Sunday, January 09, 2005

Weekly Outlook

There are a few important economic reports and some significant corporate earnings reports scheduled for release this week. Economic reports include (Mon.)-Wholesale Inventories (Tues.)-None of note (Wed.)-Trade Balance, Monthly Budget Statement (Thur.)-Import Price Index, Advance Retail Sales, Initial Jobless Claims (Fri.)-Producer Price Index, Business Inventories, Industrial Production, Capacity Utilization. Advance Retail Sales, Industrial Production and the Producer Price Index all have market-moving potential.

Mon.-Alcoa(AA), Genentech(DNA) Tues.-Intel(INTC), Nortel Networks(NT) Wed.-Apple Computer(AAPL) Thur.-Sun Microsystems(SUNW) Fri.-Delta Air Lines(DAL), QLogic Corp.(QLGC) and Rambus Inc.(RMBS) are some of the more important companies that release quarterly earnings this week. There are also a number of other events that have market-moving potential. The Citigroup Entertainment, Media and Telecom Conference(Sun.-Wed.), the Consumer Electronics Assoc. Conference(Sun.-Wed.), the Needham Growth Conference(Tue.-Fri.), the Fed's Kohn speaking(Sun.), the Fed's Yellen speaking(Sun.), the Fed's Guynn speaking(Mon.), the JP Morgan Healthcare Conference(Mon.-Thur.), the Deutsche Bank Real Estate Conference(Thur.) and the Fed's Poole speaking(Thur.) could also impact trading this week.

Bottom Line: I expect U.S. stocks to finish the week higher on strong earnings/economic reports, lower energy prices, a stabilizing US dollar, short-covering and bargain-hunting. While weakness will probably re-surface in the near future, a decent bounce should occur next week. Technology shares should outperform on optimism from the Consumer Electronics Show. US economic growth will likely begin to decelerate modestly over the next few months on slowing growth in Asia and Europe, an end to the benefits of hurricane rebuilding, less stimuli and lingering overcapacity issues from the 90's. However, a stabilizing US dollar, lower long-term interest rates, decelerating inflation, lower energy prices and continuing job/income gains should offset most of the drags on US growth. I expect the major US indices to trade mixed-to-modestly higher through the first six months of the year before another significant rise sometime beginning in the 3rd quarter. My short-term trading indicators are still giving Sell signals and the Portfolio is 50% net long heading into the week.

No comments: