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Flurry of earnings reports

to dominate Wall Street

NEW YORK: A flurry of first quarter earnings reports will dominate Wall Street this week with banks, brokerages and drug companies expected to meet or beat analysts' expectations.

But Wall Street will continue to struggle with reawakened inflation fears stemming from rising commodity prices, which pushed the KR-CRB Index to an eight-year high last week and rocked the stock and bond markets.

The Dow Industrials rallied on Friday to close at 5532.59, up 45.52. But the average was down 151 points for the week, their biggest weekly loss for the year.

Also reporting earnings this week will be International Business Machines Corp (IBM.N), which took a beating last Friday after two analysts downgraded the stock amid jitters about mainframe pricing and a strong dollar.

Tuesday is the big day for banks, with Mellon Bank Corp, Banc One Corp, Bankers Trust New York Corp, Citicorp, Wells Fargo and Co, and "New" Chase Manhattan Corp due to report.

"This is going to be a pretty solid quarter, I don't think we're looking at any disasters", said Anthony Davis, analyst at Dean Witter Reynolds, referring to regional banks.

"The earnings will overall show that many of the concerns related to interest rate margins and asset quality over the last 15 months have been exaggerated", said Michael Mayo of Lehman Brothers, who focuses on regional banks.

Last Thursday J.P. Morgan & Co became the first money centre bank to report. Net income soared 72 percent, bolstered by strong trading results.

But the stock actually fell that day as fears of higher US interest rates overshadowed the better-than-expected results. On Friday, some bank stocks including J.P. Morgan began to recoup losses.

Brokerages have had a good run this quarter, analysts say, and have benefited from both the market's volatility and volume and from a continuing flow of initial public offerings.

"It has been a pretty good quarter for brokerages. For those who depend on bonds it may not be so good, but, overall, they are doing quite well", said Barbara Marcin, vice-president at Citibank Global Asset Management.

There were 163 initial public offerings in the first quarter of 1996, compared to 215 in the fourth quarter of 1995 and 87 in the year ago period, according to Securities Data Co. The total number of IPOs for 1995 was 576.

"They had volatility, they had volume and they had underwriting. They are going to have a great quarter", said Larry Wachtel, analyst at Prudential Securities.

Drug companies are expected to have a strong quarter and the sector, overall, could show a 15 percent gain over the year ago period, according Gruntal drug analyst David Saks.

"The industry is serving a dynamic ageing population and every year, every quarter there are more people over 60", Saks said, adding that the US Food & Drug Administration was noticeably approving more drugs.

"So you have more drugs stimulating sales and more people consuming the drugs than ever before".

IBM is unlikely to suffer much in the event of poor earnings as it has already sold off, falling 5-7/8 to 111-1/2 on Friday. "By the time we get to the scene of the crime there shouldn't be much of a problem", Wachtel said.

In addition to earnings, the market will be watching for further indications of inflation. Last week inflation fears were stocked by rising grain and oil prices.

"The basic problem is that up to now we have assumed that we would not have inflation or interest rate problems and that we would not face an overheating economy. Now all three variables have been brought into question", said Michael Metz, chief investment strategist at Oppenheimer & Co.

He said that the rise in energy and grain prices came at a time of high employment which could translate into upward pressure on wages.-Reuter