By Carla Mozee, MarketWatch
LOS ANGELES (MarketWatch) -- Tech heavyweights Apple Inc., Google Inc., International Business Machines Corp. and Microsoft Corp. are scheduled to release quarterly results next week, and with gloomy expectations for earnings for the sector, investors will be keen to hear the companies' forecasts.
The market will be "at the beginning of the heart of earnings season," this week, according to Robert Pavlik, chief market strategist at Banyan Partners, who noted that 3M Co. (MMM) and Johnson & Johnson (JNJ) will be among other companies in focus with the release of their results.
After the Martin Luther King Jr. holiday on Monday, the heavy slate of results due Tuesday include numbers from Google (GOOG), IBM (IBM) and Texas Instruments Inc. (TXN)
The marquee event next week will likely be Apple's report Wednesday. "It's the most important stock in the stock market. Everyone will be interested in what to see what their numbers are and what their guidance will be," said Phil Orlando, equity-market strategist at Federated Investors.
Apple holds significant influence on the U.S. market as its shares have a 3.8% weight in the S&P 500 Index (SPX) and a 10% weight in the Nasdaq Composite Index (RIXF). Their impact was felt this week as the stock dropped about 4% ahead of the Silicon Valley company's results.
An upside earnings surprise from Apple could boost its shares and strengthen sentiment in the tech sector. Unlike the past nine quarters, Apple isn't predicted to be the largest contributor to sector earnings growth at the company level, according to FactSet. If the company were to report a year-over-year fall in earnings, it would be the first time since the second quarter of 2003, the research and data provider said.
Analysts polled by FactSet currently expect Apple to post fiscal first-quarter earnings of $13.45 a share, down from $13.87 a year ago. Revenue, however, is expected to rise to $54.92 billion from $46.33 billion in the year-earlier period.
The results will be first full quarter to include sales of the iPhone 5, which was launched in September. Total shipments are expected to come in at roughly 48 million, but Apple's stock has been hit recently in part on worries about slower demand for the device. Several analysts and media outlets have reported that Apple has reduced orders for certain iPhone 5 components.
"We're about to report biggest iPhone sales ever, and people are just thinking about what's next," Walter Piecyk of BTIG told MarketWatch.
Investors will also be eager to hear what Microsoft (MSFT) will say about sales of its latest product, the Windows 8 operating system, which was unveiled in October.
The slow start for the Windows 8 cycle largely stems from "the fact that this is not a simple upgrade; it requires some investment in time to relearn the product, given the addition of the tabletlike portion of the operating system's user interface to optimize the experience for touch," wrote Nomura software analyst Rick Sherlund in a note Friday.
Near-term catalysts for Microsoft's stock aren't apparent, said Sherlund. However, "traction should improve over the year with increased new hardware availability and lower prices, with a better opportunity for the stock in the second half" of the year.
Microsoft shares are up 2% so far in 2013.
Earnings for the information-technology sector are expected to drop 2.9% for the quarter. The industrials sector is projected to fare the worst in terms of earnings, with an expected decline of 4.8%, according to FactSet.
The aggregate earnings-growth rate for the fourth quarter is 1.9%, limited by expectations for the technology, industrial and health-care sectors.
But overall, U.S. corporate earnings "so far haven't really failed to disappoint. They've come in pretty much in line, maybe a little bit to the upside," said Federated's Orlando.
Of the 54 companies in the S&P 500 that have reported earnings so far, FactSet said 65% have posted earnings above the mean estimate, and 69% have turned in sales above the average.
Outside of tech, results this week are expected from Starbucks Corp. (SBUX), Procter & Gamble Co. (PG), Union Pacific Corp. (UNP) and McDonald's Corp. (MCD)
In a light week for economic data, investors will receive reports on sales of new and existing homes in December, and Orlando expects to see continued improvement in the sector. The existing-home sales report is due Tuesday. The figures for new home sales are scheduled for Friday.
If this week's data were to come in below expectations, the market may take it in stride considering the time of year. "We're now in the middle of winter; you would expect that the numbers are going to be sloppy in winter," according to Orlando, who said that the people prefer to buy homes later in the year. "If we did miss on the numbers, I think the market would look past that."
But the government's report on weekly jobless claims, due Thursday, could pressure stocks, said Banyan's Pavlik. The most recent data were "influenced by adjustments that may get straightened out this week, so you might see a little bit of an increase in initial claims," he added. "The Street may react a little bit negatively to that if they just read the top line, and not the actual report."
Stocks will enter the holiday-shortened week at multiyear highs, with Friday's gains aided by strong quarterly reports from General Electric Co. (GE) and by moves in Washington to resolve the debt-ceiling issue.
The S&P 500 finished Friday up to 1,485.98, its highest close since December 2007. It ended the week with a gain of 1%. The Dow Jones Industrial Average (DJI) picked up 1.2% and the Nasdaq Composite Index (RIXF) rose 0.3% for the week.
Pavlik said he felt "encouraged" and "impressed" by the stock market's performance lately. Many investors late last year had taken profit and prepared to be out of the market, he said, because they were nervous about the outcome of budget talks in Washington.
With an aspect of the budget crisis settled at the start of 2013, equities have "held up and have moved higher," aided by rotation out of Treasurys and other fixed-income asset classes.
But investors should still keep caution in mind, he cautioned, as Capitol Hill is poised to vote for pushing in-depth discussions about the raising the ceiling "down the road."
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