| NEW YORK
NEW YORK Aug 4 With earnings season winding
down and the employment report out of the way, the U.S. stock
market is likely to shift into a lower gear this week.
The earnings season so far has been largely positive with
more than half of the companies that have reported beating
estimates. But cuts in outlooks from a number of bellwethers,
including Intel and Caterpillar, mainly due to
increasing concerns over China's growth, have raised fears about
the third and fourth quarters.
"It has sort of become a trend now to go into earnings
season with low expectations, so beating those expectations is
not a big deal," said Tim Ghriskey, chief investment officer of
Solaris Group in Bedford Hills, New York.
"The market is starting to really look at outlook cuts and
guidance more than earnings itself."
The market is also likely to trade sideways this week after
the Dow and the S&P 500 marked record closing highs for a second
day on Friday.
For the year, both the Dow and the S&P 500 are up more than
The S&P 500 index has passed through two century marks this
year - 1,600 and 1,700. The last time the broad market index
covered more round numbers in a year was in 1998 when it touched
1,000, 1,100 and 1,200, according to Howard Silverblatt, senior
index analyst at S&P Dow Jones Indices.
Of the 391 companies in the S&P 500 that have reported
earnings for the second quarter, 67.8 percent have topped
analyst expectations, in line with the average beat over the
past four quarters, data from Thomson Reuters showed. About 55
percent have reported revenue above estimates, more than in the
past four quarters but below the historical average.
Negative outlooks for the third quarter from S&P companies
have outpaced positive outlooks 3.7 to 1 so far in this earnings
season, according to Thomson Reuters data. Last quarter, the
ratio was 6.3 to 1, but on average since 1996, the ratio stands
at 2.1 to 1.
So far this earnings season, just 75 companies have given
guidance and about 50 more companies are expected to give their
outlook in the coming weeks. During last quarter's earnings
season, 127 S&P companies gave guidance.
The market will be closely watching remarks by U.S. Federal
Reserve policymakers in the coming week for more clues on when
the U.S. central bank might begin to reduce bond-buying
stimulus, despite mixed signals from the jobs market.
The latest jobs report on Friday showed non-farm payrolls
rose by 162,000 in July, below expectations, but the
unemployment rate fell to 7.4 percent, its lowest since December
On Tuesday, the president of the Chicago Federal Reserve
Bank, Charles Evans, is scheduled to speak at a press breakfast,
while Richard Fisher, head of the Dallas Federal Reserve Bank,
is to deliver a speech on the economy in Portland, Oregon, on
Elsewhere, the Bank of Japan holds its monetary policy board
meeting on Wednesday and Thursday. The BoJ is expected to keep
monetary policy on hold as its unprecedented quantitative easing
and government stimulus gradually spread through the economy.
Among companies due to report earnings this week, CVS
Caremark posts second-quarter results on Tuesday.
McDonald's Corp is to report July restaurant sales on
Thursday. Also on Thursday, Dean Foods Co, the top U.S.
dairy company, posts quarterly results.
In economic news, weekly jobless claims on Thursday could
offer clues about the labor market conditions following Friday's
mixed jobs report. The Institute for Supply Management (ISM)
report on the services sector is due on Monday, and June trade
data is expected on Tuesday.
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