Robust earnings to keep stocks charged
NEW YORK (Reuters) - Stock market bulls are betting strong second-quarter profits will send equities even higher with the earnings reporting season in full swing next week.
Rising energy and food prices coupled with uneven retail sales are not likely to slow down investors as they test the market's limits. At the same time, the financial sector is expected to avoid major losses from the subprime sector.
After a week where the Dow Jones industrial average and Standard & Poor's 500 index reached record highs on mergers and acquisitions activity and multibillion-dollar blue-chip buyback plans, investors will eye profits, inflation data and the Federal Reserve for signs of further good news.
Earnings will be headlined by Microsoft Corp. (MSFT.O), Intel Corp. (INTC.O), Citigroup Inc. (C.N) and Bank of America Corp. (BAC.N) among an exhaustive list of major companies.
Amid the flood of results, Federal Reserve Chairman Ben Bernanke will give two days of semiannual testimony on U.S. monetary policy before Congress.
"Earnings are not going to be a problem," said Michael Metz, chief investment strategist at Oppenheimer & Co., in New York. "The speculators are very excited. Unless it is a major surprise, the external (factors) won't matter. The markets are feeding on themselves.
"I don't think Ben Bernanke has anything new to say at the moment about inflation, and the Federal Reserve does not think the subprime problem will derail growth," Metz added.
On Friday, the Dow Jones industrial average .DJI ended at a record 13,907.25, while the Standard & Poor's 500 index .SPX set a new lifetime high at 1,555.10 and ended at 1,552.50, also a record. For the week, the blue-chip Dow average rose 2.2 percent, the S&P 500 added 1.4 percent and the Nasdaq Composite Index .IXIC gained 1.5 percent.
CPI AND HOUSING STARTS AHEAD
In what will be one of the busiest weeks for corporate earnings, Wall Street also will get some fresh economic numbers to crunch.
The Bureau of Labor Statistics will release the U.S. Producer Price Index for June on Tuesday and the Consumer Price Index for June on Wednesday.
Economists surveyed by Reuters forecast that overall PPI, a measure of wholesale prices at the farm and factory gate, will rise 0.2 percent in June. They also see core PPI, excluding volatile food and energy prices, up 0.2 percent.
CPI is expected to rise 0.1 percent in June, while core CPI is seen up 0.2 percent, the Reuters poll showed.
The Census Bureau's housing starts and building permits report for June is likely to show continued slowdowns, keeping the chance of a hike in the fed funds rate unlikely.
On Thursday, investors will scrutinize the minutes from the Federal Open Markets Committee's most recent meeting in late June for any further hints about monetary policy. Continued...
