As Wall Street sifts through more than 300 third-quarter earnings reports this week, technology and pharmaceutical stocks will be getting some of the closest scrutiny.
The focus on drug companies results from a recent spate of bad news about Merck & Co. and Pfizer Inc., both Dow components. On Sept. 30, Merck pulled its blockbuster arthritis drug Vioxx from the market due to an increased risk of heart attack. And the New England Journal of Medicine raised questions about Pfizer’s rival drug, Celebrex, saying that medication could carry similar risks.
The two companies’ outlooks will be far more important to investors than third-quarter profits. Wall Street will want to see whether Merck will lower its guidance for future quarters due to the loss of Vioxx sales and whether Pfizer, despite the journal study, expects to increase its market share.
The markets will look to a number of technology heavyweights as well, hoping for signs that the long-suffering technology sector can break out of its months-long slump. Microsoft Corp. and International Business Machines Inc. will lead a number of tech companies with earnings in the week ahead.
Last week, another surge in oil prices stymied Wall Street, pushing stocks lower for the week. A disappointing earnings report from General Motors Corp. also made investors nervous, while strong earnings from Intel Corp., Citigroup and Bank of America Corp. were largely overlooked.
For the week, the Dow Jones Industrial average lost 1.21 percent, the Standard & Poor’s 500 fell 1.24 percent and the Nasdaq Composite Index was down 0.44 percent.
Economic data
The Labor Department’s Consumer Price Index, a measure of prices for goods and services around the country, is due out Tuesday, with economists predicting a 0.2 percent increase in September, up from the 0.1 percent increase in August. The same holds true for the “core” CPI — without the costs of food and fuel added — though some economists are starting to question the wisdom of breaking out food and fuel costs when measuring consumer prices, since energy prices can have a profound effect on consumer spending.
Other economic data expected this week include the Commerce Department’s latest report on housing starts and building permits, also due Tuesday, measuring new construction activity around the country. Economists expect a slight drop off in both starts and permits in September, though with winter approaching, that’s to be expected.
Earnings
Pfizer is expected to earn 54 cents per share when it reports earnings before Wednesday’s session, up from 47 cents per share a year ago. The stock has fallen 26.6 percent from its high of $38.85 on Feb. 6 to close at $28.50 on Friday, but analysts expect an uptick in the company’s outlook now that its chief rival in the arthritis pain market has bowed out.
Merck, meanwhile, will announce its earnings Thursday before the session, and is expected to earn 75 cents per share, down from 83 cents per share in the third quarter a year ago. The company’s stock lost more than 25 percent of its value in a single session after it announced the Vioxx removal, and is 37.9 percent off its high of $49.08 on Feb. 18. Merck shares closed at $30.50 Friday.
Other pharmaceutical companies reporting earnings in the week ahead include Genzyme Corp. on Wednesday before trading begins and Schering-Plough Corp. and Eli Lilly & Co. on Thursday morning.
Microsoft, which releases its earnings Thursday afternoon, has been stuck in a trading range for nearly three years, with its stock price hovering between $27 and $30 with few exceptions. While earnings at the software giant have been consistent, they’ve also been rather static. The company is expected to post profits of 30 cents per share, the same as the third-quarter a year ago. (MSNBC.com is a joint venture of Microsoft and NBC Universal.)
Google's first report
Google Inc., which started trading in August, will be releasing its first quarterly earnings report since going public, announcing its results Thursday, after the session. The online search leader has risen from an offering price of $85 to $144.11 at Friday’s close. The company is expected to earn 30 cents per share in the quarter.
Other technology firms reporting in the coming week include online auctioneer eBay Inc. on Wednesday afternoon and online shopping giant Amazon.com on Thursday afternoon.
A number of Dow components are also slated to release earnings this week alongside IBM, Merck, Microsoft and Pfizer:
- Altria Group Inc. is expected to post profits of $1.26 per share on Tuesday morning, compared with $1.22 per share a year ago.
- Ford Motor Co. will be closely watched to see if the automaker will join General Motors Corp. in a disappointing quarter. Ford is expected to earn 14 cents per share, compared to 15 cents per share a year ago, when it releases earnings Tuesday morning
- McDonald’s Corp., which last week increased its profit outlook to 61 cents per share for the quarter, is expected to make it official Tuesday morning. Analysts had been expecting earnings of 54 cents per share before the announcement. The fast food giant earned 43 cents per share a year ago.
- Before Wednesday’s session, J.P. Morgan Chase & Co. Inc. will release earnings expected at 75 cents per share, down from 78 cents per share a year ago.
- American International Group Inc., the insurance company, is expected to earn $1.08 per share, compared to 98 cents per share a year ago, when it releases earnings Thursday morning.