By Wallace Witkowski, MarketWatch
SAN FRANCISCO (MarketWatch) — Investors will get their first taste of big-ticket earnings for the third quarter next week as Alcoa Inc. and J.P Morgan Chase & Co. report results, but international economic events may provide a distraction from earnings season.
Equities markets are cruising near 52-week highs as earnings season gets rolling. Over the past week, the Dow Jones Industrial Average /quotes/zigman/627449 DJIA +0.26% has climbed 1.3%, the S&P 500 Index /quotes/zigman/3870025 SPX -0.03% has risen 1.4%, and the Nasdaq Composite Index /quotes/zigman/123127 COMP -0.42% has advanced 0.6%.
On Friday stock markets were mixed with the Dow finishing up slightly and the other two major indexes declining as investors contended with a jobs report that showed a drop in the unemployment rate but sparked debate as to what the numbers actually meant for the economy. Read more on Friday jobs report and 7.8% unemployment rate.
Markets have gotten a boost from another infusion of quantitative easing from the Federal Reserve and investors will get to see if stocks can support those gains as earnings season ramps up, said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
Stocks end mixed after jobs data
Stocks looked to cap their first weekly gain in three weeks, putting the Dow industrial on track to close at a five-year high, after an unexpected drop in the U.S. unemployment rate. Steve Russolillo has details on The News Hub. Photo: Getty Images.
“Earnings are the mother’s milk of share prices,” Luschini said.
Tuesday will mark the traditional start of the earnings season as Alcoa /quotes/zigman/246295/quotes/nls/aa AA +0.22% , the first Dow component to report each quarter, gives its results reports after the closing bell.
“We’ll be looking for global readings,” the Janney strategist said. “Any evidence they’re expecting improvement globally would be good.”
A slowdown of growth in China along with Europe’s recession and fiscal woes are expected to have put a dent in international revenue for most multinational firms.
Also on Tuesday, after the closing bell, Yum Brands Inc. /quotes/zigman/303422/quotes/nls/yum YUM -0.71% reports. Luschini said Yum results should also provide a good preview of consumer activity ahead of Friday’s University of Michigan-Thomson Reuters consumer-sentiment index.
Yum results should also provide a glimpse into consumer spending in China. While the chain recently announced its 4,000th KFC store in China, it has reported a slowdown in same-store sales growth. Read more on Yum and U.S. restaurant earnings outlook.
And, as the nation wraps up its Golden Week holiday on Sunday, attention will once more turn to the People’s Bank of China, which is expected to release September financial statistics later in the week.
Of particular interest will be new loan growth figures for September, which should offer guidance about whether more easing measures are on the way, said John Canally, investment strategist and economist for LPL Financial.
In September, the Chinese central bank injected 365 billion yuan ($57.9 billion) into the financial system to prop up equity markets, but anticipated supporting measures from Chinese securities regulators never materialized. Read more on China easing.
Banks earnings in focus on Friday
Two big financial earnings reports will cap the week when Dow-component J.P. Morgan Chase /quotes/zigman/272085/quotes/nls/jpm JPM -0.26% and Wells Fargo & Co. /quotes/zigman/239557/quotes/nls/wfc WFC -0.36% give their results on Friday. Luschini said those reports should also provide a good gauge of consumer health through such figures as mortgage banking activity and reserve releases.
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