NEW YORK - The stock market has reacted well to the recent stream of glum earnings. But this week, Wall Street faces an even bigger flood of first-quarter results, and as General Electric Co.’s bleak report earlier this month showed, bad earnings can even hurt a stock market with low expectations.
Out of the 30 components that make up the Dow Jones industrial average, Bank of America Corp., American Express Co., Merck & Co., McDonald’s Corp., AT&T, DuPont, Boeing Co., 3M Co. and Microsoft Corp. will report quarterly results this week.
Other big technology players besides Microsoft — notably Yahoo and Apple — are also scheduled to release earnings. So are toy makers Hasbro and Mattel, homebuilder Pulte Homes and shipper UPS.
Overall, Wall Street has been pleased with how companies fared during the first quarter. Their upbeat mood, however, is relative. After months of shocking news — financial institutions on the brink of failure, demand sapped in the credit markets, and declines in the nation’s payrolls and discretionary spending — even poor earnings gave investors relief.
A case in point is Citigroup, which along with Google and Caterpillar helped the stock market soar on Friday.
Citigroup posted a first-quarter loss that was wider than the average analyst estimate, but compared with its even-bleaker results in the fourth quarter, the first three months of 2008 looked practically decent.
Last week, the Dow finished up 4.25 percent, the Standard & Poor’s 500 index ended up 4.31 percent, and the Nasdaq composite index rose 4.92 percent.
Though sentiment on Wall Street is clearly better than it was earlier this year, the market can rise only so much due to mediocre news — no matter how much investors have already priced in a recession.
And General Electric’s profit decline and lowered forecast on April 11 caused the Dow to plunge more than 250 points.
Meanwhile, with the housing market still weakening, the nation’s economic and credit troubles are likely to last for a while.
Economists surveyed by Thomson Financial/IFR predict the National Association of Realtors will report on Wednesday that existing home sales fell in March, and that the Commerce Department on Thursday will report that new home sales also fell that month.