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Wall Street looks to 3Q
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September 2, 2001: 7:00 a.m. ET
Markets brace for start of pre-announcement season
By Staff Writer Alexandra Twin
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NEW YORK (CNNfn) - It was the best of times – in the 1990s – and now it's the worst of times, and so the stock market, after falling for a year and a half, faces another September.
Historically, the second worst performer of the year – since 1982, according to research firm Ned Davis – September is also the last month of the third quarter, which means it's typically the beginning of profit warning season, in which companies issue their often negative earnings pre-announcements.
Investors will be listening closely, looking for signs that the economic downturn is on its last legs – which may mean that the worst is over for corporate earnings as well. Will that be enough to spur the market to a better-than-expected September performance?
"People are really going to be watching the pre-numbers for this next quarter," Troy Nickerson, co-head of Nasdaq trading at Robertson Stephens, told CNNfn's Market Call. "We need to get some sort of reversal if we're going to be able to stabilize."
Friday offered a mild rally after what had been a four-day losing streak, culminating in the Dow Jones industrials closing below 10,000 Thursday for the first time in nearly five months.
The Dow gained 30.17 points to 9,949.75 but fell 4.5 percent for the week and 5.4 percent in August. The Nasdaq composite index rose 13.75 points, or 0.8 percent, to 1,804.43, narrowing its weekly loss to 5.8 percent and its monthly decline to 11 percent.
The Standard & Poor's 500 rose 4.55 points, or 0.4 percent, to 1,133.58, capping a 4.3 percent drop for the week and a 6.4 percent loss for the month.
Stock markets will be closed Monday in observance of Labor Day.
Last-minute turnaround
The rise Friday followed a pair of positive economic reports. The government said orders to factories rose 0.1 percent in July, when economists expected a decline. Separately, the Chicago Purchasing Managers Index for August showed a rise to 43.5 percent, also above expectations, seen as a positive sign that the beleaguered manufacturing business may be turning around.
Analysts saw this as a potentially hopeful sign for Tuesday's report from the National Association of Purchasing Managers (NAPM), a key index of manufacturing activity.
Click here for CNNfn's economic calendar
Economists polled by Briefing.com forecast a drop to 43.2 in August from 43.6 the previous month. That would be the 13th consecutive reading below 50, seen as a sign of a shrinking manufacturing sector.
Donald Selkin, chief investment strategist at Joseph Gunnar, said the stronger-than-expected Chicago number could bode well for the NAPM, but he was concerned about Friday's jobs report.
Joining the long list of companies announcing layoffs last week were electronics maker Hitachi (HIT: Research, Estimates), discount brokerage Charles Schwab (SCH: Research, Estimates) and furniture retailer Herman Miller (MLHR: Research, Estimates).
According to Briefing.com, a consensus of economists expect Friday's data from the Labor Department to show 50,000 jobs were lost after payrolls shrank 42,000 in July. The unemployment rate is expected to rise to 4.6 percent from 4.5 percent.
Wall Street waits
Although grocery retailer Albertson's (ABS: Research, Estimates) and chipmaker National Semiconductor (NSM: Research, Estimates) are expected to report second-quarter results this week, the focus will be on the third-quarter.
Already, Sun Microsystems (SUNW: Research, Estimates), Dell Computer (DELL: Research, Estimates), Advanced Micro Devices (AMD: Research, Estimates) and Novellus (NVLS: Research, Estimates) have joined more than 300 companies to warn that third-quarter results will fall short.
Click here for CNNfn.com's earnings page
"We have to hope that expectations have been ratcheted down so much that maybe we will be less susceptible to downside surprises in the third quarter," Selkin said.
"Analysts are already expecting earnings for the quarter to be down 14 percent so maybe some of these warnings will already be anticipated by the market."
Since 1982, the S&P 500 has fallen 0.36 percent in September, on average, making it the worst month of the year for stocks. The best month, December, has averaged a 2.3 percent gain.
Overall profits at America's largest companies are expected to fall for the first time in a decade this year. But next year could bring relief.
"I'd stay focused on the idea that the economy will show firmness in the next few months, if not the next few days," Robert Robbins, chief investment strategist, SunTrust Robinson Humphreys, told CNNfn's Before Hours.
Analysts surveyed by First Call expected earnings among S&P 500 companies to rise 9 percent during the first quarter of 2002.
"The market is event driven and we're looking for some events in times of turnaround," Robertson Stephens' Nickerson said. "We need corporations to start spending money again and then for that to follow through to the consumer." 
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