Markets face flood of earnings, inflation data

/ Source: The Associated Press

With Wall Street coming off a record week that saw the Standard & Poor’s 500 index and the Dow Jones industrials barrel to record highs, investors will be waiting to see if earnings and economic reports justify the market’s huge advance.

Eleven of the 30 companies that make up the Dow release their quarterly results this week, while the government will come out with key readings on inflation. The data will help investors determine if the solid corporate growth amid moderating price pressures they’re looking for is indeed in store for the second half of 2007.

Most analysts expect second-quarter earnings to rise between 4 percent and 5 percent, while Standard & Poor’s is anticipating growth of closer to 6 percent. Better-than-expected results could lead to a stock surge, but not necessarily; if companies warn of problems going forward, Wall Street could give back its impressive gains.

The stock market, which had wobbled for a month on worries about interest rates and the subprime mortgage market, rallied on scattered evidence that the consumer is still strong. The Dow rose 2.2 percent last week; the S&P climbed 1.4 percent; and the Nasdaq composite index gained 1.5 percent.

Though the market seemed to set aside its interest rate fears last week, those jitters could arise again if government inflation gauges are higher than expected.

The Labor Department releases the Producer Price Index and the Consumer Price Index Tuesday and Wednesday, respectively. The June PPI is forecast to show a rise of 0.1 percent after a May jump of 0.9 percent. The core PPI, which eliminates food and energy prices, is expected to have risen 0.2 percent, following a similar increase in May.

The market predicts that the June CPI will post a 0.2 percent increase, down from May’s rise of 0.7 percent, and that the core CPI will also rise 0.2 percent, higher than the 0.1 percent uptick in May.

Investors will also search for clues about future rate moves when Federal Reserve Chairman Ben Bernanke speaks Wednesday to the House Financial Services panel, and when the Fed releases minutes Thursday from its Open Market Committee’s June meeting. At that meeting, the central bank held the benchmark rates steady and reiterated that inflation is its prime concern.

The earnings onslaught begins ...
This week’s rush of second-quarter results will come from all corners of the economy — airlines, banks, chip manufacturers, drug makers, and more.

On Tuesday, Intel Corp. is expected to report a profit of 19 cents a share. The semiconductor maker closed at $25.97 Friday, at the top of its 52-week range of $16.84 to $26.00.

On Wednesday, analysts predict International Business Machines Corp. will post a profit of $1.47 a share. IBM closed at $108.60 Friday, at the upper end of its 52-week range of $72.73 to $109.66.

Google and Microsoft Corp. release their quarterly earnings Thursday. Google, expected to report a profit of $3.59 a share, closed at $552.16 Friday, setting a fresh 52-week high. The stock has traded as low as $363.36 this year.

Microsoft, whose profit is expected to be 31 cents per share, closed at $29.82 Friday, at the upper end of its 52-week range of $22.23 to $31.48.

On Friday, analysts forecast that Citigroup Inc. will post a profit of $1.13 per share. The bank closed at $52.52 Friday, in the middle of its 52-week range of $46.22 to $57.00.

Amid some important economic data ...
On Tuesday, the Federal Reserve reports on industrial production and capacity utilization, both of which are expected to be a bit stronger in June than in May. Also Tuesday, the National Association of Home Builders releases its housing market index, and analysts forecast a slight dip.

The Commerce Department on Wednesday reports on housing starts and building permits. Both are anticipated to show slightly smaller rises in June than in May.

The Conference Board on Thursday releases its June index of leading indicators, which is expected to come in flat following a 0.3 percent rise in May.