Warren Buffett“A public opinion poll is no substitute for thought.”
Adlin Sinclair“Success is a welcomed gift for the uninhibited mind.”
Earnings growth takes center stage (Reuters)
NEW YORK (Reuters) –
Profits from top U.S. technology companies like IBM (
.N) and financial companies like
.N) this week could help stocks gain as long as investors see room for more
.
.O) failed to excite investors on Friday, while steep loan losses reported by
. (
.N) dragged down the market.
The benchmark Standard & Poor's 500 index (.SPX) rose 23.5 percent last year, with information technology the top performing sector. It jumped 60 percent, raising questions about whether the sector may have become too expensive.
“It's all about how fast they can grow earnings to catch up to those valuations,” said Jeff Kleintop, chief market strategist at
in Boston.
“This is a business spending-led recovery rather than consumer recovery … so I think earnings growth will remain above average and justify those valuations.”
, when the
took a heavy toll on corporate profits.
earnings for the quarter are forecast up 186 percent versus a year ago, according to
. It would be the first quarter that S&P 500 company earnings grew year over year since the second quarter of 2007.
U.S. markets will be closed on Monday for
. Day, but beginning on Tuesday, the earnings period accelerates, as some 57
are set to report this week.
.O) is expected on Thursday. Among financials,
is expected on Thursday, while
.N) and
.N) should report on Wednesday.
For the second week of the new year, the three major indexes lost ground. The Dow Jones industrial average (.DJI) was down 0.1 percent, while the S&P was down 0.8 percent and
(.IXIC) was down 1.3 percent.
The S&P 500 is still up 68 percent since its early March lows, largely because of stronger-than-expected earnings and
.
On the economic front, data that could influence stocks this week includes reports on
, producer prices and leading indicators.
Data on December housing starts, expected on Wednesday, is forecast to show 580,000 new units from 574,000 in November.
More than 70 percent of companies beat estimates in recent reporting periods, and investors are eager to see if the fourth-quarter will produce similar results. The
of 2008 was the worst earnings period in the history of the index.
“I think we're going to get decent numbers relative to estimates,” said Fred Dickson, a market strategist at D.A. Davidson & Co. in
Lake Oswego, Oregon
. ”
have gone up, but so have earnings.”
, which fell 3.2 percent to $20.80 on Friday, “had such a good run on the margin front that I think a lot of people are a little bit leery that there's going to be any further improvement in margins,” said Owen Fitzpatrick, head of U.S. Equity Group,
.
IBM shares have risen almost 60 percent in the past year as the company cut costs and changed its business mix. Analysts expect the company to report fourth-quarter revenue of about $27 billion, about even with a year earlier, and profit per share of $3.47 versus $3.27 a year earlier.
Financials, which were up 14.8 percent as an S&P sector last year, could benefit from gains in
and other factors, Kleintop said.
“Financials still remain the sore spot in the market. If financials are going down, the whole market is going down,” he said.
Financials, materials and consumer discretionary companies are expected to have the highest earnings growth for the fourth quarter,
showed. Energy and industrials are expected to have the lowest.
.N),
.N) and American Express Co (
.N).