Week Ahead: Earnings Could Keep the Bulls Running
Published: Friday, 16 Oct 2009
8:42 PM ET Text Size
By: Patti Domm
Executive Editor
Corporate earnings will trump almost everything for the stock market in the coming week.
A string of better-than-expected third quarter earnings reports have helped fuel the stock market rally, taking the Dow above 10,000 for the first time in a year.
About half the Dow 30 and a quarter of the S&P 500 report in the week ahead. Analysts expect the majority of these companies to continue to beat expectations.
Traders are also watching the dollar, which continues to weaken as stocks and other risk assets move higher. They are also keeping an eye on the quick boil in oil prices, which moved sharply higher in the past week and are beginning to make some investors cautious.
"Basically, the market has gone up on proof of earnings, so after this earnings season, there's not going to be another catalyst before earnings early next year," said Binky Chadha, chief U.S. equities strategist at Deutsche Bank.
"It's the second quarter of sequential top line growth, and we also should have the third quarter of bottom line growth. In the fourth quarter, year on year earnings will be positive because Q4 of '08 was so bad...Q4 earnings should mark the end of the earnings recession," he said.
Of the 61 S&P companies that reported so far, 79 percent have reported better than expected earnings. Chadha said, however, companies are also beating on the top line, and as of Thursday, 65.5 of a smaller sampling had better than expected sales results.
Chadha, like a number of strategists, believes the stock market is set to move higher, for now. But he also thinks it will take a breather after the earnings season. He expects the S&P to reach 1125 by the end of the earnings season but it could pull back into the year end, reaching a level of about 1075, close to its current level. His target for the end of next year is 1260.
http://www.cnbc.com/id/33351707/
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