Is Wall Street still in a bear market, or beginning a bull market? Either way, it's probably due for a major pullback.
And this week, the market's hurdle is a big one: A flood of quarterly results and outlooks from companies as varied as banks, toy sellers and computer chip makers.
For The Record
Los Angeles Times Tuesday, April 14, 2009 Home Edition Main News Part A Page 4 Metro Desk 1 inches; 25 words Type of Material: Correction
The Week Ahead: A Monday Business article about the stock market's performance said the Dow Jones industrial average advanced 0.08% last week. It advanced 0.8%.
Stocks have been on a tear, gaining 23% over five straight weeks from 12-year lows. The Dow Jones industrial average finished last week at 8,083, a two-month high.
But the market cannot go up forever, especially when the economy remains so uncertain.
Since 1900, whenever the stock market has risen more than 20% within two months, it has dropped an average of 7% in the ensuing month, according to JPMorgan equity analyst Thomas J. Lee. Historical averages do not always accurately predict the future, of course, but the statistic is a glaring reminder that Wall Street is still on shaky ground.
"A bear market rally looks exactly like this -- very, very quick. It sucks people in," said Robert Levitt of Levitt Capital Management.
Last week's Dow performance was decent -- a 0.08% advance -- thanks to a late-week rally on an upbeat profit forecast from Wells Fargo & Co. But investors got a taste of volatility earlier in the week, and there could be more to come. The Dow lost 2.8% over Monday and Tuesday as investors became worried about the bad news that earnings reports might bring.
The market did a sharp U-turn Thursday and jumped higher after Wells Fargo announced that it expected a record $3-billion profit for the first quarter, an encouraging sign that the banking industry might not be as damaged as many had feared. But using Wells Fargo to take the temperature of the entire banking industry is a bit like using New York's real estate market as an indicator for the whole country's: It has simply been much stronger than others.
Investors need more data points, and that is what they will get this week in the way of first-quarter results. Along with those results will come guidance from executives on how the rest of the year looks.
"If you have a market that's already starting to build in a turn, what the guidance is going to do is either confirm it or deny it," said Quincy Krosby at the Hartford.
More banks will be releasing quarterly results this week, notably Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co. Other industries reporting earnings include technology (Intel Corp.), media (Gannett Co., Media General), nondiscretionary consumer products (Johnson & Johnson) and discretionary goods (Mattel Inc., Harley-Davidson Inc.).
