Wall Street Awaits Clues on Economic Improvement

Strategic Insights -

Investors will be closely watching a wave of earnings reports from hundreds of companies this week, including tech giants Yahoo!, Sun Microsystems, and Texas Instruments, as well as consumer product companies Procter & Gamble, Kimberly-Clark, and Starbucks. The reports will provide valuable insights into consumers' willingness to spend, while also giving investors a sense of whether the economy is starting to show signs of improvement. However, the uncertainty in the market remains high, with investors waiting for Congress to act on President Obama's stimulus plan and the Federal Reserve to provide its assessment of the economy.

Key Takeaways:

  • Hundreds of companies, including Yahoo!, Sun Microsystems, and Texas Instruments, will issue earnings reports this week, providing insights into the tech sector's performance.
  • Consumer product companies like Procter & Gamble, Kimberly-Clark, and Starbucks will give an indication of consumers' willingness to spend.
  • Investors are watching for positive surprises in terms of guidance, similar to IBM's forecast for 2009, which helped send the Dow Jones industrials up 3.5 percent.
  • Microsoft Corp. posted an 11 percent drop in fourth-quarter profit and plans to slash 5,000 jobs over the next 18 months.
  • Volatility in the market is expected to increase during earnings season, with Quincy Krosby of The Hartford stating that "during periods of earnings, volatility tends to pick up even in the best of times."

Statistics:

  • The Dow Jones industrials rose 3.5 percent on Wednesday after IBM's positive forecast.
  • Microsoft Corp.'s fourth-quarter profit dropped 11 percent.
  • The company plans to slash 5,000 jobs over the next 18 months.
  • The Federal Reserve's benchmark fed funds rate is currently set at 0.25 percent.
  • The Obama administration's stimulus plan proposes an $825 billion economic recovery package dedicating about two-thirds to new government spending and the rest to tax cuts.
  • The remaining $350 billion of the $700 billion financial bailout package passed last fall has been authorized for spending by Congress.

Sources:

  • Quincy Krosby, chief investment strategist at The Hartford, as quoted in The Associated Press (no date provided)
  • The Associated Press, "Wall Street waits for clues on economy; IBM's forecast helps stocks," (no date provided)
  • The White House, "President Obama's Recovery Agenda," (no date provided)
  • Associated Press, "Microsoft to cut 5,000 jobs, raise prices" (no date provided)
  • Federal Reserve (no date provided)