Market braces for consumer reports
It reacted quietly to financials' earnings, but consumer-based firms report this week.
NEW YORK - Wall Street has had a mostly subdued reaction to corporate earnings released in the last few weeks, but that could soon change.
Just about halfway through the first-quarter reporting season, most of the blue chips that make up the Standard & Poor's 500 index have not presented any surprises. In fact, stripping out the gloom coming from financial companies like Merrill Lynch & Co. Inc. or Citigroup Inc., profits are up 11 percent year-over-year.
With this decent performance, the market hasn't had the kind of turbulence that some feared before the start of earnings season, and the S&P 500 index has risen about 4 percent in the last two weeks.
But the coming week might change the market's dynamics, as consumer-oriented companies including electronics stores and food companies are scheduled to release results. Wall Street is worried about slowing consumer spending, and those companies might give investors their best indication yet about how much Americans are willing to spend.
When General Electric Co. reported an unexpected 6 percent drop in profit, the news unnerved investors worried that the financial crisis that gutted investment banks had begun to spread. GE is considered a good economic indicator because its businesses work in a number of big sectors.
The Dow Jones industrials tumbled in response to the report on April 11, but in the following two weeks, investors have stepped back and have been able to examine earnings results as a whole. Though financial companies have so far left the S&P 500's profit growth at a negative 13 percent, there still are more companies beating Wall Street projections than not.
Right now, the consumer-oriented companies that have already reported results show a 6.8 percent decline in profits. This is shaping up to be their fifth-straight quarter of down earnings.
Some of the big names due to report this coming week include Tyson Foods Inc. on Monday; Office Depot Inc. and Avon Products Inc. on Tuesday; Kellogg Co. and Kraft Foods Inc. on Wednesday; and Burger King Corp. and CVS Caremark Corp. on Thursday. Analysts say the key will be what those companies predict for the third and fourth quarters, which is when most economists believe the economy may begin to swing higher.
The Treasury Department is expected to begin making the first electronic deposits to taxpayers for the stimulus package on Monday - five days sooner then expected. The thought on Wall Street is that the checks will boost profit at retailers during the second quarter.