Profits, data could extend Wall Street gains
NEW YORK (Reuters) - Wall Street could extend gains next week if financial results from market bellwethers such as Cisco Systems Inc (CSCO.O) and data suggest the U.S economic slowdown isn't as dire as once feared.
Besides news from Cisco, the largest network equipment maker, the technology sector will be on the front burner because of Microsoft Corp's (MSFT.O) pursuit of Yahoo Inc (YHOO.O). Microsoft has made an unsolicited bid now worth $42.4 billion for the Web company, but Yahoo has played hard to get.
Economic reports next week are expected to shed light on the vast services sector, housing and productivity.
Also high on the agenda will be a speech by Federal Reserve Chairman Ben Bernanke on mortgage delinquencies and foreclosures on Monday.
Investors will have a batch of earnings reports to sift through as they also gauge the outlook for an economy battered by a housing slump and record oil prices.
"There needs to be more proof, either in economic data or continued strong earnings reports, to be able to move us significantly higher," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.
Recent reports, including Friday's government release on April payrolls, helped calm worries about the economy's slump, sending major indexes to levels last seen in January.
The market also moved upward on another rate cut by the Fed on Wednesday, a pullback in commodity prices and a rebound by the dollar. But how long this bullish scenario will play is unclear.
"We may get a focus toward earnings. We've seen a little relief there, but we'll probably need some other events to get us above the 200-day moving average on the S&P," said Michael Strauss, chief operating officer and chief economist at Commonfund, based in Wilton, Connecticut.
"Some of what may be under way is the unwinding of the materials stocks. There's some cashing in of the chips."
This week the S&P 500 .SPX rose above the psychologically important 1,400 and the Dow surpassed 13,000 as investors snapped up financial and technology shares, two of the worst-hit areas previously.
In a sign of investors' skittishness, Friday's trading started with big gains that later faded on a slide in shares of Sun Microsystems Inc (JAVA.O). The business computer maker posted a surprise net loss, sparking downgrades of its stock.
On the week, however, the Dow ended 1.3 percent higher, the Nasdaq advanced 2.2 percent and the S&P 500 rose 1.2 percent.
Cisco, whose routers and other networking gear form the back bone of many corporate networks, is due to post results on Tuesday. Fannie Mae (FNM.N), the largest U.S. home funding company, and D.R. Horton Inc (DHI.N), the largest U.S. home builder, also will announce results on Tuesday.
Other key company earnings later in the week include Walt Disney Co (DIS.N) and American International Group (AIG.N), the world's largest insurer.
Next week's economic calendar will begin on Monday with the Institute for Supply Management's non-manufacturing index for April. Other reports during the week include first-quarter productivity and costs, March pending home sales and March international trade.
Fed Chairman Bernanke is scheduled to speak on Monday evening in New York. On Tuesday Fed Reserve Bank of Kansas City President Thomas Hoenig will speak in Denver.
On Wednesday, Fed Governor Randall Kroszner is scheduled to speak in Cincinnati, Ohio.
(Additional reporting by Caroline Valetkevitch and Jennifer Coogan; Editing by Kenneth Barry)
