See, by the end of last week, which brought us the first round of earnings for the Quarter That Ate The Economy, the professional investing hordes had actually lowered their sights enough to be pleasantly surprised. And so it was that lackluster news from Yahoo, Microsoft and Motorola sparked a gaudy Thursday rally on all the indexes and some decent Friday follow-though, and the economic news out of Washington fostered hopes that the consumer would see us through, and —
Can't you just feel the expectations creeping back up?
Not a good time
Some 1,200 companies will showing their balance sheets to Wall Street this week, a data dump of crunched numbers, profit forecasts and other financial mumbo-jumbo that will only confirm what everybody's supposed to know by now: Business, in the second quarter, was lousy.
And then Citigroup kicks things off Monday morning by reporting earnings of 74 cents a share, topping not only expectations but last year's results. Microsoft, reporting for real this week, will be expected to do again what it did last week — make everybody feel good about dominant tech companies — except this time IBM and Intel, and maybe even Apple, will be expected to help.
And then there's the seers. Jack Welch, management guru of management gurus, is expected to dispense some pearls of wisdom this week about how far corporate America is from daylight. Alan Greenspan hits the House on Wednesday to say something about the economy and nothing about interest rates, and then take questions. (Expect a lot of bombs lobbed about the tax cut, and for Greenspan to calmly reply that fiscal decisions aren't his cup of tea.) And of course the White House will be reminding everyone to please spend your tax rebate immediately, we could sure use the stimulus.
How badly do we need it? The week's economic reports are right up Wall Street's alley. Monday, the Commerce Department weighed in with business inventories (too much) — and Tuesday the Fed reports on industrial production for June (not enough). Wednesday comes consumer prices (well-contained — green light for Fed cuts) and Thursday it's weekly jobless claims (hopefully not as bad as last week's 9-year high). Friday, however, is all for the politicians — the Treasury Department reports on federal budget for June. Here's hoping we're still in the black.
For Wall Street, the question of the week is the same as it was last week: If this is the bottom, how long do we have to stay here? We got a rally on Thursday and Friday because investors had started the week in a deep state of depression — the buying was everyone congratulating themselves on their newfound cold-eyed realism.
But now what?
The traders have tasted success, and the ante has been upped. Which leaves it to the bellwethers among all those companies to keep feeding the expectations beast with more pleasant surprises — surprises which will now be that much harder to pull off.
Friday got both the Dow, at 10,539, and the NASDAQ, at 2,084, to levels they hadn't seen in months, because everybody agreed that things were bad but might not get any worse. But everybody also agrees the real turnaround in business spending is a half a year away, and any revivification of the manufacturing sector might take longer than that. So as 1,200 companies air their dirty balance sheets in public this week, what more is there for an investor to get still more excited about?
We'll see.