Wall St. Week Ahead: Market to shift into lower gear as earnings, data fade

thenews 2013.08.03 05:16

With earnings season winding down and the employment report out of the way, the U.S. stock market is likely to shift into a lower gear next week.

The earnings season so far has been largely positive with more than half of the companies that have reported beating estimates. But cuts in outlooks from a number of bellwethers, including Intel (INTC.O) and Caterpillar (CAT.N), mainly due to increasing concerns over China's growth, have raised fears about the third and fourth quarters.

"It has sort of become a trend now to go into earnings season with low expectations, so beating those expectations is not a big deal," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

"The market is starting to really look at outlook cuts and guidance more than earnings itself."

The market is also likely to trade sideways next week after the Dow and the S&P 500 marked record closing highs for a second day on Friday.

For the year, both the Dow and the S&P 500 are up more than 19 percent.

The S&P 500 index has passed through two century marks this year - 1,600 and 1,700. The last time the broad market index covered more round numbers in a year was in 1998 when it touched 1,000, 1,100 and 1,200, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Of the 391 companies in the S&P 500 that have reported earnings for the second quarter, 67.8 percent have topped analyst expectations, in line with the average beat over the past four quarters, data from Thomson Reuters showed. About 55 percent have reported revenue above estimates, more than in the past four quarters but below the historical average.