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.
“(Last) week has been chock full of geopolitical tensions, rising oil and just a handful of earnings reports that really have been uninspiring. Nobody wants to wake up to that,” said Leo Grohowski, chief investment officer of U.S. Trust. This week, “at least you’ll have real information and data.”
Wall Street withered last week amid intensifying economic and political turbulence. For the week, the Dow Jones industrial average lost 3.17 percent, the Standard & Poor’s 500 index slumped 2.31 percent and the Nasdaq composite index tumbled 4.35 percent.
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.
The Fed’s June report on industrial production and capacity utilization, due Monday morning, is another critical report. Manufacturing output is forecast to grow 0.4 percent after dipping 0.1 percent the month before, while utilization is seen edging up slightly to 81.9 percent. The Fed has been watchful of excess capacity, since greater utilization could drive inflationary pressures.
Minutes from the Fed’s June 29 meeting, due Friday, will be examined for clues about the central bank’s opinion of inflation and the economy.
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. IBM shares have suffered from the recent fallout in the tech sector, losing 9 percent ($82.2) so far in 2006 to end Friday at $73.57.
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. Google shares have fluctuated wildly in 2006, falling 3 percent ($414.86) this year to close Friday at $403.50.
Citigroup Inc., one of the world’s biggest financial institutions, releases its earnings Monday morning. Analysts predict Citigroup’s profit will rise to $1.06 per share from 97 cents a year ago. The stock has dropped from a 52-week high of $50.35 in May to finish Friday at $47.58.