Biz media assess whether stocks will continue to rise

This week could be a big one for the markets given all the expected news. Could all that mean it’s the end run for stocks?

Here’s the story from the Wall Street Journal:

With U.S. companies set to begin reporting first-quarter results on Monday, big investors are shaking off lukewarm profit forecasts and gloomy economic data and betting that central-bank action will help keep stocks rolling.

A handful of corporate and government reports this week could shed light on whether such optimism is justified.

Aluminum giant Alcoa Inc. is scheduled to kick off U.S. earnings season Monday afternoon, followed by retailer Bed Bath & Beyond Inc. on Wednesday and two of the nation’s biggest lenders, J.P. Morgan Chase & Co. and Wells Fargo Co., on Friday.

Later this week, the Federal Reserve will release minutes of its March policy meeting, possibly giving investors fresh insight into its plans for interest rates and its “quantitative easing” program of bond purchases. Last Friday’s jobs report, which showed slow job growth in March and an exodus of workers from the labor force, may make Fed officials especially cautious about pulling back on easy-money policies.

On Friday, the Commerce Department is scheduled to release its retail-sales report for March. Those figures may show whether consumers’ surprising resilience this year is likely to persist. Consumer spending has been relatively robust in the first two months of the year, despite a Jan. 1 increase in payroll taxes. But the disappointing March employment report could signal mounting pressure on pocketbooks—and, in turn, on retailers.

The numbers could push stocks even lower after one of the worst weeks in a while, according to Reuters:

Stocks ended their worst week this year with losses on Friday after a weaker-than-expected jobs report undermined confidence in the economy and first-quarter earnings growth.

The jobs data, which showed employers hired at the slowest pace in nine months, was the latest in a series of disappointing economic reports.

Companies begin to report quarterly earnings next week, which is likely to be another concern for investors in light of recent economic data. Analysts’ estimates for earnings growth in the first quarter have fallen since late last year, according to Thomson Reuters data.

“I think earnings season could be less than stellar again. Given market performance to date, we could see some softness in the market because we’ve generated some healthy returns already,” said Natalie Trunow, chief investment officer of equities at Calvert Investment Management, which has about $13 billion in assets.

Stocks had been rallying on the Fed’s promise to keep providing stimulus and on mostly improving U.S. economic data. The S&P 500 is up 8.9 percent since the start of the year.

The S&P 500 was down 1 percent for the week. All but three of the S&P 500’s 10 industry sectors posted declines.

I find these types of market stories and preview a much more interesting way to set the tone for the week ahead than just listing upcoming Treasury auctions and economic data in a table. But they do present a problem for journalists who essentially have to try and predict the future.  They do have some clues.

Here’s the WSJ again:

Analysts surveyed by data provider FactSet predicted first-quarter profits will decline 0.6% from a year earlier among companies in the Standard & Poor’s 500-stock index. If they are right, corporate earnings will fall from the year-earlier period for the second time in three quarters.

Yet many fund managers remain optimistic that stocks will continue their record-setting run. The Dow Jones Industrial Average is up 11% for the year following Friday’s close at 14565.25. Bullish investors see signs the U.S. economy will continue a slow expansion, creating jobs, boosting incomes and bolstering corporate profits.

“The Fed’s unconditional support of asset prices has made people more confident,” said David Ellison, a portfolio manager with Hennessy Funds, which oversees around $3 billion. “But my bet is that the economy is getting better.”

U.S. companies have allowed some optimism to creep into their forecasts, but their tone remains cautious. Concerns about still-high unemployment, budget debates in the U.S. and depressed prospects in Europe have been a counterweight to an improving housing market and better prices on petroleum products.

I guess we’ll find out the answer to these questions soon enough.