With a key report on consumer prices due and eight of the 30 Dow Jones industrials reporting earnings, the abbreviated week ahead should give investors important insights into the state of the economy and hopefully shake Wall Street out of its post-holiday funk. The markets will be closed Monday for Martin Luther King Jr. Day.
Wednesday’s Consumer Price Index reading from the Labor Department, if it follows the trend of lower prices from other economic reports, should ease Wall Street’s inflation fears considerably, despite oil prices that have shot past $48 per barrel.
And investors will look closely at earnings for hints of how companies feel about their prospects in 2005. Steady profits through 2004 and promises of a repeat performance in the coming year would set the stage for a decent rally in stocks after two weeks of losses to open the year.
Last week, a sharp climb in crude oil futures, mediocre earnings and a mix of economic data served to roil the markets, as investors held off on any major investments until a better view of the economy could be discerned. On Friday, the markets staged a modest rally after the Labor Department reported a larger-than-expected drop in wholesale prices, staving off fears of inflation.
For the week, the Dow fell 0.43 percent, the Standard & Poor’s 500 was down 0.14 percent, and the Nasdaq composite index lost 0.03 percent.
CPI, sentiment figures due
The Consumer Price Index, a measure of how much Americans pay for goods and services, is expected to climb just 0.1 percent for December, less than the 0.2 percent reading in November. With food and energy prices removed from the equation, so-called “core” CPI is expected to rise 0.2 percent, as oil prices fell substantially in December. November’s core CPI rose 0.2 percent as well.
On Friday, the University of Michigan will release its preliminary consumer sentiment index for January, which is expected to come in at 98, a slight rise from the 97.1 reading last month. A rise in the index means that consumers are more confident in the strength of the economy.
For a holiday-shortened week, there will be plenty of earnings reports coming out. In addition to the eight Dow companies, both major U.S. automakers, a slew of airlines, key technology companies, and three financial giants will all report earnings in the week ahead.
Wall Street was very disappointed last week with General Motors Corp.’s 2005 outlook, which called for earnings-per-share between $4 and $5. Analysts said that figure, a sharp decline from expected 2004 earnings, still could be too optimistic. GM has fallen steadily over the past year, dropping 31.6 percent from its Jan. 22 high of $54.27 to close Friday at $37.13. The Dow component is expected to earn 92 cents per share when it reports its earnings Wednesday morning, a sharp drop from $1.47 per share a year ago.
Ford, JP Morgan, Citigroup to report
Rival automaker Ford Motor Co. will issue earnings Thursday morning. It is expected to earn 28 cents per share, compared to 31 cents per share a year ago.
Dow components J.P. Morgan Chase & Co. and Citigroup Inc. will lead a number of financial sector earnings reports in the week ahead. J.P. Morgan Chase, announcing its earnings Wednesday morning, has fallen 12.1 percent from its high of $43.01 on March 5, closing Friday at $37.81. The financial giant is expected to earn 68 cents per share, down from 89 cents per share from a year ago.
Citigroup, meanwhile, is forecast to earn $1.02 per share when it announces earnings on Tuesday, up from 96 cents per share in the year-ago quarter. The Dow industrial’s stock is down 9.6 percent from its April 6 high of $52.54, but has recovered 11.6 percent from its 2004 low of $42.56 on Oct. 22, closing Friday at $47.51.
Among other notable companies in the financial sector, Bank of America Corp. is expected to earn 95 cents per share when it reports Tuesday, up from 92 cents per share a year ago.
Tech, airlines in spotlight
IBM Corp. leads off a busy week for the technology sector, and is expected to earn $1.74 per share when it releases earnings Tuesday afternoon, up from $1.54 per share last year. The Dow component’s stock is up 14.5 percent from its 2004 low of $82.21 on Aug. 12, closing Friday at $94.10. Other technology companies reporting in the week ahead include Internet portal Yahoo! Inc., online auctioneer eBay Inc., cell phone component maker Qualcomm Inc. and chip maker Advanced Micro Devices Inc.
Investors will also focus on airline stocks, with at least a half-dozen reporting earnings this week, to see if anyone else will follow Delta Air Lines Inc.’s lead in slashing fares and cutting already-slim margins in the face of a massive surge in jet fuel prices. Delta has tumbled 53 percent from its 2004 high of $13.03 on Jan. 7, closing Friday at $6.13.
Other airlines reporting this week include American parent AMR Corp., Southwest Airlines Co., and Continental Airlines Inc.
More to report
Finally, the other Dow Jones industrials reporting earnings in the week ahead are:
- Industrial giant 3M Co., reporting Tuesday morning and expected to earn 90 cents per share, up from 77 cents per share a year ago;
- Pharmaceutical bellwether Pfizer Inc., expected before Wednesday’s session and forecast to earn 58 cents per share, up from 53 cents per share a year ago;
- Engine and aerospace manufacturer United Technologies Corp., due out Friday before the session and expected to earn $1.27 per share, up from $1.16 in the year-ago quarter; and
- General Electric Co., parent company of NBC, is also scheduled to report Friday morning. It’s forecast to earn 50 cents per share, compared to 45 cents per share last year.