NEW YORK – Investors are expected to focus on oil prices and corporate earnings outlooks next week, and the slightest warning about company revenues could weigh on stocks.
In a note to clients Friday, brokerage UBS said it expects more profit warnings because of rising energy and labor costs, among other things.
"The real key is going to be the earnings picture," said Joseph Battipaglia, chief investment officer for Ryan, Beck & Co. "We're starting to see very early pre-announcements to the negative here, and in some cases it's a matter of just tweaking the revenue number and that brings the stock down sharply."
Earnings reports are due next week from major corporations including software company Oracle Corp. (ORCL), consumer electronics retailers Best Buy Co. Inc. (BBY), Circuit City Stores Inc. (CC) and soup maker Campbell Soup Co. (CPB).
A number of economic indicators, including non-auto retail sales, consumer prices and consumer sentiment reports, will also be watched closely.
Lehman Brothers said in a report Friday that slow growth in non-auto retail sales and a further leveling off in the core Consumer Price Index are unlikely to prevent the Federal Reserve from raising interest rates at its upcoming policy meeting on September 21.
Economists widely expect the Fed to raise official rates to 1.75 percent from 1.5 percent.
The effect of fuel costs on corporations and consumers remains a concern. Investors will wait anxiously for word on crude prices from a meeting of OPEC oil producers Wednesday.
Ministers of the Organization of the Petroleum Exporting Courtries (search) will meet in Vienna Wednesday to review production policy.
"Investors have gotten used to the fact that oil is going to be rather expensive for a while," said Michael Metz, chief investment strategist at Oppenheimer & Co.
Security concerns, and uncertainties over the U.S. Presidential elections are also on investors' minds.
"We are in a war-time market," said economics and markets analyst Bill Rhodes of Rhodes Analytics. "Nobody knows what to make of it.
"This whole market has an underlying theme of real concern — right up to and beyond the election. Hopefully next week won't be as slow and as quiet as it was this week."
Lehman Brothers said it expects the U.S. current account deficit, to be announced Tuesday, to rise to $160 billion in the second quarter, up from $144.9 billion in the first quarter.
"Given that it doesn't have an immediate effect and no one has a solution, everyone is pretty content at the moment to sweep the deficit under the rug," said John Shin, economist at Lehman Brothers.
"The problem is, it is a big thing to sweep under the rug. It's a big lump. We are concerned about it."
Despite the market's problems, there are still bullish voices to be heard.
"I think the market is in the mood to go higher," said Michael Metz at Oppenheimer. "Fundamentally, the economy is in decent shape. We were much too optimistic going into the spring, and now we've had the adjustment.
"The market has had a lot of chances to really fall apart over the last few months and it hasn't."
For the week, both the Dow Jones Industrial Average (search) and Standard & Poor's 500 index (search) closed higher, marking a fifth consecutive week of gains for both indexes. The Dow ended up 0.52 percent, while the S&P advanced 0.92 percent.
The Nasdaq Composite Index (search) ended the week 2.7 percent higher, its largest percentage increase in three weeks.