July 15, 2006 in Business

Wall Street strains for good news

Associated Press The Spokesman-Review
 

NEW YORK —Although a whirlwind of bad news and deepening uncertainty sent stocks tumbling last week, Wall Street could see a return to reason in the week ahead with a fresh round of economic and earnings data that could help investors regain their footing.

The tidal wave of events last week couldn’t have been worse for the market. Profit warnings and disappointing earnings from Alcoa Inc. and General Electric Co. drove fears about slowing economic growth, while escalating tension in the Middle East, Iran and North Korea sent oil prices racing to new record highs.

Nervous investors quickly backed out of stocks, giving Wall Street its worst weekly performance of the year. The Dow Jones industrial average logged three days of triple-digit declines, losing 396 points from Wednesday through Friday.

At the least, this week’s news could help investors gain some clarity on the economy, for better or worse. Data on wholesale and consumer prices — as well as minutes from the latest Federal Reserve meeting and expected congressional testimony from Fed Chairman Ben Bernanke — could answer questions about whether to expect more interest rate increases.

Meanwhile, the impending flood of profit reports may calm worries about the shaky start to the second-quarter earnings season — or confirm fears that rising energy prices and lending rates are finally taking a toll at the corporate level.

Economic data

Wall Street will be focused mostly on the Labor Department’s producer price index Tuesday morning. Wholesale prices — considered a precursor to consumer inflation — are expected to grow 0.3 percent in June after rising 0.2 percent the prior month. Core PPI, which excludes volatile energy and food costs, are seen gaining 0.2 percent.

The department then releases the latest consumer price index reading on Wednesday, with both overall and core consumer prices projected to grow 0.2 percent in June. Any signs that persistently high oil prices have boosted prices elsewhere in the economy could spark worries about rising interest rates and send investors running for cover.

Earnings

A handful of Dow Jones industrials report their earnings this week as the first real wave of results hit the market. The most closely watched earnings will be those from IBM Corp., Intel Corp. and Microsoft Corp., since technology spending is considered a barometer of future economic growth.

IBM posts its results Tuesday afternoon, and analysts predict the economy’s earnings will grow to $1.29 per share from $1.12 per share the year before.

Results from Google Inc. Thursday afternoon will provide investors with an update on the Internet advertising market. The Web technology company is expected to earn $2.21 per share for the quarter, sharply higher than the $1.36 per share earned last year.

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