Recession fears to weigh on earnings rpts

By Herbert Lash

NEW YORK (Reuters) - A heavy gloom hanging over Wall Street may deepen this week unless such bellwether companies as Apple and United Technologies provide investors with hope that the U.S. economy can avert recession.

A slew of major corporations, also including Bank of America Corp (BAC.N), Microsoft Corp (MSFT.O) and AT&T Inc (T.N), will release quarterly earnings in a shortened trading week that has scant economic data scheduled for release.

Markets will be closed on Monday for Martin Luther King Jr Day.

"Earnings (this) week are the only thing that the market has to hang its hat on. With the market in such a fragile condition, those earnings better be good or we could see some severe selling," Richard Sparks, senior equities analyst with Schaeffer's Investment Research in Cincinnati, said on Friday.

Investors took little solace this past week from a $150 billion White House rescue plan as stocks fell on enormous losses at Citigroup, the top U.S. bank, and Merrill Lynch, the world's largest brokerage, and economic data signaled the U.S. economy was headed for recession.

U.S. stocks, as measured by the broad Standard & Poor's 500 Index, are off 9.7 percent so far in January -- their worst start of a year ever. If markets again slide like they did this week, stocks will be in bear territory -- a 20 percent drop from their peak in October.

One major stock index -- the Russell 2000 Index .RUT of small-cap stocks -- passed that milestone last week. A fall in the S&P 500 of about 5.5 percent this week would put it in bear territory. Its 5.4 percent fall last week was the biggest weekly percentage drop since July 2002.

On Friday, the S&P 500 fell 8.06 points, or 0.60 percent, to a 16-month low of 1,325.19. Both the Dow Jones industrial average .DJI -- off 59.91 points, or 0.49 percent, at 12,099.30 -- and the Nasdaq Composite Index .IXIC -- down 6.88 points, or 0.29 percent, at 2,340.02 -- hit 10-month lows.

For the week, the Dow fell 4.02 percent and the Nasdaq 4.10 percent.

In light of the economic outlook companies are going to be cautious regarding their guidance, said Owen Fitzpatrick, head of U.S. equities at Deutsche Bank Private Wealth Management.

In addition, the sharp sell-off seen in recent weeks might not be over, Fitzpatrick said.

"The market seems to be to some extent capitulating," he said. "I think we're finding a bottom, and that's not to say we might not find another one."

Among companies slated to report are financial heavyweights Bank of America and Wachovia Corp WB.N on Tuesday; technology bellwethers Apple (AAPL.O), on Tuesday, eBay Inc (EBAY.O) and Motorola Inc (MOT.N) on Wednesday, and AT&T, on Thursday. Among major industrials and big oil, UTX (UTX.N) and ConocoPhillips (COP.N) report on Wednesday and Caterpillar Inc (CAT.N)Friday.

Investors will sift data to assess the pulse of the nation's economic health from first-time claims for state unemployment insurance benefits and existing-home sales for December, both to be released on Thursday.

The forecast for jobless claims is 325,000, while the pace of existing home sales is expected to show an annual rate of 4.95 million, according to Reuters polls.