A Narrow Range on Wall Street as Earnings Season Begins

As usual, Alcoa Aluminum will kick off the rush of quarterly earnings reports late Monday, and after a strong run of outperforming market expectations, hopes are high. That means the scope for disappointment has risen. Other big corporations scheduled to report this week include JPMorgan Chase Company, Bank of America and Google.

Much of the earnings growth for companies so far since the recession has come from cutting jobs and other costs. But analysts say this quarter’s earnings season will show more revenue growth.

More than 30 percent of companies could report revenue growth of at least 10 percent, according to the senior index analyst at Standard Poor’s, Howard Silverblatt. Analysts expect Alcoa, for example, to say its first-quarter revenue jumped 26 percent to $6.16 billion from $4.89 billion. The global economic recovery has meant more demand for Alcoa’s aluminum. It shares were 0.17 percent higher.

Companies are also turning to buyouts to help them grow. Endo Pharmaceuticals Holdings said Monday that it would buy American Medical Systems for about $2.9 billion. Endo will also assume $312 million in debt for the company, whose devices and procedures treat pelvic disorders. The deal offers American Medical shareholders a 34 percent premium over the company’s share price on Friday.

And Level 3 Communications announced that it would buy Global Crossing in a transaction worth $3 billion, or $23.04 a share.

Investors, though, still have a long list of worries, including a new earthquake that struck Japan on Monday, the one-month anniversary of its March 11 earthquake. It was the second major aftershock in less than a week to hit the world’s third-largest economy. Officials said Monday’s aftershock did not endanger operations at the damaged Fukushima Dai-ichi nuclear complex.

In late morning trading, the Dow Jones industrial average was up 49.61 points, or 0.4 percent. The Standard Poor’s 500-stock index gained 0.2 percent. The Nasdaq was less than 0.1 percent lower.

In Europe, the FTSE 100 index of leading British shares was 0.18 percent higher, while the DAX in Frankfurt declined 0.1 percent. The CAC 40 in Paris was 0.35 percent lower.

Earlier in Asia, Japan’s Nikkei 225 stock average dipped 0.5 percent to close at 9,719.70, Hong Kong’s Hang Seng index slid 0.4 percent to finish at 24,303.07. Benchmarks in mainland China, South Korea, Taiwan, Singapore and India also fell.

Inflation figures will also take center stage, with the United States, Britain, the euro zone and China all set to report numbers for March. They are expected to show that price pressures remain elevated, partly because energy and commodity costs continue to rise for a variety of reasons, not least the battle for control of Libya, an oil exporter.

“Inflation was a key theme last week with respect to central bank rate decisions and it will continue to remain a key theme this week,” market analyst at CMC Markets, Michael Hewson, said.

A raft of other economic data will also be released this week, including American retail sales and industrial production figures and China’s first estimate for economic growth in the first quarter.

Expectations of the latter may be negatively affected by the news that China posted a trade deficit in the first three months, its first since 2004. Higher commodity and energy costs as well as the country’s insatiable demand for raw materials were the main reasons behind the deficit.

Oil prices are crucial in assessments of the global economy. Not only are they stoking inflationary pressures and heightening expectations that the world’s leading central banks will be raising interest rates from super-low levels sooner than anticipated, but they are also weighing on economic activity.

As a result, traders are keeping a close watch on developments in the oil markets, especially after a week when they struck fresh 30-month highs almost daily. The benchmark contract as traded in New York remained elevated despite a decline of 91 cents a barrel, to $111.88.

Article source: http://www.nytimes.com/2011/04/12/business/12markets.html?partner=rss&emc=rss