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Wall Street eyes earnings, looking for bottom

(Agencies)
Updated: 2008-10-20 09:44

Jack Ablin, chief investment officer at Harris Private Bank, said the biggest signs that a bottom has formed will be how investors react to bad news this coming week. He believes investors have engaged in "slash and burn selling" with all the news converging at once, and a change in that pattern will be telling.

A trader works on the floor of the New York Stock Exchange, October 17, 2008. [Agencies]

"I think the bad economic data and earnings are already priced in to an extent," he said. "What I'm looking for is a disconnect with investors where bad economic news or a bad earnings report is greeted by a rally, that will be telling about which direction we're heading."

Ablin points out that earnings reports and economic data are mostly backward looking, and in most cases reflect conditions before the meltdown hit its peak in the past few months. He's interested in what chief executives have to say about their companies going forward.

The consensus among many analysts is that companies will begin to curtail their projections for the fourth quarter because of deteriorating growth. There have been a number of reports already out from companies like Google Inc. and Honeywell International Inc. that overall have not been as bad as feared.

This week, a larger breadth of America's business community are set to release results. Among them are Dow components' AT&T Inc., Caterpillar Inc., 3M Co., Boeing Co., Microsoft Corp., and McDonald's Corp. Others include Amazon.com Inc., UPS Inc., and Altria Group Inc.

Economic reports this week include September's index of leading US economic indicators on Monday. Other big reports include Thursday's weekly US jobless claims and Friday's report on existing home sales.

Investors might also get a better idea about what Federal Reserve Chairman Ben Bernanke thinks about the credit and stock markets. He is scheduled to testify at a house Budget Committee hearing about the economy and financial markets.

"All of this could extend the extraordinary volatility we've been seeing," Yardeni said. "But, some would say that's actually a sign we're making a bottom, as painful as it is."

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