Investors face more signs of a stalling economy, including what will probably be a weak jobs report. Earnings are due from General Motors, Pfizer, Procter & Gamble and Time Warner. Oh, and did we mention the continuing debt-ceiling crisis?
By Charley Blaine on Fri, Jul 29, 2011 8:49 PM
20You recommend this50%You don't recommend this50%Shared 48 timesHere's the good news from a lousy week for stocks: It could have been worse.
Will there be better news in the week ahead? Maybe, if there's a little luck. At the very least, the market will be volatile.
The second-quarter earnings season will continue with reports due from 107 members of the Standard & Poor's 500 Index (INX) , including three components of the Dow Jones Industrial Average ($INDU): Pfizer (PFE), Kraft Foods (KFT) and Procter & Gamble (PG).
Meanwhile, the debt-ceiling crisis will still be raging. In addition, the economy may well command as much attention as the political crisis, especially Friday when the Labor Department releases its report on July payrolls and unemployment. The report may not provide a lot of cheer.
The past week really was a mess. The Dow fell every day, losing nearly 538 points, or 4.2%, in the process. In fact, the Dow is on a six-day losing streak, its first since early June. The S&P 500 fell 3.9%, with the Nasdaq Composite Index ($COMPX) off 3.6%.
The Nasdaq's loss came as Apple (AAPL) closed above $400 for the first time, and there was talk about when the stock would hit $500. Not this past week: The stock fell back to $390.48, ending the week off 0.7%.
But Amazon.com's (AMZN) market capitalization topped $100 billion for the first time during the week and held it. Shares rose 2.8% thanks to a huge second-quarter sales gain. Amazon.com's market cap is roughly equal to those of ConocoPhillips (COP), PepsiCo (PEP) and Verizon Communications (VZ).
Gold (-GC), meanwhile, soared as high as $1,634 an ounce because of worries in Europe, the weak U.S. economy and the political warfare in Washington. The metal finished the week at $1,628.30 an ounce, up 8.4% for the month. Silver (-SI) reached $40.16 an ounce, a gain of 15% in July.
It's about the economy
The debt-ceiling battle will produce a more austere economic environment in the next few years. What now has many economists worried is that the prospect of a lesser federal presence in the economy will actually weaken business conditions.
In fact, going through the government's report on gross domestic product showed two things: Consumers aren't spending, and state and local spending is shrinking fast.
The big economic report of the coming week is the jobs report. In June, the Labor Department reported just 18,000 nonfarm jobs created and an unemployment rate of 9.2%. For July, the rate will still be 9.2%.
Nonfarm payrolls may rise 85,000, with private employment up 135,000. But watch state and local employment, which is weakening rapidly. Minnesota's government shutdown put 20,000 workers on furlough.
These trends may show up on the week's other economic reports. They include:
The Institute for Supply Management's Manufacturing Index, due Monday. Look for a number just above 50, which signals growth in manufacturing. But not much. Partly that's hangover from the Japanese earthquake. Partly it's due to the economic uncertainty.
Personal income and spending. Incomes aren't growing, and spending has been trimmed by consumers worried about job security and squeezed by high fuel costs and food prices. Gains will be flat at best.
Auto sales for July, due Tuesday. The forecast is for sales to rise modestly from June and come in at an annualized 11.9 million units, up 4% from June. Japanese automakers are still dealing with parts shortages.
ADP National Employment Index, due Wednesday. This measures private-sector employment and can vary wildly from the government's data. Look for a private-sector gain of 135,000 private-sector jobs. It may be too optimistic.
Institute for Supply Management nonmanufacturing index, due Wednesday. Like the manufacturing index, don't look for big gains.
Jobless claims, due Thursday from the Labor Department. If claims stay below 400,000 for a second week, that could change all the estimates.
How about them earnings
For all the worries about how the debt-ceiling battle may affect the economy, earnings have been surprisingly good. If you subtract Bank of America (BAC), Thomson Reuters is projecting earnings among S&P 500 companies will grow 16.3%. (With Bank of America, which had a huge loss because of its acquisition of Countrywide Financial, the growth rate is 10.4%. )
Meanwhile, of the 327 companies that have reported results, 73% have beaten estimates, compared with the 64% average since 1994.
Energy and materials companies are reporting the most growth in earnings.
Here are the key earnings for the week:
Monday: Allstate (ALL), HSBC (HBC), Humana (HUM) and Tenet Healthcare (THC). HSBC is expected to announce it's cutting 10,000 workers globally.
Tuesday: Pfizer, Barclays (BCS), Boston Beer (SAM), Hertz Global Holdings (HTZ) and Sirius XM Radio (SIRI). Merck (MRK) said Friday it was cutting its work force by 12,000 to 13,000. Will Pfizer?
Wednesday: MasterCard (MA), Time Warner (TWX), Garmin (GRMN) and Transocean (RIG), owner of the Deepwater Horizon rig, which blew up last year in the Gulf of Mexico, killing 11 and setting off the worst U.S. oil spill.
Thursday: General Motors (GM), Apache (APA), Kraft Foods (KFT) and piano-maker Steinway Musical Instruments (LVB).
Friday: Procter & Gamble, Royal Bank of Scotland (RBS) and Viacom (VIA.B)."
(money.msn.com)
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