Market Drop Is Expected in Shorter Trading Week

Investors may pare holdings this holiday-shortened week on fears U.S. companies will again start warning the slowing economy is hurting profits.

Unemployment data Friday could quell some concerns if they show fewer workers are losing jobs than expected. But on the whole, money managers say they will be cautious ahead of the period when companies announce likely earnings shortfalls. This so-called pre-announcement season begins in about two weeks.

Technology-related stocks are expected to decline the most as investors snap up profits after a six-session rally sent prices soaring in relation to corporate earnings reports.

The market is closed for the Memorial Day holiday today, and the rest of the week will bring only a few corporate profit reports. Retail chain Costco Wholesale Corp., telecommunications software maker Converse Technology Inc. and fuel cell maker FuelCell Energy Inc. are expected to report earnings Thursday.

The prospect of large mergers sparked some interest last week. Lucent Technologies Inc. shares got an initial boost on renewed speculation the struggling telecommunications equipment maker will be bought by French rival Alcatel. The companies could agree on a merger as early as Tuesday, sources told Reuters.

Few expect Wall Street to move much higher until economic data or corporate statements give an indication the economy’s recovery is sustainable.