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To maybe kick off some discussion this weekend, I thought I'd post these comments and analysis from Reuters as at noon ET Saturday. Those especially interested may also like to look over Friday's DU Stock Market Watch thread if you haven't done so already. Profits key if stocks are to recoverSat Jan 21, 2006 11:40 AM ET NEW YORK (Reuters) - Digging out of the red will be a tall order for U.S. stocks next week after Friday's big losses unless the corporate profit picture improves and the international tensions driving oil prices through the roof ease. Stocks ended this week with their biggest fall in nearly three years on Friday, and the magnitude and breadth of the decline could shake individual investors' faith in the market, leading to additional selling on Monday. Friday's selling was a sign investors had realized weak earnings early in the week were not one-time misses but part of a larger trend, Alec Young, Standard & Poor's equity market strategist, said. "You never get drops of this magnitude without something serious going on," Young said. "It's not a pretty picture, and it clearly caught a lot of people off guard." Retail investors were likely to look at the selling and push the market lower on Monday, Young said. ... For the week, the Dow shed 2.7 percent to 10,667, the S&P lost 2.0 percent to 1,261 and Nasdaq ended 3 percent lower at 2,247. ... U.S. crude prices gained 2.2 percent to $68.35 a barrel on Friday in New York after al Qaeda threats added to worries about supplies from crude exporters in Iran and Nigeria. Oil prices have gained 23.4 percent since their 5-month low of $55.40 hit in mid-November. ... Earnings at companies in the Standard & Poor's 500 index were projected to have risen 14 percent for the fourth quarter of 2005 before the reporting period began, according to Reuters Estimates. Of the S&P 500 companies that reported earnings before Friday, earnings per share for about 60 percent have exceeded expectations. Still, some analysts have tempered their views after weak results and disappointing outlooks from tech heavyweights like Intel and Yahoo Inc. Next week will bring earnings from about 150 S&P 500 companies, making it the busiest reporting week. The companies include Microsoft Corp., American Express Co., 3M Co., General Motors Corp. and Johnson & Johnson. Other highlights include Bristol-Myers Squibb, Qualcomm Inc. and Sun Microsystems Inc.. ... On the economic front, an advanced GDP report on Friday is likely to show the U.S. economy expanded at a 3.1 percent annual pace in the fourth quarter of 2005, down from 4.1 percent in the previous three months. Other economic gauges next week include new orders at U.S. factories in December, due to be released on Thursday. Also next week a report on existing home sales, due on Wednesday, is forecast to show a drop to 6.9 million sales in December, which would make it the third consecutive monthly decline. U.S. new home sales are also expected to have fallen in December. A report is due on Friday. /more...see also (earlier Reuters analysis): Wall St tries to catch its breath after "blood bath" Fri Jan 20, 2006 6:32 PM ET NEW YORK (Reuters) - After Wall Street's worst day in almost three years, some stock traders headed home on Friday to lick their wounds and settle in for a weekend of worry. "What a blood bath today," exclaimed one trader. The first thing to do was take a step back and try to figure out if Monday will present any buying opportunities rather than dwell on what happened, he said. "If it steadies here, and bargain hunters come in, it'll all be forgotten," said Rick Meckler, president of LibertyView Capital Management, in Hoboken, New Jersey. "But if you see some accelerated selling on Monday, that'll be when people begin to question whether this is the start of a real downtrend." ... Stocks often bounce back after selling off in response to nonfinancial news like security threats or weather catastrophes.
Equities traders worried the volatility might scare some investors out of stocks and into other assets. U.S. interest rates have been rising for more than a week and commodities ranging from oil to gold have also climbed. "The alternatives to equity investment today, when money market rates are as high as they are, are much different than they were a year ago," said Meckler. "It gives people more of a choice when there is some bad news." ... "You have gold making a high, and gold at these levels is kind of a red flag. Maybe there's some money going out of equities," said Jim Fehrenbach, head of institutional sales and institutional trading at Piper Jaffray (PJC.N: Quote, Profile, Research), in Minneapolis. Come Monday, some traders said, they'd have to keep a cool head and be back with new investment ideas. /more...and: US stock sell-off has investors asking where to?Fri Jan 20, 2006 6:23 PM ET NEW YORK (Reuters) - With U.S. stocks suffering their biggest single-day loss in almost three years on Friday, investors wondered where the money was going as gold hit fresh 25-year highs and oil surged to above $68 a barrel.
The bond market ticked higher at the end of the day, a possible sign of a flight to safety as often occurs when investors fear further declines in the stock market. But the bond market is expecting a large supply of treasuries in coming weeks, and investors who might normally pile into bonds may be waiting for prices to go lower. ... "I can't find a central theme this time" for the stock market's decline, said David Dreman, who oversees about $13 billion in assets.
Oil surged higher, which can bode well for energy companies, but there wasn't a flight to safety, which is surprising, Dreman said. /more......Your thoughts?
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