What's ahead for the stock market
Big Oil will report big profits. Key reports are also due from Caterpillar, 3M, Procter & Gamble and WellPoint. The Fed meets on interest rates.
Updated: 8:50 p.m., Saturday
Investors liked what they heard this past week on earnings from banks and most big tech companies. The coming week brings Big Oil.
Consumers may not care for what Exxon Mobil (XOM), Chevron (CVX), ConocoPhillips (COP), Royal Dutch Shell (RDS.A), BP (BP) and others will say about oil prices. You can expect them to say crude oil is heading higher. Demand for oil and other fuels is strong. Better, profits are strong and likely to stay that way. Crude closed at $85.12 a barrel on Friday, up 7.3% on the year.
That means more pain at the pump. The national retail price of gasoline -- $2.851 a gallon on Friday -- is up 76% from the end of 2008 and is already topping $3 a gallon in many parts of the country. But investors will probably cheer the oil companies' prospects.
That should help stocks generally. But listen carefully if Ford Motor (F) and Honda Motor (HMC) talk about fuel prices when they report results on Tuesday and Wednesday, respectively. Higher fuel prices killed auto sales in 2007 and 2008.
Investors got an idea Friday of what to expect from the world of energy when oil services company Schlumberger (SLB) reported first-quarter results.
Even if the company, which offers everything from well cementing to seismic services, reported a profit decline in the first quarter, CEO Andrew Gould said it was starting to see profit margins rise, especially in its international business. And the uptick was earlier than he'd expected.
Result: Shares jumped 6.6% to $72.68 on Friday. The finish was eighth-best among stocks in the Standard & Poor's 500 Index ($INX) and was a big reason why the index finished up 9 points on Friday to 1,217 and why the energy sector was the market's strongest last week.
So get ready for Big Oil.
Article continues below.
Thanks to energy stocks and Apple (AAPL), up 9.5% on the week, it was a nice week to be an investor. The Dow Jones industrials ($INDU) ended Friday at 11,204, up 70 points on the day and 1.7% on the week. The S&P 500 was up 9 points to 1,217 and up 2.1% on the week. The Nasdaq Composite Index ($COMPX) was up 11 points to 2,530, up 2% for the week.
The closing levels were the best since Sept. 12, 2008, for the Dow and the S&P 500 -- just before Lehman Brothers collapsed. The Nasdaq ended at its best level since June 2008.
If you're technically minded, the S&P 500's close was a breakout. It moved above its 52-week high, and it's now 80% above its March 9, 2009, low. The Nasdaq has nearly doubled since its March 2009 low.
The reason for the gains was increasing optimism that an economic recovery has taken hold. Business is starting to see real sales gains. Those consumers with jobs are feeling more confident and are starting to spend again. Rail and truck shipping volumes are increasing.
To be sure, the recovery hasn't hit everyone; no recovery ever does.
High unemployment and, worse, underemployment remain big issues. Most U.S. housing markets are struggling.
Europe has big problems. Greece's huge government deficits mean it needs a bailout and faces major spending cuts. And there are problems with Spain and Portugal as well.
Despite those worries, the overall market optimism -- plus Big Oil's prospects -- may translate into a stronger market next week. Here's what else to look forward to.
First, remember that there will be intense wrangling over a financial reform bill all week.
Second, Lloyd Blankfein, the CEO of Goldman Sachs (GS), and others from the firm will testify Tuesday before the Senate Permanent Subcommittee on Investigations about the firm's actions before the subprime mortgage crisis erupted in 2007.
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And then there are the earnings:
Monday: While Big Oil is the focus of the week, the big report Monday will come from Dow component Caterpillar (CAT). Caterpillar has been boosting guidance, citing the emerging global recovery. Pay attention to results from money management company Blackrock (BLK). And listen to Texas Instruments' (TXN) comments about the health of mobile telecommunications. It reports after the close.
Ford will get the most attention because investors will want to hear how the company views the recovery and its prospects given sales incentives from Toyota Motor (TM) and General Motors. Analysts see Ford reporting 31 cents a share in earnings, up from a year-ago loss of 75 cents a share. The revenue estimate is $30.5 billion, up 42.7% from a year ago.
The biggest of a slew of energy companies due on Tuesday is BP. It also faces some bad publicity in the aftermath of the Deepwater Horizon drilling rig explosion last week in the Gulf of Mexico. The explosion may have killed 11 workers. Over the weekend, the well was reported to be leaking 1,000 barrels of crude a day.
Wednesday: Honda reports early in the day. Royal Dutch Shell and Cabot Oil & Gas (COG) are among the energy companies reporting. Outside of energy are several media reports: Comcast (CMCSA) , Meredith (MDP) (publisher of Better Homes & Gardens) and Martha Stewart Living Omnimedia (MSO).
Health insurer WellPoint (WLP), the nation's largest by number of people enrolled, will command attention. A Reuters report said a company computer program scans for women with breast cancer and then drops their coverage. WellPoint says it's looking for people who might have had pre-existing conditions.
Thursday: This is a huge day with more than 550 companies reporting.
Exxon Mobil reports before the open. The revenue estimate is $96 billion, up 51% from a year ago. For the record, that annualizes at $360 billion, about the same as the gross domestic product of Greece. The earnings estimate is $1.41 a share, up 53% from a year ago.
Friday: Chevron, the second-largest U.S.-based oil company, reports before the open. The earnings estimate is $1.93 a share, up 168% from a year. Revenue is expected to jump 47% to $53.3 billion. James River Coal (JRCC) reports as well.
The Fed dominates the economic news
The Federal Reserve's rate-making body, the Federal Open Market Committee, will hold a two-day meeting to decide interest-rate policy for the next few months. The decision will come Wednesday afternoon.
This is the big economic event of the week. The bullishness of the stock market may generate more pressure for the central bank to raise the target for its key interest rate -- the federal funds rate. It is now 0% to 0.25%.
A parallel question is how the Fed should reduce its $1 trillion inventory of mortgage-backed securities without flooding the markets and pushing interest rates higher.
Also coming next week:
The S&P/Case-Shiller Index, due Tuesday. This measures home-price changes in 20 major markets. It's likely to show more signs that the housing market has bottomed. But not much more.
Two measures of consumer confidence. The Conference Board's Consumer Confidence Index is expected to rise to 53.5 for April. IHS Global Insight thinks it will be 57. That would be the best showing since September 2008.
The final University of Michigan Consumer Sentiment Index for April, due Friday, is expected to hit 71. That would be up from 69.6 in an earlier estimate.
First-quarter gross domestic product, due Friday. Sounds boring, but GDP is how we measure the economy. And this report is likely to end the argument over whether the recovery is real.
The consensus estimate is that the report will show the economy growing at a 3.5% annual clip. Growth in the 2009 fourth quarter was helped by companies adding to inventories. That's likely to be a reduced factor.
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[BRIEFING.COM] The S&P 500 (-0.4%) remains near its low and is facing a bit of a challenge as five sectors display relative weakness, leaving the energy sector (-0.1%) as the top performer. The sector has received a measure of support from crude oil, which is higher by 0.9% at $91.73/bbl.
Elsewhere among commodities, gold futures ended the pit session with a gain of 0.3% at $1222.10/ozt, while silver and copper settled little changed at $17.78/ozt and $3.04/lb, respectively. ... More
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