Earnings reports, confidence index to be released

NEW YORK -- —  Wall Street’s in the dark about a lot of things -- how much risky debt banks are holding, how the Federal Reserve plans to keep the markets running smoothly and whether the strong parts of the economy will stay strong.

And like anyone in the dark, investors are having a difficult time finding their bearings.

This week could mean more floundering unless they get some clearer signals about the economy’s resilience and about the risks that banks and brokerages face after investing in mortgages that later went sour.

The Dow Jones industrial average finished last week down 1.5% after the erratic, triple-digit swings the blue-chip index logged over those five days. The Standard & Poor’s ended down 1.7%, while the technology-dominated Nasdaq composite index finished up 0.2%.

The Federal Reserve last Wednesday lowered key interest rates by a quarter of a point, as expected.

But it said that the strained financial markets had eased a bit since the summer’s credit crisis and that “the upside risks to inflation roughly balance the downside risks to growth” -- suggesting to Wall Street that the Fed might not keep lowering rates to spur business activity.

That’s a scary thought for some investors who believe the economy’s health is in jeopardy because of widespread credit problems.

Last week’s government data gave investors a very fuzzy picture of the economy: October job growth was much stronger than expected, but September personal spending and October manufacturing growth slowed.

The parts of the economy in question, as they have been for the greater part of the year, are the housing and financial sectors.

U.S. earnings, overall, are poised to post their first decline in five years, thanks to poor results at companies that made bad bets when lending and investing. Meanwhile, industries such as technology have stayed robust.

“It’s been an interesting tale of two markets,” said Linda Duessel, market strategist at Federated Investors in Pittsburgh. “The economy still looks good except for these two areas, which are deep, deep, deep in the woods.”

So far, there’s not enough evidence to say the economy isn’t surviving the recent crisis facing banks and other lenders.

“The market just hates the news they don’t know yet,” Duessel said.

There are still a few more quarterly earnings reports yet to come in. Companies with earnings releases scheduled for this week include automakers General Motors Corp. and Ford Motor Co.; technology companies Cisco Systems Inc., Sun Microsystems Inc. and Qualcomm Inc.; and insurers American International Group Inc. and Marsh & McLennan Cos.

And though the economic data schedule is thin this week, there are a few reports that investors will be monitoring.

The Institute for Supply Management releases its October index today, and economists are anticipating, on average, slightly weaker growth than in September.

Meanwhile, the University of Michigan is expected to show a drop in consumer sentiment in November compared with October.

But even if these reports turn out to be positive, they’re not likely to give the market much of a boost to the upside. The Fed seems satisfied with how the economy is doing, so a good set of numbers won’t change its sentiment.

Wall Street is likely to get more direction from inflation figures -- the Labor Department’s producer and consumer price indexes -- which aren’t scheduled to be released until next week.

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At a glance

Today

The Institute for Supply Management issues its report on activity in the non-manufacturing economy for October.

Treasury bill auction.

Quarterly earnings reports due from Sun Microsystems and Burger King Holdings.

Tuesday

House Energy and Commerce subcommittee hearing on children’s product safety and the powers of the Consumer Product Safety Commission.

House Foreign Affairs Committee hearing on Yahoo and its human rights case in China.

Quarterly earnings reports due from Archer Daniels Midland, Molson Coors Brewing, Office Depot, Revlon, Tenet Healthcare and Valero Energy.

Wednesday

Labor Department issues preliminary reports on productivity and costs for the third quarter of 2007.

Federal Reserve reports on consumer credit for September.

Quarterly earnings reports due from Cisco Systems, DirecTV Group, General Motors, Harrah’s Entertainment, News Corp., Sara Lee and Time Warner.

Thursday

The nation’s largest retailers announce their sales figures for October.

Labor Department reports on weekly jobless benefit claims.

Freddie Mac reports on mortgage rates.

Federal Reserve Chairman Ben S. Bernanke testifies before the Joint Economic Committee on the economic outlook.

Quarterly earnings reports due from Qualcomm, Walt Disney, Charter Communications, Clear Channel Communications, Ford Motor and Toll Bros.

Friday

Commerce Department reports on international trade for September.

Quarterly earnings report due from Liberty Media Holding.

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Source: Times staff and wire reports