Next week is the first "peak week" of second-quarter earnings
season, with more than one-third of the Dow Jones Industrial
Average components and one-fifth of the companies in the Standard
& Poor's 500 Index reporting.
Sales of existing homes and housing starts both likely declined
in June, according to a poll of economists before those figures are
released next week.
And President Obama is scheduled to sign historic
financial-reform legislation Wednesday.
Investment Banks Hurt By Volatility
Investment banks Goldman Sachs Group Inc. (GS) and Morgan
Stanley (MS) are expected to report lackluster second-quarter
results Tuesday and Wednesday, respectively, following turbulent
markets and desiccated business demand. The biggest dent to the
investment banks has been the erosion of fixed-income markets,
which have been one of the biggest profit drivers as Wall Street
recovered from the financial crisis.
Quality-Control Issues May Pain J&J
Slightly better results are predicted for drug makers Johnson
& Johnson (JNJ), which reports Tuesday, and Eli Lilly & Co.
(LLY), on Thursday. The industry has seen demand come back, at
least for flagship drugs, as the economy has recovered. But J&J
has been dealing with a string of quality-control problems for its
nonprescription drugs that has hurt sales and damaged the company's
reputation. Lilly faces patent expirations starting with Zyprexa in
October of next year and also has been pressured by drug-approval
delays.
Pepsi, Coke Expected To Top Year Ago
PepsiCo Inc. (PEP), which reports Tuesday, is expected to top
year-earlier figures as it posts its first full quarter of results
since February's acquisition of its two largest independent
bottlers. Coca-Cola Co. (KO), also seen reporting better results
Wednesday, is buying the North American operations of its largest
bottler, Coca-Cola Enterprises Inc. (CCE), in the wake of Pepsi's
deal.
AT&T, Verizon Results Likely Improved
The two largest U.S. telecommunications companies, AT&T Inc.
(T) and Verizon Communications Inc. (VZ), will report
second-quarter results Thursday and Friday, respectively. AT&T
continues to benefit from its deal with Apple Inc. (AAPL) on the
iPhone and has been outpacing Verizon in wireless-subscriber gains
of late.
Apple, which reports on its fiscal third quarter Tuesday, is not
likely to show any effects from its well-publicized woes with the
iPhone 4, which went on sale three days before the end of the
quarter. This will be the first reporting period to include sales
of the iPad tablet device that was launched in early April.
Demand Rebound Boosts IBM, Microsoft
International Business Machines Corp. (IBM), which reports
Monday, and Microsoft Corp. (MSFT), on Thursday, are expected to
benefit from a rebound in demand for technology from consumers and
businesses. IBM has been gaining in recent years from its shift
toward software and services and away from hardware. Microsoft,
which faces a number of long-term threats to its business, plans to
focus on launching new products and improving profitability,
although it has so far been unable to capitalize on new
technologies such as wireless and digital music.
Airlines Expected To Swing To Profit
Major airlines are expected to swing to a second-quarter
profit--or post a narrower loss--on increased passenger numbers and
double-digit gains in a key revenue gauge. Delta Air Lines Inc.
(DAL), the world's biggest carrier, kicks things off on Monday.
United parent UAL Corp. (UAUA) comes Tuesday, followed by AMR Corp.
(AMR), parent of American Airlines, on Wednesday and Continental
Airlines Inc. (CAL) on Thursday.
Declines Seen In June Housing Data
Economists surveyed by Dow Jones see June housing starts
declining 3.5% and existing-home sales falling 9.2% from a month
earlier. The government will report on housing starts Tuesday, and
the National Association of Realtors issues home sales statistics
Thursday. Both figures rose in March and April as tax incentives
spurred home sales before the April 30 deadline. The National
Association of Home Builders will issue its July housing market
index Monday. On Thursday, the nonprofit Conference Board releases
its June index of leading indicators.
Obama To Sign Financial Overhaul Wednesday
President Obama is scheduled to sign the financial-reform
legislation in a ceremony Wednesday. On Friday, top administration
officials called the bill the Senate passed Thursday a victory for
the American people and a boon to the U.S. economy. They said the
wide-ranging revamp of the nation's financial regulations would
prevent future financial crises, establish the strongest-ever
regime of consumer protections, eliminate regulatory arbitrage in
the financial industry and give Americans more economic
security.
Senate Vote Expected On Jobless Benefits
The U.S. Senate is expected to vote Tuesday to extend expired
unemployment benefits. The House would then have to approve the
extension. The jobless benefits expired at the end of May, leaving
those who exhausted benefits since that time without a federal
lifeline.
Senate Panel To Vote On Kagan Nomination
The Senate Judiciary Committee is scheduled to vote Tuesday on
President Obama's nomination of Solicitor General Elena Kagan to
the Supreme Court. The vote was delayed from this week because Sen.
Jeff Sessions (R., Ala.), the top Republican on the committee, said
the oil spill in the Gulf of Mexico kept him from focusing on the
nominee.
FDA Panel To Discuss Benefits Of Avastin
A Food and Drug Administration advisory committee will discuss
Roche Holding AG's (RHHBY, ROG.VX) top-selling cancer drug,
Avastin, at a meeting Tuesday. The oncology drugs advisory
committee could recommend that the agency remove the breast-cancer
indication for the drug, which is approved to treat several types
of cancer and had global sales of nearly $6 billion last year.
Analysts estimate that if the breast cancer indication were to
removed, annual sales could fall by about $1 billion.
SEC To Vote On Financial Advisors Rule
The Securities and Exchange Commission will vote Wednesday on a
long-awaited rule to require investment advisers to provide clients
with narrative brochures containing "plain English descriptions" of
the advisers' businesses, services and conflicts of interest.
Investment advisers generally support the proposal, although they
have asked that the required narrative be streamlined and flexible.
The SEC also will consider altering a somewhat-obscure rule on
mutual-fund fees that Chairman Mary Schapiro says cost investors in
such funds $13 billion in 2008.
Bernanke To Testify Before Senate, House
Federal Reserve Chairman Ben Bernanke will testify twice next
week before Congress, where he will discuss the Fed's semiannual
monetary policy report. His testimony comes at a crucial time for
the U.S. economy, with some analysts fearing that growth may be
slowing because of the high jobless rate. Bernanke will testify on
the monetary policy report Wednesday before the Senate Banking
Committee and Thursday before the House Financial Services
Committee.
Oil Firm Leaders, Feinberg Will Testify
The heads of Anadarko Petroleum Corp. (APC) and Mitsui Oil
Exploration Co. will testify before a U.S. Senate subcommittee
Thursday on their liability in the Gulf of Mexico oil spill. The
testimony will be the first time executives of BP PLC's (BP, BP.LN)
partners in the Macondo well will give federal lawmakers their
views on their responsibility for the recovery from the spill that
resulted from the late April burning and sinking of Transocean
Ltd.'s (RIG, RIGN.VX) Deepwater Horizon rig. Kenneth Feinberg, the
new administrator for the independent $20 billion escrow fund
established by BP last month, also will testify in a hearing before
the subcommittee on Federal Financial Management, Government
Information, Federal Services and International Security.
Conferences
Among the significant conferences next week are the BNP Media
Casino Marketing Conference from Monday through Wednesday in Las
Vegas and RedChip Equities Conference on Wednesday in New York.
-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357;
kathy.shwiff@dowjones.com
(Dow Jones Newswires staff contributed to this report.)
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