Smart Investing/Trading for the week ending April 11 2008

Weekly US Markets Update and Outlook

U.S. stocks brace for flood of earnings reports

Financial woes regain spotlight as WaMu, Citigroup, Merrill Lynch report

MarketWatch: Concerns about the impact of the credit crisis and the weak economy will come into sharp focus next week, with investors set for a flood of earnings from ailing financials as well as the technology sector. Among earnings highlights will be J.P. Morgan Chase, Merrill Lynch, Citigroup, Washington Mutual, Intel, IBM and Google.

With General Electric Co. shocking the market Friday with a profit shortfall and lowered forecasts, the market will now be putting even more emphasis on earnings forecasts given widespread uncertainty surrounding the economy. On Friday, GE disappointed Wall Street after reporting profit that fell 6% in the latest quarter and lowering its forecasts. The diversified industrial giant said its financial businesses took a hit from the credit crisis, while its other U.S. businesses were hurt by a slowing economy. GE shares slid 12.8%, suffering their worst one-day decline since the stock market crash of 1987, with the broad market following suit. The Dow Jones Industrial Average plunged 256 points, or 2%, to 12,325. The broad S&P 500 index fell 27 points, or 2%, to 1,332, while the Nasdaq Composite fell 61 points, or 2.6%, to 2,290. For the week, the Dow and S&P both finished down more than 2% while the Nasdaq slid 3.4%.

End of the uptrend?

"As we saw Thursday and Friday, the uptrend for stocks is over for now, with the market now reacting to earnings and unable to break out of its recent trading range," said Hinsdale's Nolte. Stocks had been on an uptrend for the previous three weeks, ever since the near-collapse and subsequent bailout of investment firm Bear Stearns Cos. had the market hoping that the worst of the credit crisis was behind. Investors have also been betting that a U.S. economic recession would be shallow and brief. Yet, uncertainty over the impact of the credit crisis and the weak economy are still forcing investors to seek clarity into corporate earnings and outlooks. "We start getting into the peak of earnings season, with 65 S&P 500 companies reporting next week, mostly from the financial sector," said John Butters, analyst at Thomson Financial. "We're almost done in terms of profit warnings for this quarter, but now companies start giving guidance for the next quarter and that will be something to keep an eye on with all the uncertainty in the air," he said

First-quarter gloom

The impact of the credit crisis and weak economy will be clearly reflected in the results of most corporate results for the first three months of the year. S&P 500 companies are overall expected to post negative earnings growth of 14.1%, already much weaker than the 10.9% expected just a week ago, due to GE's results and downward revisions at financial firms, according to Thomson. Financials remain the main culprit for the earnings downdraft, with the sector expected to post a whopping 64% drop in earnings from the year-ago quarter. Consumer-discretionary firms are next in line, with weak results from home builders and automakers expected to bring earnings down 13% from a year earlier. The best performing sector remains energy, where surging crude-oil prices have helped lift earnings by 28%. Crude-oil prices hit another record high of $112.21 a barrel this past week.

Economy

Besides earnings, investors will also parse through the latest economic indications, including March retail sales on Monday, followed by New York state's April manufacturing survey and the National Association of Homebuilders Index on Tuesday. On Wednesday, attention will turn to readings on both consumer and producer price inflation for March. Thursday will bring data on weekly jobless claims, March leading indicators and the Philadelphia Federal Reserve survey. Finance ministers and central bankers from around the world will also meet for the G7 meetings in Washington, D.C., this weekend, bringing in their own takes on the length and severity of the global financial system's recent troubles and the related setback to the world economy.

Weekly KLSE Update and Outlook

I Cap on weekly KLSE CI: With the slower upward movement of its daily MACD, the weekly MACD continues to trend in the bearish territory, The KLCI is now consolidating amidst prudent sentiment that was compounded by the fluid political scenario and soaring prices of food staples that have further stoked inflation. Hence, the sideways trading will likely persits until more optimism returns to the market.

* The above is a close-up picture of cherry blossom flower from a cherry tree. In Japan, the cherry tree is known as sakura. The cherry blossoms sakura trees is indigenous to the Himalaya, Northern India, China, Japan, Korea and Taiwan. Although, some of these trees are now planted in some parts of the US, Germany and Canada as a present and symbol of friendship from Japan, it is the Japanese collection of 200 or more hybridized trees grafted centuries ago that is intriguing. In Japan, the viewing period for the flowering of the cherry blossom trees ranges from locations to locations around March 22 - April 18. The flower blooms only for a week or so.