NEW YORK - With crude prices still near historic highs and the Federal Reserve holding steady on interest rates, investors have been looking forward to the start of earnings season to see whether corporate America can still deliver strong profits.
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The markets sold off heavily last week as the Fed gave no signal when it might stop raising interest rates. With oil closing out the week above $58 per barrel, investors are worried that high rates and high energy prices will slow the economy too much.
So it falls now to second-quarter earnings, which kick off on Thursday with Alcoa Inc.'s report, to assuage Wall Street that corporate profits will continue to grow at a healthy pace and keep the economy moving forward despite increasing interest rates and oil prices that show no signs of dropping lower.
Until Thursday, when the first reports come out, investors can expect a sluggish market, with light volume due to the holiday-shortened week.
Last week, the major indexes were relatively unchanged, as a drop in oil prices from Monday's record highs was offset by disappointment over the Fed's apparent willingness to continue its policy of steady rate hikes. For the week, the Dow Jones industrial average gained 0.05, the Standard & Poor's 500 climbed 0.24 percent and the Nasdaq composite index rose 0.2 percent.
ECONOMIC DATA
Investors will also look to the Labor Department's job creation report, due Friday, for signs that the economy continues to generate jobs. The May report, which showed just 78,000 jobs created, was a disappointment, though some investors felt it would prompt the Fed to change its rate policy. Economists are looking for 180,000 jobs to have been created in June.
The Commerce Department's report on U.S. factory orders is due Tuesday. Economists expect orders to have risen 3 percent in May, a sharp increase from the 0.9 percent increase recorded in April.
And on Wednesday, the Institute for Supply Management will release its index measuring June's economic activity in the service sector. The services index is expected to edge slightly lower, to 58, from a 58.5 reading in May.
EARNINGS
Alcoa, the metals manufacturer, has traditionally been the first Dow industrial to announce its quarterly earnings, which it will release after Thursday's session. Alcoa is expected to post earnings of 48 cents per share, up from 46 cents in the second quarter a year ago. The company's stock slumped this year, off 25.3 percent from its 52-week high of $34.99 on Nov. 29. It closed Friday at $26.14.
Management consultant Accenture Ltd., also reporting late Thursday, has traded in a narrow range for most of the past year, but is up 10.9 percent from its 52-week low of $21 on May 13, closing Friday at $23.28. The company is expected to earn 43 cents per share for the quarter, down from 47 cents a year ago.
