| NEW YORK
NEW YORK Jan 18 With earnings momentum on the
rise, the S&P 500 seems to have few hurdles ahead as it
continues to power higher, its all-time high a not-so-distant
The U.S. equity benchmark closed the week at a fresh
five-year high on strong housing and labor market data and a
string of earnings that beat lowered expectations.
Sector indexes in transportation, banks and
housing this week hit historic or multiyear highs as
Michael Yoshikami, chief executive at Destination Wealth
Management in Walnut Creek, California, said the key earnings to
watch for next week will come from cyclical companies. United
Technologies reports on Wednesday while Honeywell
is due to report Friday.
"Those kind of numbers will tell you the trajectory the
economy is taking," Yoshikami said.
Major technology companies also report next week, but the
bar for the sector has been lowered even further.
Chipmakers like Advanced Micro Devices, which is due
Tuesday, are expected to underperform as PC sales shrink. AMD
shares fell more than 10 percent Friday after disappointing
results from its larger competitor, Intel. Still, a
chipmaker sector index posted its highest weekly close
since last April.
Following a recent underperformance, an upside surprise from
Apple on Wednesday could trigger a return to the stock
from many investors who had abandoned ship.
Other major companies reporting next week include Google
, IBM, Johnson & Johnson and DuPont
on Tuesday, Microsoft and 3M on Thursday
and Procter & Gamble on Friday.
CASH POURING IN, HOUSING DATA COULD HELP
Perhaps the strongest support for equities will come from
the flow of cash from fixed income funds to stocks.
The recent piling into stock funds -- $11.3 billion in the
past two weeks, the most since 2000 -- indicates a riskier
approach to investing from retail investors looking for yield.
"From a yield perspective, a lot of stocks still yield a
great deal of money and so it is very easy to see why money is
pouring into the stock market," said Stephen Massocca, managing
director at Wedbush Morgan in San Francisco.
"You are just not going to see people put a lot of money to
work in a 10-year Treasury that yields 1.8 percent."
Housing stocks, already at a 5-1/2 year high, could
get a further bump next week as investors eye data expected to
support the market's perception that housing is the sluggish
U.S. economy's bright spot.
Home resales are expected to have risen 0.6 percent in
December, data is expected to show on Tuesday. Pending home
sales contracts, which lead actual sales by a month or two, hit
a 2-1/2 year high in November.
The new home sales report on Friday is expected to show a
2.1 percent increase.
The federal debt ceiling negotiations, a nagging worry for
investors, seemed to be stuck on the back burner after House
Republicans signaled they might support a short-term extension.
Equity markets, which tumbled in 2011 after the last round
of talks pushed the United States close to a default, seem not
to care much this time around.
The CBOE volatility index, a gauge of market anxiety,
closed Friday at its lowest since April 2007.
"I think the market is getting somewhat desensitized from
political drama given, this seems to be happening over and
over," said Destination Wealth Management's Yoshikami.
"It's something to keep in mind, but I don't think it's what
you want to base your investing decisions on."