NEW YORK – As the Dow industrials approach 13,000 for the first time, investors will keep a close eye on the heavy flow of quarterly earnings while new data on consumer sentiment and the pace of the U.S. economy stream in next week.
U.S. stocks jumped on Friday, with the Dow closing at a record high after coming within 35 points of 13,000 as stronger-than-expected earnings reports poured in.
The Dow Jones industrial average may have difficulty breaching this key level, however, given how strong indexes have been in recent weeks and the temptation for investors to take profits.
"I would expect next week to see a little bit of consolidation," said Rick Campagna, portfolio manager with Provident Investment Counsel in Pasadena, California. "I wouldn't be surprised to see a little bit of profit-taking."
In the past week, the Dow rose 2.8 percent, the S&P gained 2.2 percent and Nasdaq rose 1.4 percent.
Strong corporate earnings from companies like Google Inc. and Caterpillar Inc. have handily beat expectations and have left April on course to be the best month for the Dow and the S&P in just over four years.
Of the 101 companies in the Standard & Poor's 500 Index that reported results this past week, 70 beat consensus earnings per share estimates, 14 met expectations and 17 missed, according to Reuters Estimates.
For companies reporting results in the first quarter so far, 91 have beaten estimates, or 67.4 percent, down from 70.5 percent that beat a year ago, Reuters Estimates said.
The upcoming crop of earnings reports includes a fairly diverse group such as brewer Anheuser-Busch Cos. Inc., Microsoft Corp. and DuPont.
Also on the list are aerospace companies Lockheed Martin Corp., Northrop Grumman Corp. and Boeing Co.
and oil companies Exxon Mobil Corp. and ChevronCorp.
Results from S&P 500 companies so far show earnings are projected to rise 5.3 percent from the first quarter of 2006, up from 4.5 percent last week, according to Reuters Estimates.
Peter Dunay, investment strategist, Leeb Capital Management New York, said if the earnings growth rate holds, "the market will maintain its upside."
DATA FOCUS ON DATA, GDP
In the data department, Tuesday's report from the Conference Board on its index of consumer sentiment will be a highlight. The index fell to 107.2 in March from 111.2 in February; in a Reuters poll of economists, the median forecast for April points to further slippage to 105.0.
On Friday, the Reuters/University of Michigan Surveys of Consumers is due for an update. A preliminary report showed the consumer sentiment index for April slipped to 85.3 from 88.4 in March. The consensus is for a final reading of 85.2.
As the slump in housing remains a worry for investors, they will have more data to consider Tuesday and Wednesday.
The National Association of Realtors will report March existing-home sales data on Tuesday while on Wednesday investors get a look at data on new home sales. According to the consensus, new sales activity in March is expected to rise slightly from the pace in February, which was the lowest level in nearly seven years.
Also on Wednesday, the Commerce Department issues data on durable goods orders for March. The median forecast is for a 2.5 percent increase, which would be larger than February's 1.7 percent increase.
The economy will come into focus on Friday when investors get their first look at the pace of U.S. growth in the first quarter. The consensus forecast calls for a 1.8 percent annual rate, down from 2.5 percent in the fourth quarter of 2006.
"We see a continued deceleration in GDP through the remainder of the year," said Hugh Moore, a partner in investment manager Guerite Advisors, Greenville, South Carolina.
Moore said he is telling investors that if they want to stay invested in stocks they should have their money in large-cap multinationals and dividend-paying stocks.