Strong earnings may not lift Wall Street

First-quarter earnings season kicks into full swing Monday, and several key economic reports - including two inflation assessments - are due from the government.Diane Bondareff / AP
/ Source: The Associated Press

Despite Wall Street's expectations of yet another round of impressive quarterly earnings, this week's onslaught of data could leave the market right back where it started _ or ultimately lower.

First-quarter earnings season kicks into full swing Monday, and several key economic reports _ including two inflation assessments _ are due from the government.

Companies are once again expected to post double-digit profit growth for the first three months of the year. However, some analysts fear this may be the last solid quarter for a while as the impact of rising interest rates and energy costs is felt.

Even if first-quarter earnings meet or beat estimates, disappointing outlooks for the coming periods could make investors wary. On Thursday, General Electric Co. left its 2006 forecast unchanged; its stock tumbled 1.6 percent and continued falling in after-hours trading.

Meanwhile, the question remains, how much higher will the Federal Reserve lift interest rates as it continues battling inflation. Disappointing reports on wholesale and consumer inflation will likely send investors running for cover. On the other hand, stabilizing prices could energize the market following its recent decline.

Without much news last week to give investors confidence in stocks, the lingering uncertainty over earnings and the economy's health left stocks drifting. The Dow gained 0.16 percent, the S&P 500 lost 0.49 percent and the Nasdaq slipped 0.55 percent in a holiday-shortened week.

Although investors may get sidetracked by earnings, critical data on inflation and home building will feed Wall Street's obsession with interest rates.

The Commerce Department on Tuesday reports data on the number of housing starts and building permits issued in March. Economists are expecting housing starts to retreat by 75,000 to 2.05 million and building permits to fall by 99,000 to 2.08 million _ a sign that the housing market is indeed slowing in response to higher mortgage rates.

Also Tuesday, the Labor Department releases its monthly producer price index, which tracks prices paid by wholesalers and is often seen as a precursor to inflation at the consumer level. The PPI is forecast to edge up 0.4 percent after tumbling 1.4 percent in February; core PPI, which excludes food and energy prices, is seen rising 0.2 percent after adding 0.3 percent in the prior month.

The department's reading of its consumer price index on Wednesday is expected to show a gain of 0.4 percent, up from a slight 0.1 percent rise last month. Core CPI is seen adding 0.1 percent.

Nearly half the Dow industrials report their results this week. Analysts have said the lack of profit warnings in recent weeks means results stand to match or beat Wall Street's lofty expectations.

The Dow components reporting next week include financial services firm Citigroup Inc., drugmaker Pfizer Inc., automaker General Motors Corp., soft-drink producer Coca-Cola Co. and computer maker International Business Machines Inc.

Tech investors will be closely watching results from Yahoo Inc. for a read on the health of the online advertising industry. When the company reports after the closing bell Tuesday, analysts predict its profit will drop to 11 cents per share from 13 cents a year earlier. Yahoo is about 29 percent below a 52-week high of $43.66 in early January, finishing Thursday up 3 cents at $31.13.

Surging demand for its popular iPod media player should help Apple Computer Inc., which posts its report Wednesday afternoon. Analysts expect Apple's profit to climb to 43 cents per share from 35 cents a year ago. Its stock is down 23 percent from a mid-January high of $86.40; on Thursday, shares fell 24 cents to $66.47.

Shipping firm UPS Inc. could come into focus as investors watch for signs of soaring oil prices eating into corporate profits. UPS shares rose 14 cents to $81.60 Thursday, near a recent 52-week high and up 9 percent so far this year. The company reports Thursday morning; its earnings are seen jumping to 88 cents per share from 78 cents last year.

                    On Tuesday, the Fed publishes the minutes from the latest Federal Open Market Committee meeting. While the central bank has said it remains hawkish on inflation, analysts will be scouring these notes for any clues on whether an end to interest rate increases is near.