Stocks Anticipate High Fourth-Quarter Results

As last week proved, expectations for strong fourth-quarter scorecards are fueling the stock market.

But with stocks so richly valued, even good profit reports this week may not be enough to push them higher, analysts say.

“Everyone knows that the December quarter was very good,” said Stanley Nabi, managing director at Credit Suisse Asset Management. “There’s no surprise in that direction. My feeling really is that [this week] there will be consolidation of the market.”

Earnings season kicks up another notch beginning today and stretching across the week with reports from about 140, or almost 30%, of the companies in the Standard & Poor’s 500 index.

Scorecards from computer maker Gateway Inc., fast-food chain McDonald’s Corp. and drug maker Merck & Co. will be among the key reports.

“Companies are reporting earnings above expectations and giving positive guidance for revenue going forward,” said Ozan Akcin, chief market strategist at Puglisi & Co. “That’s something we haven’t seen and it’s encouraging.”

But the bullish view of corporate earnings already has propelled stocks higher for most of January, analysts said, so the good news may already be priced into stocks.

Economic data, including reports on the housing market and capital spending, will play second fiddle to earnings this week.

Today, the National Assn. of Realtors will release its figures on the number of existing homes sold in December.

The Conference Board releases its consumer confidence figures for January on Tuesday.

The Commerce Department issues its reports on December durable goods orders and December new-home sales Wednesday.

Weekly jobless claims will once again merit attention Thursday.

Friday’s agenda will be chock-full of economic data: an estimate of growth in fourth-quarter gross domestic product and the University of Michigan’s final reading on consumer sentiment in January.

The Federal Reserve’s policy-making body, the Federal Open Market Committee, will meet Tuesday and Wednesday. It’s widely assumed that the Fed will reiterate its commitment to keeping U.S. interest rates low for a considerable period. The results of the meeting are to be announced Wednesday.