NEW YORK - The worries and concerns that have pressured stocks for much of January could dissipate in the week ahead, which should bring some resolution to a decidedly irresolute marketplace.
Three major events will shape trading on Wall Street this week: the election in Iraq, the Federal Reserve's Open Market Committee meeting wrapping up Wednesday and the Labor Department's job creation report for January on Friday. These headwinds kept stocks in check for weeks, but the resulting clarity after the fact will shape trading for the rest of the quarter.
Iraqi voting was conducted Sunday without large-scale violence. While the results of the election will determine business prospects in the Middle East in the long term, investors were pleased that, no matter who won, the elections proceeded without a heavy loss of life or severe disruptions in oil production.
On Wednesday, the Fed is widely expected to raise the nation's benchmark interest rate by a quarter percentage point to 2.5 percent. But Wall Street will again look very closely at the Fed's accompanying policy statement, hoping the Fed will confirm that inflation remains in check and the economy remains on track.
Finally, Wall Street analysts are hoping for a strong job creation report from the Labor Department on Friday. The number of jobs created in November and December were fewer than economists had expected, showing weakness in the labor market at a time when companies are flush with cash. A rise in job creation would not only help consumers, but show that corporations are confident in the economy.
With the economic reports are in, investors should be able to make solid decisions about their holdings by the end of the week.
Last week, the markets eked out slim gains, buoyed by back-to-back up days on Tuesday and Wednesday. For most of the week, however, investors ignored earnings and bid stocks lowers ahead of the coming week's events.
For the week, the Dow Jones industrial average rose 0.33 percent, the Standard & Poor's 500 was up 0.3 percent and the Nasdaq composite index climbed a meager 0.08 percent. That reversed a three-week slide for all three indexes.
The Labor Department's jobs report is generally the most important piece of economic data in any given month. For January, Wall Street expects 185,000 new jobs, compared to 157,000 in December.
On Tuesday, the Institute for Supply Management will release its manufacturing index for January. The ISM index is expected to rise slightly to 57.7, compared with a 57.3 reading in December.
ISM will then release its non-manufacturing index, measuring economic activity in the service sector, on Thursday. The services index is expected to fall to 61 for January, down from December's 63.9 reading.
Earnings season is about half over, but there are still a number of major corporations left to report earnings. Good earnings reports have done little to move the market in the past few weeks - Microsoft Corp.'s strong quarterly report late Thursday springs to mind - but as the market's other uncertainties lift, more attention will likely be paid to earnings.
Dow component ExxonMobil Corp. has benefited from the sharp rise in oil prices over the last year, and despite a drop-off in crude futures in the fourth quarter, the oil giant is expected to earn $1.07 per share, compared with 68 cents per share a year earlier. Shares of ExxonMobil have climbed steadily over the past year, up 27.8 percent from their 2004 low of $40.10 on March 24 to close at $51.27 on Friday. The company is expected to issue its report Monday morning.
The Walt Disney Co.'s turnaround story has boosted its shares 35.1 percent from its 2004 low of $20.89 on Aug. 13, closing Friday at $28.23. However, earnings for the most recent quarter, due Monday afternoon, are expected at 30 cents per share, down from last year's 33 cents per share. A strong 2005 outlook should help Disney make up for the lower profits.
Time Warner Inc. is also expected to post lower earnings - a Wall Street estimate of 16 cents per share, compared with earnings of 24 cents per share a year ago. The stock enjoyed a strong run-up in the fourth-quarter rally, rising 14.9 percent from its Aug. 12, 2004 low of $15.60 to close Friday at $17.93. The company will issue its report before Friday's session.
Other notable companies reporting earnings in the week ahead include:
- Tyco International Inc., which reports Tuesday morning and is expected to earn 42 cents per share, compared to 34 cents a year earlier;
- Google Inc., which reports Tuesday afternoon and is forecast to earn 72 cents per share in its second quarterly report since going public;
- Amazon.com Inc., which is expected to issue earnings on Wednesday afternoon and is expected to earn 40 cents per share, up from 29 cents a year earlier; and
- Gillette Co., which is forecast to earn 41 cents per share, up from 35 cents in fourth quarter 2003, when it reports its earnings Thursday morning.
The nation's automakers will release their monthly sales data on Tuesday, which often moves automotive stocks.
The Fed, as usual, is expected to announce its interest rate decision and release its policy statement at 2:15 p.m. EST on Wednesday.
On Thursday, the nation's biggest retailers announce their January sales.
On Friday, Fed Chairman Alan Greenspan will speak at the Group of Seven conference of industrialized nations, where he is widely expected to address the sagging U.S. dollar.