories still high for Intel's top products, Wall Street will look carefully at any outlook Intel provides for future quarters as well.
Other tech companies reporting this week include online giant Yahoo! Inc. on Tuesday afternoon, expected to report profits of 9 cents per share; Apple Computer Inc., reporting Wednesday after the close and forecast to earn 18 cents per share; and cell phone maker Nokia on Thursday before the session, expected to earn 15 cents per share.
Merrill Lynch & Co. is expected to report its third-quarter results Tuesday before the session, hoping to do better than its rival Morgan Stanley, which disappointed Wall Street with its earnings last month. Merrill Lynch is forecast to earn 92 cents per share, down from the $1.03 it posted in the same quarter a year ago. The stock is down 16 percent from its year-best closing price of $62.25 on March 5.
Citigroup will follow Thursday before the session, and is expected to earn 99 cents per share, better than the 90 cents per share profit from a year ago. The company's stock has dropped 14 percent since its April 2 high of $51.80.
Other financial companies reporting during the week include Bank of America Corp. on Thursday morning, forecast to earn 91 cents per share; KeyCorp, also Thursday before the session, expected to post a profit of 59 cents per share; and Wachovia Corp. on Friday, forecast to earn 99 cents per share.
Two other widely held stocks will report this week. General Motors Corp. has fallen nearly 20 percent from its high of $55 on Jan. 7, closing Friday at $41.49. The automaker will report its latest earnings on Thursday before the session. Wall Street is expecting profits of 96 cents per share, up from 79 cents from a year ago.
And mortgage giant Fannie Mae, embroiled in a controversy over its accounting practices, will also report earnings early Thursday. Wall Street is expecting $1.88 per share from the company, up from $1.83 per share in the year-ago period. But with the company under scrutiny from both regulators and Congress, the company will need to assure investors that it can continue to keep its profits steady. The stock has fallen nearly 9 percent since Sept. 21.