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Earnings dance begins

on Wall Streer

NEW YORK: The earnings dance begins in earnest on Wall Street beginning on Monday with several major high technology companies issuing their quarterly reports.

But Wall Street must first hurdle Friday's surprisingly strong March jobs report that sent the long bond skidding.

Analysts say stocks will likely fall Monday with bonds. U.S. stock markets were closed for observance of Good Friday, when the long bond tumbled nearly two points in an abbreviated session.

The Labour Department Friday reported non-farm payrolls jumped 140,000, more than double Wall Street's expectations for a 60,000 rise. While February payrolls were revised downward to an increase of 624,000 from a jump of 705,000, it showed the economy was nonetheless much stronger than the Street had expected for the first quarter.

"It clearly means we'll get no reduction in short-term rates in May (at the Fed's next FOMC meeting). There's no need. I think there's a very good chance the the Fed's easing cycle is finished," said Hugh Johnson, chief investment officer at First Albany Corp.

Meanwhile, another major focus in the start of the rush of corporate earnings reports for the first quarter. Analysts said Motorola, Texas Instruments, Advanced Micro Devices, Microsoft and Intel are expected to report earnings this week and investors know they will be mostly unimpressive when compared to the spectacular year-ago period.

Other major companies -- including International Paper, Boise Cascade and Chrysler -- are also expected to report, but it is the techs which the Street will be watching most closely.

"We'll have to pick our way through every day, earnings report by earnings report," said Johnson, anticipating a market about to begin a veritable pinball game in which each set of reports could launch it in a different direction.

"A lot of focus will be on the technology sector, the worry being that spending on computers and peripherals has slowed in the first quarter, and the question is how will it affect earnings," Johnson said.

Larry Wachtel, analyst at Prudential Securities, said that the high tech earnings "will set the tone for the market."

"Take Motorola, for instance," he said. "It has problems because the cellular business stinks. So it's not like they are going to have a good quarter. The question is how bad will it be. Will it be within expectations? The same goes for Texas Instruments."

Michael Metz, chief investment strategist at Oppenheimer & Co., said he expected to see an accident-prone week with grain prices at record highs and a rise in energy prices.

"We have a commodity inflation problem and it remains to be seen whether this psychology spills over into the wage sector. That is the variable that makes market participants feel uneasy," Metz said.

Data in the upcoming week include the March producer and consumer price indeces on Wednesday and Thursday, respectively.

"It will be very hard for any company to post strong year-to-year results because of the very strong comparisons with the first quarter of 1995," Johnson said.

"That's why the stock market is not showing all the resilience that it has shown in the past. Gains are harder to come by and that is why we are going to struggle through this earnings season. It's almost as though the last two weeks have been a warm up and now the game begins."-Reuter