By Regina Hing, MarketWatch
NEW YORK (MarketWatch) -- After a week of fending off gloomy economic data, investors may get little respite next week as U.S. companies report earnings expected to bear the scars of a battered global market.
U.S. week ahead: Alcoa, J.P. Morgan
The coming week includes the unofficial start to quarterly earnings, including Alcoa and J.P. Morgan, plus Yahoo's annual meeting, Laura Mandaro reports on Markets Hub. Photo: AP.
Companies have actually done a remarkable job margins are at an all-time high, profit growth is in line with sales growth its the macroeconomic factors that have been the real drag, said Ed Keon, managing director at Quantitative Management Associates, a subsidiary of Prudential Financial Inc. Clearly anyone who has exposure to Europe will be struggling.
Second-quarter earnings for S&P 500 /quotes/zigman/3870025 SPX +1.03% companies are expected to rise 5.8% year-over-year. But excluding Bank of America Corp. /quotes/zigman/190927/quotes/nls/bac BAC +0.52% , whose results last year were hit by a mortgage lawsuit settlement, the indexs earnings are forecast to rise a mere 0.7%, according to Thomson Reuters. The research firm also notes that the ratio for negative versus positive company guidance is at its worst since the end of 2008. Read more on company outlooks.
[Consensus estimates] have been brought down to a point where even if the environment is difficult, it will be easier for companies to beat, said Bill Stone, chief investment strategist for PNC Asset Management. But we still wont get the kind of blowout we had last quarter.
Alcoa, J.P. Morgan
Alcoa Inc. /quotes/zigman/246295/quotes/nls/aa AA +1.29% unofficially kicks off the reporting cycle late Monday. After having had its consensus estimate slashed almost 50% in the past month, the aluminum maker is now expected to post 5 cents of earnings per share, down from 32 cents last year. Alcoa has been the worst performer on the Dow Jones Industrial Average /quotes/zigman/627449 DJIA +0.80% in the last year, losing 46%. Read Alcoa earnings preview.
The week builds up to a peak with the much-anticipated earnings announcement from J.P. Morgan Chase & Co. /quotes/zigman/272085/quotes/nls/jpm JPM +2.61% on Friday, the first of the big banks to report. The embattled lender is expected to report profit of 76 cents a share, according to a survey by FactSet.
Of more interest may be the exact size of a trading loss from a complex derivatives strategy that went awry; the loss is expected to top $2 billion.
Europe markets: China matters
European investors will watch for key indicators outside the continent--China reports second quarter GDP and the Federal Open Market Committee minutes will indicate the chances of more quantitative easing. Andrea Tryphonides and Nina Bains discuss.
The issue will also be how much in hedging losses they really made, added Stone, referring to the trading loss caused by J.P. Morgans London unit.
That trading loss, which crushed J.P. Morgans stock in May and tarnished its CEOs reputation, isnt the only controversy facing the bank. J.P. Morgan is one of several institutions under investigation for alleged rigging of the London interbank offered rate. Those charges led to a record $452 million fine for Barclays Plc /quotes/zigman/301787 UK:BARC +2.00% and the departure of the British banks chief executive officer. Read more on fine.
Europe meeting Monday
Much of the attention, however, will remain in Europe, as euro-zone finance ministers gather on Monday to flesh out details of the crisis measures they agreed on at the European Union summit last month. On the table are pressing matters over how to use the rescue fund or the European Stability Mechanism to aid struggling members Spain and Cyprus; next steps for Greece; as well as when the European Central Bank-led single banking regulator might be formed.
Theres evidence that investors are willing to bid up market prices based on whats happening in Europe, said Keon. Look at the rally we had from the summit that was pretty substantial, and not because we got any new information, but just because investors saw some stability in Europe.
Global policy moves have been the main driver of stocks over the last few weeks.