Earnings Season Coming To Wall Street

by Darren

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In the last few months, stock market valuations have been going up and down based primarily on news, either economic or general. That will change in the next few weeks as companies enter earnings season. Now is the time to see just how much inflation, low consumer confidence, and high transportation costs are weighing on company’s earnings. There is every reason to believe that earnings for many companies will be even worse than expected.

“The earnings, which are a reflection of the economy in general, have been going down and unfortunately there’s a lot of concern it will go down a lot more,” said Standard & Poor’s senior index analyst Howard Silverblatt. “How long can they continue through the storm? Nobody believes the ‘worst is behind us’ comments from the CEOs because they can’t predict where this economy is going.”

Of course one issue pushing higher inflation and consumer worries is the high cost of crude oil, which is expected to go past $150/barrel for the first time this week. Beleaguered motorists are already changing travel plans, curtailing unnecessary trips, and cutting back on purchases in order to make ends meet, but one has to wonder how much further they can bend before they break.

Gasoline prices are up a stunning 50% in 2008, which is further making the Fed’s job of trying to jumpstart the economy difficult. Investors this week will be looking for any signs of good economic news. Barring that, more money may go from the dollar into Oil, creating even higher energy costs. Depending on what Ben Bernanke does with interest rates, high inflation might just set in for the remainder of 2008.

People looking to invest in stocks this week will probably do best to look at companies who have at least some isolation from rapidly rising fixed and supply costs.

On Tuesday of this week the National Association of Realtors will be releasing data on new home sales. On Thursday you can expect to learn about the employment numbers when they Labor Department releases key job figures. Finally, on Friday, the University of Michigan will be releasing key consumer confidence numbers.

Investor sentiment moving forward will have a lot to do with the results of the data released in these reports this week.

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