What's ahead for the stock market

Earnings from Alcoa, GE, Google and JPMorgan Chase will guide investors. Can the Dow close above 11,000?

By Charley Blaine Apr 9, 2010 8:15PM

Charley BlaineUpdated: 10:30 p.m. ET, April 11 

 

If  you thought this past week was a little quiet, it was -- until the last 30 minutes of trading on Friday. And then the buying kicked in that pushed the Dow Jones Industrial Average ($INDU) to 11,000.98 at 3:54 p.m. ET -- the first time the blue chips had pierced 11,000 since Sept. 29, 2008.

The Dow couldn't hold 11,000 on the day, but it did finish up 70 points to 10,997 and ended the week up 0.64%. It was the sixth straight weekly gain for the stock market.

The fun really begins in the coming week. The first-quarter earnings season cranks up with heavyweight reports due from five Dow components: Alcoa (AA), Intel (INTC), JPMorgan Chase (JPM), Bank of America (BAC) and General Electric (GE). And Google (GOOG), too.

So, what to expect? Very strong earnings and possibly better guidance as the economic recovery starts to accelerate. And maybe higher stock prices.

Even if the Dow couldn't hold 11,000, the blue chips had their best close since Sept. 26, 2008. So did the Standard & Poor's 500 Index ($INX). And the 17-point gain for the Nasdaq Composite Index ($COMPX) brought it to 2,454, its highest close since June 19, 2008.

 

In addition to the Dow's 0.64% gain for the week, the S&P 500 was up 1.4% and the Nasdaq up 2.1%.

 

With members of the European Union agreeing to a financial rescue line to Greece on Sunday, offering the country up to $40 billion in aid to meet its debt obligations, the good feelings from Friday should carry over to Monday.

Article continues below.

Can the market get past 11,000?
Regardless of possible resolution of the Greek uncertainty, Friday's finish left investors with this question: How strong a resistance point will Dow 11,000 be (or for that matter, 1,200 on the S&P 500)? The market has been flirting with the two levels since around March 22.

The answer won't come simply by watching indexes. It will come with the market reaction to the earnings that will come in.

To be sure, many analysts believe the market is long overdue for a 5% to 10% correction. There's even talk of a 20% correction, which would bring the Dow back to 8,800.

On MSN Money's Top Stocks blog: Louis Navellier flatly wrote he saw the big rally since 2009 ending soon. "Right now," he wrote, "the amazing improvements for most stocks compared with 2009 are masking the fact that things are just less bad."

Markets for the week



4/9/2010

4/1/2010

% chg.

YTD chg.
Dow industrials

10,997.35

10,927.07

0.6%

5.5%
S&P 500

1,194.37

1,178.10

1.4%

7.1%
Nasdaq 

2,454.05

2,402.58

2.1%

8.1%
Russell 2000

702.95

683.98

2.8%

12.4%
Crude oil 

$84.92

$84.87

0.1%

7.0%
(per barrel)











U.S. Dollar Index 

81.24

81.44

-0.2%

3.9%
10-yr. Treasury

3.89%

3.94%

-1.3%

1.2%
Gold

$1,161.90

$1,126.10

3.1%

6.0%
(per troy ounce)











 

While there's concern about stocks, Most analysts are bullish about earnings because of indications the job market is starting (but only starting) to come back. Thursday's sales reports from retailers were also robust, especially high-end retailers like Tiffany (TIF), analyst Brian Sozzi of  Wall Street Strategies told Reuters.

And, for those who like esoteric indicators, rail-car loadings are now running solidly above year-ago levels. But they're still below 2008 levels, according to data from the Association of American Railroads and ASI/Transmatch, which drills into the railroads' data.

Even shipments of lumber and crushed stone, critical elements in construction, are starting to perk up.

Thomson Reuters is expecting earnings for the S&P 500 to rise some 37% to about $160 billion from a year ago, led by improved results for banks, materials producers and consumer discretionary stocks such as Ford Motor (F) and others.

There will be real gains in revenue -- 10% overall -- with energy, materials and technology companies enjoying the biggest gains overall.

There haven't been many earnings warnings, especially compared with a year ago, Thomson Reuters says. The ratio of negative warnings to positive warnings is 1.2-to-1, down from 1.3-to-1 a year ago and lower than the long-term average of 2-to-1.

So, here's who reports next week:

Monday: Alcoa is the marquee report, coming after the close. The aluminum maker is expected to report 10 cents a share in earnings, up from a loss of 60 cents a year ago. Revenue is supposed to jump 25% to $5.2 billion. The stock was downgraded Friday.

Tuesday: Railroad CSX (CSX), industrial supplies distributor Fastenal (FAST) and Intel. Intel has said it sees a strong quarter. Analysts agree, forecasting a 37% increase in revenue to $9.82 billion and earnings per share of 38 cents, up 245% from a year ago. Shares are up 10%, 10th-best among the 30 Dow stocks.

Wednesday: JPMorgan is expected to report 63 cents a share in earnings, up from 40 cents a year ago. But watch to see if it responds to a Wall Street Journal report that banks routinely unload lots of debt for short periods of time at the end of the quarter to reduce their risk levels.

Thursday: Google, which reports after the close, has had a tricky year. Its decision to defy China over censorship issues has hit the stock; shares are down 8.7% this year. So, there are lots of questions: How does it see the China situation? How is its Android phone performing?  Also reporting: Advanced Micro Devices (AMD), Krispy Kreme (KKD) and mining giant Rio Tinto (RTP).

Friday: Bank of America and GE report before the open. Shares of both companies are among the strongest Dow stocks, up 22%-plus this year. This will be B of A's first quarter under the leadership of Brian Moynihan, who succeeded Ken Lewis as CEO in January. The company is expected to report 9 cents a share in earnings, down from 17 cents a year ago. The stock finished Friday at $18.59, up 23% for the year and 492% from its March 2009 low. Analyst Dick Bove of Rochdale Securities thinks Bank of America could be worth $53 a share if broken up.

With General Electric, the question is whether its huge finance business has really turned the corner. Analysts are starting to come around on the industrial giant. The stock is up 22% this year to $18.52.

As busy as the week ahead sounds, the following week gets a lot busier.

A veritable flood that includes reports from IBM (IBM), Coca-Cola (KO), Apple (AAPL), Goldman Sachs (GS)Boeing (BA), McDonald's (MCD), Freeport-McMoRan Copper & Gold (FCX), Wells Fargo (WFC) and Schlumberger (SLB).  

A series of important economic reports
The first week or so of any month is relatively quiet, except for the big jobs report.

Next week, like earnings, has a lot of market-moving news on tap. Here's what to watch:

Consumer Price Index, due Wednesday. Inflation is supposed to be low. But watch out for rising energy prices in March.

Retail sales for March, due Wednesday. The consensus estimate is for a 1.1% gain. "Households are spending more and saving less in anticipation of an improving economy," says IHS Global Insight. The economic research firm sees sales up 1.2% in March, led by improving auto sales.

Industrial production for March, due Thursday. Look for 0.6% improvement in March over February. Partly it's the economy's fault. And partly it's because there weren't any big winter storms.

Housing starts and building permits for March, due Friday. Nobody expects big gains, but the consensus is for starts to come in at a seasonally adjusted 610,000 units, up from February's 575,000. Permits, the less sexy but more important of the two numbers, are expected to be 626,000, down from February's 627,000 rate.



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