NEW YORK (CNN/Money) -
More than 200 companies report earnings next week. More than a dozen economic reports are due. But there’s one event that’s going to trump them all.
The presidential election.
With just a few days until the Nov. 2 election, polls show President Bush and Sen. John Kerry essentially neck and neck. The uncertainty about the outcome has kept the stock market range bound as investors worry about a deadlock similar to 2000.
A videotaped appearance by al Qaeda leader Osama bin Laden, in which he said the United States may face renewed attacks, intensified the election rhetoric over the weekend. News of the tape broke after U.S. markets closed Friday.
"I don't think the stock market is going to take a nosedive because they found out he's alive," said Robert S. Robbins, chief investment officer of SunTrust Robinson Humphrey Co., told Reuters. "I don't think it will be meaningful on Monday. The real question that people are nervous about is who is going to be the next president."
Republicans believe a second term for Bush would be best for the stock market, preserving the Bush tax cuts, and enacting other “big business” friendly policies. Democrats point out that historically, stocks perform better under Democrats, and stocks certainly did well under the last Democratic president, Bill Clinton.
What both sides agree on is that just having an indisputable winner one way or the other would help the stock market move out of this range.
Unfortunately, a winner may not be certain come Nov. 3.
“Welcome to legal battle 2004. Probably unemployment will go down suddenly because so many attorneys will be hired,” said Ram Kolluri, chief investment strategist at GlobalValue Investors. “It's going to be a zoo."
“Unless there is a dramatic, clear-cut winner, which at this point is not statistically likely, there is little chance of this being resolved right away,” Kolluri added. “I think both sides are automatically primed to challenge certain results.”
The first unresolved election in a century was a shock to investors in 2000, sparking a market sell off in what is traditionally an up year. Election years tend to be positive for the major indexes, according to the Stock Trader’s Almanac.
However, stock market may have less of a reaction next week than they did four years ago.
“There are worries about mechanical failures, lost ballots, all kinds of things,” said Ned Riley, chief investment strategist at State Street Global Advisors. “But I think the market is prepared for a delay in the results. I don't think it will be as much of a surprise as it was in 2000.”
“For all we know, the surveys are not accurate, and maybe there is no room for contention,” Riley said.
In addition to the election, earnings next week are due from a few top-tier companies, although the number of influential names reporting has certainly slowed. Big names reporting next week include Duke Energy (Research), Prudential (Research), Qualcomm (Research) and Time Warner (Research) (parent of CNN/Money).
Chain stores will report their monthly results Wednesday and Thursday. Wednesday also brings the weekly report on oil and gas inventories from the Energy Information Administration.
Economic reports cover personal income and spending, the manufacturing and services sectors of the economy, and then Friday’s big Kahuna, the monthly jobless claims report.
“The election will take center stage next week, but hopefully that will actually end on Tuesday,” said Tim Heekin, head of stock trading at Thomas Weisel Partners. “Then later in the week, people can focus on the jobs report and the earnings.”
Key events in the week ahead
- Reports on personal income and personal spending are due Monday. Income in September likely rose 0.3 percent, according to Briefing.com estimates, after rising 0.4 percent in August. Spending probably rose 0.6 percent following a flat read in August.
- The Institute for Supply Management (ISM) releases its manufacturing survey Monday. The index is expected to have dropped to 58.3 in October from 58.5 in September.
- The ISM services index is due Wednesday. The index likely rose to 58.3 in October from 56.7 in September.
- Thursday brings the first read on third-quarter productivity. Productivity likely grew at an 1.8 percent annual rate in the quarter, after growing at a 2.5 percent rate in the second quarter.
- Also due Thursday is the report on factory orders. Factory orders in September likely rose 0.5 percent, after falling 0.1 percent in August.
- Friday brings the October employment report. Economists expect that employers added 160,000 jobs to their payrolls in the month, after adding 96,000 the previous month, according to estimates. The unemployment rate is expected to hold steady at 5.4 percent, unchanged from the previous month.
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