WORLD STOCK MARKETS - Corporate news expected to take back seat to Iraq - Q4 results decent but outlook murky
The winds of war have been buffeting Wall Street, sending skittish investors to the sidelines, and the storm is only likely to intensify this week as the White House makes its last diplomatic push for Iraqi disarmament.
With US forces massing in the Middle East and the rhetoric from Washington heating up, the United States appears increasingly on the brink of war. The suspense is killing stocks and has plunged key market gauges to their lowest levels in more than three months.
Ordinarily, investors' focus would be fixed on the outlook for the economy and corporate profits, but the coming week was ``just not going to be an ordinary week'', said Hugh Johnson, chief investment officer at First Albany Asset Management.
A modest rally lifted most stocks on Friday but Wall Street ended a third straight negative week and was in the red for January despite a promising start.
The Dow Jones industrials closed up 108.68 points (1.37%) at 8,053.81, shrugging off a weak start. The Standard and Poor's 500 advanced 11.09 points (1.31%) to 855.70 but the Nasdaq fell 1.43 points (0.11%) at 1,320.92.
The markets closed out January with a loss, despite conventional logic about a ``January effect''.
Tom Schrader of Legg Mason Wood Walker dismissed the Wall Street adage that performance in January foreshadowed the trend for the year. ``I don't think there is any statistical proof to back it up,'' he said.
But Brian Piskorowski, equity strategist at Prudential Securities said January's direction had predicted the market's annual course with 92.3% accuracy.
The parade of corporate earnings will fade into the background somewhat this week, but Wall Street will be tuned in for results and, more importantly, forecasts from technology bellwether Cisco Systems Inc and No. 4 long-distance telephone company Sprint Corp.
While brewing geopolitical events will likely shove nearly everything else to the back burner this week, economic reports _ particularly data on the manufacturing sector and the labour market _ could also affect the mood.
The Institute of Supply Management's gauge of the factory sector, set for release today, and US payrolls data on Friday will give investors some early glimpses of the state of the economy.
Evidence that the US economy is pulling out of its soggy patch has been spotty at best, and the increasing possibility of war has whipped up fears growth could stumble as corporate America puts off investment decisions and stubbornly high oil prices bite into corporate profits.
Wall Street will also be watching on Wednesday when Secretary of State Colin Powell goes before the UN Security Council to try to persuade doubters that Iraq has weapons of mass destruction.
Worries that a war could disrupt oil supplies, as well as a two-month strike that has crippled production in Venezuela, have pushed the price of crude above $33 a barrel.
Those high prices have sparked fears that corporate profits, already tepid, could take another blow as companies and consumers are forced to shell out more for energy costs.
But the 2002 fourth-quarter results from corporate America have been, for the most part, encouraging. About 67% of the companies in the S&P 500 have reported earnings so far, and, of those, 62% have beaten Wall Street analysts' expectations and 22% have matched them, according to Thomson First Call.
What is troubling, however, is that the outlook for corporate profits in the year ahead remains decidedly murky.
So far, the guidance continues along the lines of no visibility,'' said Charles White, president of investment firm Avatar Associates. Companies don't even want to say anymore that they see things getting better in the second half, because that's what they told us last year.''
In addition to Cisco and Sprint, results are expected this week from medical device maker Boston Scientific Corp, consumer products company Colgate-Palmolive Co, No. 2 US drugstore chain CVS Corp, and top US home appliance maker, Whirlpool Corp.
Beverage and food company Pepsico Inc and Anheuser-Busch Co, the maker of Budweiser beer, also have results on tap.
European markets closed out a dreadful January though prices were mostly higher on Friday after positive US economic data coaxed bargain-hunters back into the market. Most bourses still ended up posting their worst January performance in years as the countdown to war picked up.
The FTSE Eurotop 300 index of pan-European blue chips, coming on the back of three straight years of losses, ended the month more than 7% down _ its worst January performance since the index's records begin in 1986.
The DJ Euro Stoxx 50 index of leading euro-zone shares was up 0.45% on Friday to 2,248.17 points. The German DAX 30 index gained 2.01% to 2,747.83 points and the French CAC 40 added 0.81% to 2,937.88 points. The British FTSE 100 eased back 0.32% to 3,567.4 points. The euro fell to $1.0740 while oil prices were steady.
``The dollar is continuing to do a bit better than before and that also helped the European markets. But the Iraqi problem continues to create negative sentiment,'' said a dealer in Paris.