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News
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Terrorism, profits in fore
graphic October 14, 2001: 7:00 a.m. ET

Investors likely to react to threats of new attacks, corporate earnings
By Staff Writer John Chartier
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NEW YORK (CNNmoney) - Fears of another terrorist attack on U.S. soil and military strikes in Afghanistan are likely to be the driving force in the markets this week, fueled by last week's FBI alert that an attack was possible in the next few days.

Barring any geopolitical events, investors' eyes will turn to corporate earnings, of which a truckload are due out this week, including such heavyweights as Microsoft Corp., IBM, Philip Morris, Citigroup Inc. and Johnson & Johnson.

Analysts anticipate sharply lower third quarter results compared with a year earlier due to the combined effects of a slowing economy and the Sept. 11 terrorist attacks on the World Trade Center and Pentagon that left more than 6,000 people dead or missing.

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    1,262 companies have issued 3Q warnings; analysts anticipate earnings to decline 22.2% year-over-year;
   
According to First Call, the research firm that tracks earnings data, 1,262 companies have issued third quarter warnings. Analysts polled by the firm collectively expect the period's earnings to decline 22.2 percent from a year earlier. Fourth quarter earnings are expected to fall 11.6 percent and first quarter results are projected to decline 0.4 percent.

"Once again, it's anybody's guess next week. It would not surprise me to see people sell on strength, take a little cash off the table and wait for the markets to stabilize," Ackerman said.

Analysts are anticipating a rebound in the second quarter with early predictions for a 16.2 percent year-over-year increase.

However, as was the case with Yahoo! last week, markets could get a boost from surprise positive earnings and upbeat forward-looking guidance, experts said.

"It could well be another week of stabilization and consolidation as the market seeks to hold its own," said Alan Ackerman, market strategist with Fahnestock & Co. "We are likely to see some earnings disappointments. Conversely, we're also likely to see some earnings surprises. I'm looking for a market that stays in a reasonably tight trading side."

Also on investors' minds this week are likely to be economic reports on housing, employment and manufacturing, which could be a drag on markets if they come in weaker than in previous periods.

Wayne Ayers, chief economist at FleetBoston Financial said consumer behavior is the key to an economic rebound, and that federal fiscal aid is likely to improve consumers' mood.

"I'm sticking to my story that while we won't be able to sidestep a recession, I think it's going to be shallow and short-lived because of the stimulus we're likely to see," Ayers said.

U.S. markets rallied this week, erasing many of the losses incurred after the Sept. 11 attacks, thanks to increased confidence bolstered by military retaliation in Afghanistan, and positive earnings news from some bellwether companies, including Yahoo! (YHOO: Research, Estimates)

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Despite the gains, markets finished lower Friday after health officials confirmed the first case of anthrax in New York City. Markets spiraled down after it was learned that an NBC News employee contracted a topical form of the virus from a mysterious mail package received on Sept. 25.

The Dow Jones Industrial average lost 66.01 points to finish at 9,342.50, but is up 13.4 percent since Sept. 21. The Nasdaq composite index rose 1.93 points to 1,703.40, 19.6 percent above its Sept. 21 low. And the Standard & Poor's 500 index lost 5.78 points to 1,091.65.

Earnings on tap

Earnings season gets underway in earnest this week with major companies across a variety of sectors set to report results for the latest quarter.

Among the heavyweights set to report are Johnson & Johnson (JNJ: Research, Estimates), which analysts polled by First Call expect to earn 48 cents a share for the period when it reports on Tuesday, compared with 43 cents a share a year earlier.

Analysts have said consumer products and pharmaceutical companies are likely to weather a downturn since people need their products regardless of the state of the economy.

Along those lines, Pfizer (PFE: Research, Estimates) is expected to post earnings of 33 cents a share on Wednesday, compared with 27 cents a share earned a year earlier, and Merck & Co. (MRK: Research, Estimates) is projected to earn 84 cents a share compared with 78 cents a share last year, according to First Call. Merck reports earnings on Thursday.

Analysts also anticipate Coca Cola (KO: Research, Estimates), the world's biggest soft-drink maker, to report a profit of 40 cents a share on Thursday compared with 42 cents a share in the year-ago period.

Philip Morris (MO: Research, Estimates), the world's biggest cigarette maker, is expected to see third quarter earnings rise to $1.07 a share from 99 cents a share when it reports results on Wednesday.

Technology companies are being hurt by the slowdown as a result of reduced demand. Microsoft Corp. (MSFT: Research, Estimates) on Thursday is expected to post first quarter earnings of 39 cents a share compared with 46 cents a share a year earlier. Meanwhile analysts anticipate a 10 cents a share profit from Intel Corp. (INTC: Research, Estimates) on Tuesday, sharply lower than the 41 cents a share it posted a year ago.

And International Business Machines Corp. (IBM: Research, Estimates), is forecast to earn 89 cents a share on Tuesday, down from $1.08 a share a year earlier, according to First Call.

Automakers are also facing pressure as consumers trim back on big ticket purchases. The world's biggest, General Motors (GM: Research, Estimates), is expected to post an 8 cents a share profit, down sharply from the $1.55 a share it earned a year earlier when it releases results Thursday. And Ford Motor Co. (F: Research, Estimates), the No. 2 automaker, is expected to post a loss of 28 cents a share Wednesday compared with a 50 cents a share profit a year earlier.

Additionally, Boeing Co. (BA: Research, Estimates) is expected to report an 88 cents a share profit on Thursday compared with earnings of 70 cents a share in the year-earlier third quarter, and Merrill Lynch (MER: Research, Estimates), also on Thursday, is anticipated to have earned a 41 cents a share profit, down from 94 cents a share a year ago.

Economy weighs in

On the economic front, the latest report on industrial production for the month of September is due out Tuesday. Analysts have not issued estimates on whether production has changed from the 0.8 percent decline posted the previous month, according to Briefing.com.

Manufacturing has taken the biggest hit as the economy has slowed over the last year, laying off tens of thousands as demand slackened. However, some analysts believe continued weakness in manufacturing has already been factored into the markets.

Additionally, housing starts for September are expected out Wednesday. Again, analysts have not issued forecasts. The previous month construction was started on 1.53 million units. Housing has remained robust throughout the economic slowdown, but has recently shown signs of slowing down.

And on Thursday, the Labor Department releases its weekly figures on first time claims for unemployment insurance. graphic





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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

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