Fed rate cut, jobs data may lift stocks

As if a Fed meeting and a slew of data are not enough, Wall Street is still in the midst of a quarterly earning season.

With about one-third of S&P 500 companies having reported quarterly results already, earnings per shares on average are 25.6 percent below Wall Street expectations, according to the latest Reuters Estimates scorecard released Thursday night.

Revenues are 4.1 percent below expectations on average.

This compares with a year ago, when average EPS beat Wall Street's expectations by roughly 3 percent.

American Express Co (AXP.N) and McDonald's Corp (MCD.N) report on Monday. Boeing Co (BA.N) is due on Wednesday and Procter & Gamble (PG.N) reports on Thursday. A number of pharmaceutical companies will be reporting quarterly results, among them Merck & Co Inc (MRK.N) on Wednesday. All are Dow components.

Pulte Homes Inc (PHM.N) reports results on Wednesday. Home builders have been major casualties of the subprime mortgage bust, but the stocks lately have moved up from their lows. On Thursday, brokerage Raymond James raised its ratings on a number of the home builders, including Pulte.

According to data from Reuters Estimates on January 21, fourth-quarter earnings for S&P 500 companies were projected to decline 10.9 percent from a year earlier. The report included companies that reported results and estimates for those yet to report.

Praveen noted that by taking out the earnings of financial companies, skewed by enormous losses at some institutions, earnings for all other companies, in aggregate, should be positive.

"If earnings outside of financials are up around 5 percent, the market will be satisfied," Praveen said. "Given the gloom and doom we are in right now, that kind of number is probably going to be seen as a relief."

Mike Binger, portfolio manager at Thrivent Financial in Minneapolis, said, "I think the combination of the big rate cut, the stimulus package and some good corporate earnings are kind of proving to people we're not falling off a cliff."

Binger expects continued market volatility, but he thinks financial stocks and technology issues could be bought on the dips. He thinks retailers, another beaten-up sector, may also be worth buying on declines.

(Wall St Week Ahead runs weekly. Questions or comments on this column can be e-mailed to: cal.mankowski(at)reuters.com)

(Additional reporting by Jennifer Coogan and Caroline Valetkevith; Editing by Jan Paschal)