SAN FRANCISCO (MarketWatch) — Corporate earnings will command the attention of investors in the coming week with about one-third of the S&P 500 and the Dow Jones Industrial Average reporting quarterly results.
“We’re looking at the big industrials for indicators of global growth,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
Economic data in the past week have indicated a cooling off in the manufacturing sector as the Federal Reserve said March industrial production levels were unchanged in February, and manufacturing gauges in the New York and Philadelphia regions declined.
Also, slowing growth in China and a possible recession in Europe threaten to throw cold water on U.S. exports.
Among the big earnings reports beginning Tuesday are Apple Inc. (US:AAPL) along with Dow components AT&T Inc. (US:T) , United Technologies Corp. (US:UTX) , and 3M Co. (US:MMM).
Other Dow (US:DJIA) components reporting include Boeing Co. (US:BA) and Caterpillar Inc. (US:CAT) on Wednesday, Exxon Mobil Corp. (US:XOM) on Thursday, with Chevron Corp. (US:CVX), Procter & Gamble Co. (US:PG), and Merck & Co. (US:MRK) wrapping up the week on Friday.
Other high-profile earnings include Netflix Inc.(US:NFLX) on Monday, and Amazon.com Inc.(US:AMZN) on Thursday.
Of the 106 companies on the S&P 500 Index (US:SPX) that have reported earnings this season, 83% have reported earnings above consensus Wall Street estimates, according to John Butters, senior earnings analyst at FactSet Research. If that rate holds, it will be the highest upside surprise rate during earnings season in three years, Butters said.
One nonearnings factor that may color the week is the first round of the French presidential election on Sunday, where front-runners Nicolas Sarkozy and challenger Francois Hollande are expected to go to a runoff election.
“There may be a little spillover from France but it will be more of the same from earnings,” said Luschini. “The numbers have been exceeding by a sizable amount, so either management was good at keeping expectations low or analysts were too cautious.”
Luschini said Tuesday and Wednesday will be busy days for economic data and Fed watching. On Tuesday, Case-Shiller home-price data come out, along with April consumer confidence data and March new-home sales. Then, on Wednesday comes durable-goods orders for March, and the Federal Open Market Committee announcement followed by a news conference from Fed Chairman Ben Bernanke.
“Anybody and everybody will be trying to interpret where the Fed’s psyche is at the moment,” Luschini said.
Financial stocks, which are the best performing sector with regards to earnings expectations this season, will continue to be a focus. Over the past week, the blended earnings growth rate in the S&P 500 improved to 2.2% from 1% in the previous week. That was fueled by a 12.8% blended earnings growth rate from financial firms, according to Butters.
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