What's ahead for the stock market

Research In Motion, Nike and Oracle earnings will get lots of attention. The Fed is likely to leave rates alone. BP hopes to raise $10 billion.

By Charley Blaine Jun 18, 2010 7:53PM

Charley BlaineUpdated: 8:25 p.m. ET Friday

Maybe you missed it amid all the tumult over BP (BP), the Gulf of Mexico oil spill and the worries that the economy may be sagging.

But the fact is the stock market finished higher for the second week in a row. Not only that,  but the major averages are ahead on the year.



It may be a battle for the momentum to carry through into the week ahead. There are reports on housing that may depress some people. There are important earnings reports due from Nike (NKE), Oracle (ORCL) and Research In Motion (RIMM). Plus, there's always the risk that some company will surprise investors by warning that earnings look weak. And the Federal Reserve will meet on interest rates.

But the biggest hurdle of the week may be convincing the skeptics that the financial markets are stabilized. Here's what to think about:

The Dow Jones industrials ($INDU) were up 2.4% for the week. The Standard & Poor's 500 Index ($INX) added 2.4%. The Nasdaq Composite Index ($COMPX) added 3%.

For the year, the Dow and S&P 500 are up 0.2%. The Nasdaq is up  1.8%. Not much, admittedly. But up is better than down. Besides, this is an even year, and, as one study suggests, in even years, stocks tend to underperform bonds.

Article continues below.

The best news of this past week may be technical. The major indexes ended the week above their 200-day moving averages, which is one of the most important support levels in the markets.

But there's also a fear about where the markets stand. For that, look at this chart of the S&P 500 since December. What scares some market technicians is that a head-and-shoulders pattern is forming, which is just plain bad for stocks.

The logic is this: The index was rising into January. It fell back. It recovered until April 23 and fell back even more and then started to recover again. But the rebound doesn't look especially strong. The worry is that it will run out of gas, and that could generate another sell-off, which could be quite nasty.

There are, in fact, lots of skeptics who believe stocks will run out of gas and are betting big money to push it lower.

Can BP raise $10 billion?
Then, of course, there's the BP problem. The oil giant has lost nearly half of its market cap since the April 20 explosion that sank the Deepwater Horizon rig and set off what's believed to be the worst environmental spill in history.

There are lots of concerns about BP's future as a result of the market-cap loss and the $20 billion it agreed to put up to help pay for the spill.

A big test comes this week when it tries to raise $10 billion in fresh capital.

Markets for the week



6/18/2010

6/11/2010

% chg.

YTD chg.
Dow industrials

10,450.64

10,211.07

2.3%

0.2%
S&P 500

1,117.51

1,091.60

2.4%

0.2%
Nasdaq 

2,309.80

2,243.60

3.0%

1.8%
Russell 2000

666.92

649.00

2.8%

6.6%
Crude oil 

$77.18

$73.78

4.6%

-2.7%
(per barrel)











U.S. Dollar Index 

85.98

87.52

-1.8%

9.9%
10-yr. Treasury

3.22%

3.22%

0.2%

-16.1%
Gold

$1,258.30

$1,230.20

2.3%

14.8%
(per troy ounce)












The Fed will probably leave rates alone
Every time the Federal Open Market Committee of the Federal Reserve meets, pundits galore wonder when the central bank will start raising rates.

The short answer is: not when the Fed's rate-making body meets this week. In fact, its statement, due Wednesday at 2:15 p.m. ET, will be closely scrutinized to see if its view of the domestic and global economies is as bearish as many on Wall Street have become.

Right now, the target on the Fed's federal funds rate, on which most domestic interest rates are built, is 0% to 0.25%.

The euro and the health of the European Union are also a deep concern.

 

Also coming up in the economy:

Reports on existing home sales on Tuesday and new-home sales on Wednesday. The former is likely to show a gain for May because the National Association of Realtors counts sales actually closed. The reason: The homebuyer tax credits expired on April 30, and sales are supposed to close by June 30. There's been lots of activity to get deals done. Look for a seasonally adjusted sales rate above 6 million units.

The Commerce Department will probably show a decline in new-home sales to 420,000 units or so. That's because the department counts contracts signed but not yet closed. And builders have been reporting that slowing activity since April 30.

Durable-goods orders, due on Thursday. This is expected to show a decline. Orders for new Boeing (BA) commercial aircraft fell to just five in the month. Metals prices were lower.

Gross domestic product, due Friday. This is a revision of earlier reports on first-quarter growth. Analysts see this holding at around 3%. Anything lower would hit markets hard.

Consumer sentiment, due from the University of Michigan on Friday. The question is whether the gloom from BP's oil spill plus the worry about the euro turmoil will dampen consumer spirits. Homebuilder Toll Bros. (TOL) made that argument this week in reporting disappoint results.

Does Research In Motion still have momentum?
With all the hype about Apple's iPhone 4, the question is where Research In Motion stands.Research In Motion

Its BlackBerry device has huge fans among corporate users. It has a pretty good consumer audience. But there's lots of talk that Apple (AAPL) is finally making inroads into the corporate market, and the worry is that Apple will overwhelm the Canadian company.

The consensus is that RIM will report $1.34 a share for its fiscal first quarter on revenue of $4.35 billion. The release is due after Thursday's close. That would be up from 98 cents a share and revenue of $3.42 billion a year ago. That's a 37% gain from a year ago on earnings and a 27% sales increase.

The stock is down 9.6% in 2010 while Apple is up 30%.

Will the World Cup help Nike?
Nike reports fiscal-fourth-quarter results after Wednesday's close. The consensus estimates are for $1.05 a share in earnings, up from 99 cents a year ago, and revenue of $5.1 billion, up 8.8%.

The company saw decent U.S. results in its fiscal third quarter and great results from emerging markets like China. Europe was a problem.

What the company reports about Europe and the United States will be important. And watch to see if Nike has been seeing any extra pop from the World Cup in soccer.

Oracle will benefit from Sun acquisition
Oracle, which will report Thursday, is seen posting strong results for its fiscal fourth quarter.

The estimate is 54 cents a share, up 17% from a year ago. Revenue will jump 38.4%, in part because of the addition of Sun Microsystems to its mix.

A question is the lawsuit charging that it gave discounts to some preferred customers but not to the government.

Also due next week
It's a week that will offer a still-clearer picture of the consumer.

Monday: Office furniture maker Steelcase (SCS). The company has been warning about softness in the business for some time. Analysts expect a loss of 6 cents a share.

Tuesday:Adobe Systems (ADBE), in a feud with Apple; broker Jeffries (JEF) and pharmacy operator Walgreen (WAG).

Wednesday: Home-furnishings retailer Bed Bath & Beyond (BBBY), whose shares are up 10% for the year despite worries that a sagging housing market will hurt its business. Also due: CarMax (KMX), Paychex (PAYX) and Rite Aid (RAD).

Thursday:  Darden Restaurants (DRI), credit card company Discover Financial Services (DFS) and homebuilder Lennar (LEN)

Friday:KB Home (KBH).


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