U.S. stocks stumbling into February

SAN FRANCISCO
— U.S. stocks are stumbling into February, and a fresh batch of
economic reports this coming week is likely to dictate investor
sentiment.

After a hefty dose of earnings the past two weeks,
investors will turn to reports from ADP on payrolls, the ISM on
nonmanufacturing growth and U.S. government data on weekly jobless
claims and the nationwide unemployment rate.

Investors, who pushed the Dow Jones Industrial
Average past the 10,720-point mark just after the start of the year,
have grown skeptical about the strength of the global economic rebound.
The U.S. stock market has endured three straight weekly losses.

“The market is confirming that it will be a slow recovery,” said financial adviser Jim Holtzman at Legend Financial. “We’re concerned about a market correction.”

In January, the Dow Jones Industrial Average and the
S&P 500 Index both slid more than 3 percent. The Nasdaq Composite
Index fell more than 5 percent in January.

The Dow closed Friday at 10,067, the S&P at 1,074 and the Nasdaq at 2,147.

Year to date, by S&P industry sector, share
returns for information technology are down 6.5 percent; materials are
down 7.3 percent. In energy, the decline is 3 percent and in consumer
staples it’s down 1 percent. Financials are down 0.77 percent. Health
care is up almost 1 percent.

“As the calendar opens to the new trading month, we
expect that more of the same lies ahead, at least until further clarity
is gained as to what the impact of central-bank policy adjustments
around the world will have on global growth,” wrote John Stoltzfus at Ticonderoga Securities.

On the economic data front, China will release its January Manufacturing Purchasing Managers’ Index on Sunday. A couple weeks ago, China said it would pull back on lending, spooking the market, which also has been fearful of debt woes in Greece and Spain.

On Wednesday, in the U.S., payroll services firm ADP
will release its January employment data. Another market mover could be
the ISM nonmanufacturing report, a broad gauge of economic activity.
The ISM services index moved back into growth territory in December,
but has seesawed in recent months.

“It’s improving, but has lagged manufacturing,” Paul Nolte, managing director at investment advisor Dearborn Partners, said of the ISM services index.

Other reports include the U.S. weekly jobless claims
on Thursday, followed on Friday by U.S. nonfarm-payrolls data and the
latest reading on the unemployment rate.

The week of Feb. 1 marks the “peak
week” of fourth-quarter earnings reports, with three Dow components and
94 S&P 500 companies scheduled to release results, according to Thomson Reuters.

Technology bellwether Cisco Systems Inc.; Exxon Mobil Corp.; UPS Inc.; Time Warner Inc.; and Pfizer Inc. are among the high-profile companies issuing reports.

Through Jan. 29, 220 of the S&P 500 companies had reported fourth-quarter earnings.

Here’s the scorecard so far: 78 percent of the 220 companies reported earnings above analysts’ expectations, according to Thomson Reuters. In a typical quarter (since 1994), 61 percent of companies beat Wall Street targets. For the 217 companies that published revenue estimates, 67 percent topped the consensus expectation, Thomson Reuters said.

But global events seem to have eclipsed earnings news. Through Jan. 28, the average stock has declined 0.09 percent on its report-card day, according to Bespoke Investment Group.

For companies that beat Wall Street
forecasts, their stocks gained 0.8 percent, on average. Shares of
companies that missed the consensus estimate fell 2.89 percent.

—

(c) 2010, MarketWatch.com Inc.

Visit MarketWatch on the Web at http://www.marketwatch.com

Distributed by McClatchy-Tribune Information Services.