What's ahead for the stock market

Investors shocked the pundits by mostly ignoring Friday's disappointing jobs report.

Instead, investors focused on how the Federal Reserve will combat the dismal employment picture. Their conclusion was to buy everything hard -- gold, copper, silver, steel and crude oil -- and assume interest rates will head lower.

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Next week should confirm that view because of earnings due from companies including Intel (INTC), CSX (CSX), JPMorgan Chase (JPM), Google (GOOG) and General Electric (GE). 

They are the most important reports due in a week of relatively few reports, maybe 160 in all from companies around the world. A week later, the number swells to more than 500.

Investors had nothing to complain about in the past week. Not only did the Dow Jones industrials ($INDU) close above 11,000 for the first time since May 3, but the market overall moved higher for the fifth week in the past six.

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The Dow finished at 11,006, up 1.6% for the week. The Standard & Poor's 500 Index ($INX) was up 1.7%, and the Nasdaq Composite Index ($COMPX) added 1.3 on the week.

The Dow is up 5.6% for the year, with the S&P 500 up 4.5% and the Nasdaq up 5.9%.

Not a bad showing, considering that the Dow was down 7.2% for the year on July 2.

Markets for the week
			10/8/2010			10/1/2010			% chg.			YTD chg.
Dow industrials			11,006.48			10,829.68			1.6%			5.5%
S&P 500			1,165.15			1,146.24			1.6%			4.5%
Nasdaq			2,401.91			2,381.22			0.9%			5.9%
Russell 2000			693.82			671.01			3.4%			10.9%
Crude oil			$82.66			$81.58			1.3%			4.2%
(per barrel)
U.S. Dollar Index			77.56			78.31			-1.0%			-0.8%
10-yr. Treasury			2.38%			2.61%			-8.8%			-38.0%
Gold			$1,345.30			$1,317.80			2.1%			22.7%
(per troy ounce)

One non-earnings related event will come Monday when Microsoft (MSFT) unveils its Windows 7 operating system for mobile devices. The product will face intense competition from Apple (AAPL) , Google and Research In Motion (RIMM).

Here's how to view the next week's key earnings.

Tuesday: CSX and Intel
The action begins after Tuesday's close when railroad giant CSX and Intel report.

Intel gets the glamour, but CSX is as important because it ships all the stuff that's moving the global economy: grain, steel, autos, chemicals, and it has been saying that business is strong, despite the doldrums in the domestic economy.

In fact, the major railroads are showing freight traffic up 12% from a year ago and, in some categories, particularly chemicals, business is ahead of 2008 levels.

CSX is expected to report a 40% gain in third-quarter earnings from a year ago to $1.04  on a 156% revenue gain to $2.29 billion.

Intel may offer a less bullish picture because there are concerns the chip business is softening. Maybe its partly the economy. It may also be that the tech industry is morphing into something very different where mobile devices start to do larger and largest amounts of the work.

The company is expected to earn 50 cents a share, up 51% from a year ago's 33 cents.

The consensus estimate has come down from 54 cents two months ago because of recession worries and because mobile devices like Apple's iPhone are stealing sales from netbook computers.

The worries about the chip business grew this when Kulicke & Soffa Industries (KLIC), which makes semiconductor assembly equipment, said it expected revenue for the first quarter of its 2010-2011 fiscal year to be down significantly.

Shares fell 9.9% to $5.85 on Friday.

Wednesday: JPMorgan Chase
The most profitable U.S. banking company will report 88 cents a share, up from 82 cents a year ago, analysts believe, but there will be lots of questions for the company.

These will include how the financial reform bill affects the company's business, whether its problem loans are declining, when it may reestablish its dividend and how the foreclosure problem will affect its business.

As important will be how JPMorgan's trading operations were hurt by low trading volumes.

The Dow component's shares are down 5.7% on the year after a sound drubbing the second quarter. Financial stocks barely broke even in the third quarter and mostly lagged the market last month, when the Dow and the S&P 500 had their best September performances since 1939.

Thursday: Google
Google is up 20% since the end of June, in large part because investors are crazy about the prospects of its Android system in the smart phone business.

Motorola (MOT) is the best-known company to manufacture mobile devices using the operating system as its foundation. It is starting to be a major competitor against Apple's iPhone.

Earnings are projected at $6.67 a share for the third quarter, up 13% from a year ago. Revenue is estimated at $5.3 billion up 22% from a year ago.

There are other issues for Google to consider: Will it go back to China and under what terms, what's the health of the online advertising business and how some of its other initiatives, like building online applications to compete against Microsoft products, are performing.

Friday: General Electric
GE, which reports before Friday's open, is starting to invest again. It agreed to pay $3 billion for Dresser Inc., which supplies motors for the offshore oil and gas industry.

What investors should look for is whether this deal and others like it represent a company strategy shift away from financial services, which have produced as much as 50% of profits in recent years, and back to manufacturing.

The shares were up 12.2% in September and up 5.4% so far this month.

Analysts are looking for 27 cents a share in earnings, up 22% from a year ago with revenue unchanged at $36.7 billion.

The Fed and the dollar
The dollar and the weak economy will swirl in and out of all these earnings.

The Fed is worried that inflation is getting too low, and it has been suggesting that it may have to start buying Treasury securities by the bucket load to help boost the economy. This is what "quantitative easing " is all about.

There's been a lot of hand-wringing over this because no one knows if it will work or whether it will unleash a new wave of inflation. And you'll see that concern Wednesday afternoon when the Fed releases the minutes of its Sept. 21 meeting.

The pressures are building on the Fed to do something about the economy, especially after Friday's jobs report showed a decline of 95,000 jobs overall and the national unemployment rate appeared to be stuck at 9.5%.

There's virtually no chance of another stimulus package, especially if the Republicans regain control of Congress. Some Fed officials think a new aid package isn't necessary.

 Here's what else comes up next week:

Mortgage applications, due Wednesday from the Mortgage Bankers Association. A continuation of gains in the past few weeks will be welcome, Nomura Securities says.

Initial jobless claims, due Tuesday from the Labor Department. The trend has been for lower claims.

Producer Price Index and Consumer Price Index, due Thursday and Friday, respectively, from the Labor Department. No big changes are expected. But there have been worries about rising food prices as grain supplies shrink. If there's a big spike in food prices in either, stocks may get buffeted.

Retails sales, due Friday from the Commerce Department. Stronger auto sales may give this report some shine.

Empire State Survey, due Friday from the New York Federal Reserve Bank. This looks at manufacturing in New York State. The concern is whether the economic softness over the summer will end the index's growth trend.