Stock investors will key next on earnings from tech giant Intel Corp.(Nasdaq: INTC) and banks including J.P. Morgan Chase & Co. (NYSE:JPM) for hints of what to expect in the third quarter — and how badly the recession hurt businesses in the second quarter.

The Standard & Poor’s 500 Index and Dow Jones Industrial Average delayed declined for the fourth straight week last week – the longest string of losses since stocks hit their low point in March – and investors are looking at the tech sector to squelch the ongoing decline. The Nasdaq Composite Index complost 2.47% in the week ended Friday.

Earnings reports this week from computer-chip giant Intel and several big banks – including JPMorgan Chase & Co. - could provide investors and economists some insights on where the U.S. economy appears to be headed. Earnings are expected to improve over the last quarter, even though they’ll still be down substantially on a year-over-year basis, Binky Chadha, chief U.S. equity strategist at Deutsche Bank AG (NYSE: DB), told MarketWatch.com,

“A necessary condition for the markets to go up from here is that earnings have to deliver, and we need a dissipation of the uncertainty about earnings,” Chadha said.

Year-over-year (annual) earnings comparisons are typically the financial yardstick that analysts use to assess whether the U.S. economy is growing or declining, meaning that “sequential” (quarter-to-quarter) earnings aren’t as crucial. This time around, however, the quarterly numbers may be viewed as important because they might give a better picture of the economy’s health.

During periods of extreme uncertainty, earnings estimates for companies tend to be widely dispersed – a function of investors not really knowing what to expect. That’s particularly true right now of banks and financial-services companies – and companies that derive most of their income from discretionary consumer spending.

And that makes sense, given that those are the two most uncertain portions of the U.S. economy – thanks to the ongoing global financial crisis and a jobless recovery that is badly crimping consumer confidence.

After mounting one of the strongest surges in history from their March lows, U.S. stocks have fallen back in recent weeks as investors dealt with a growing realization that the U.S. economy – and its counterparts abroad – won’t rebound with the speed or strength that had been widely expected. Further evidence of this came on July 2, when a U.S. payrolls report said the economy had lost more jobs than had been expected.

Against that backdrop, analysts and other investors are looking to the U.S. high-tech sector to pull the economy out its doldrums, Money Morning recently reported as part of its mid-year forecast series.

Thomson Reuters predicted that S&P 500 earnings will decline by 36% from last year’s levels, with financials (-53%) leading the way and techs (-24%) performing better than other sectors.  This should represent the eighth-straight quarterly decline, though analysts seem more concerned about the ensuing management comments on future operations, since that will shed some light on where the economy is headed.

When Intel reports tomorrow (Tuesday) analysts expect to see that /quotes/comstock/15*!intc/quotes/nls/intcsecond-quarter sales and earnings plunged, but some analysts believe demand may be returning to the battered market following a sharp slowdown in demand for high-tech goods. Internet-search juggernaut Google Inc. (Nasdaq: GOOG) will report on Thursday.

Other firms that report this week include Goldman Sachs Group Inc. (NYSE: GS), Bank of America Corp. (NYSE: BAC) and Citigroup Inc. (NYSE: C). JPMorgan reports Wednesday.

“The market is filled with folks who want to be optimistic, but simply cannot find enough genuine reasons to buy into the market,” Mike Gambale, an analyst at Informa Global Markets, told journalists. “We don’t expect impressive numbers across the board, but there will be some surprises, as there always are.”

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Market Matters

“New and improved” was the market mantra of the week. General Motors Corp. (OTC: GMGMQ) emerged from Chapter 11 bankruptcy protection after just over a month, eager to start anew as a “new and improved” automaker.

The Commodity Futures Trading Commission (CFTC) set its sights on “new and improved” trading regulations to limit excessive speculation within the energy and other commodities markets.  Some politicos are calling for a “new and improved” stimulus package to move the economy beyond the worst recession since the Great Depression.  A “new and improved” Public-Private Investment Program (PPIP) was scaled back dramatically as selected managers will begin purchasing toxic assets from ailing banks.  Unfortunately, as the week progressed, investors did not seem too keen on these “new and improved” developments.

Despite harsh protests by consumer groups and creditors, new GM reopened for business, “leaner and meaner” than ever.  A judge’s ruling allowed the once-bankrupt company to sell its performing assets to a new government-controlled entity (thanks to a $50 billion “investment” by taxpayers).

The government then shifted its attention to the regulatory world and announced plans to propose trading restrictions on certain commodities and increase the oversight over risky derivative products that have proven so detrimental to the financial markets.

The widely anticipated earnings season got started as Alcoa Inc. (NYSE: AA) reported another quarterly loss (with better-than-expected numbers) and oil giant Chevron Corp. (NYSE: CVX) warned that its results would be hindered by poor refinery operations and a weak dollar.

Investors have taken a more cautious approach heading into the new (but not improved) earnings season, particularly after last week’s pessimistic labor data.

Stocks fell throughout the week and fixed income again became beneficiary of safe-haven trades.  The tech-heavy Nasdaq now remains the only major domestic stock index “in the black” for the year.

Fickle energy traders suddenly turned bearish, as well, as the weak economic data implied that oil demand would be curtailed for the foreseeable future (or, at least, until 2013 according to Organization of the Petroleum Exporting Countries’ “2009 World Oil Outlook”).  Crude oil plunged beneath $59, or more than 10% during the week, on ongoing economic concerns,  although consumers ultimately may be recipients of cheaper gas prices.

Economically Speaking

Talk of a second stimulus surfaced this week, with several leaders – including U.S. Vice President Joe Biden and investing icon Warren Buffett – stating that the Obama administration’s $787 billion stimulus isn’t enough to jumpstart the U.S. economy.

On the other hand, Senate Majority Leader Harry Reid, D-Nev., believes the plan needs more time to work through the system as only 10% or so has even been distributed thus far.  Economists seem to agree with “Hank,” as the latest Wall Street Journal survey reported that over 80% of respondents feel that the country does not need a new round of stimulus in the current environment.  Still, the “Oracle of Omaha” painted an optimistic picture of the future by stating that the United States is “going  to come out of this better than ever, the best days of America lie ahead but not next week or next month.”

On the global front, the International Monetary Fund (IMF) revised – upward – its forecast of economic growth for 2010 and confirmed its belief that the developing economies in China and India will greatly contribute to the global rebound.

The May trade balance highlighted a slow week of data as the deficit declined to its lowest level since late 1999 and the weak labor market helped reduce consumer demand for foreign goods.

While initial claims for unemployment benefits fell to levels not seen since the beginning of the year, continuous claims (those folks who remain on the unemployment rolls for over a week) rose by another record amount.

In other words, no matter how one dissects the numbers, the labor picture looks dire and may not begin to improve for some time.  As such, the latest University of Michigan consumer sentiment reading dropped for the first time since February, another sign that the optimism of the past few months may be fading fast.

Weekly Economic Calendar

Source: Investors Looking to Tech to Pull U.S. Stocks – and the Economy – Out of Their Doldrums

Mike is worried by rising inflation rates in the so-called ‘BRIC’ emerging markets: Brazil, Russia, India and China.

India is particularly hard hit. This week the central bank there signaled it would keep raising borrowing costs to mixed reviews.

Indian inflation was driven by the first increase in retail prices of gasoline and diesel this year. The International Herald Tribune reports that,”India joined China, Indonesia, Malaysia and Sri Lanka as a near doubling of oil prices pushed up costs and eroded profits of refiners.”

It’s also worth keeping in mind that BRIC nations have still relatively small economies compared to the US, Europe and Japan.

“If you look at them in real (and not in overly flattering purchasing parity power) terms,” says The Global Guru editor Nicholas Vardy,” the BRIC countries are best compared with large U.S. states in terms of economic heft. China and its population of 1.3 billion generate as much economic wealth as do the 60 million inhabitants of California and Texas. India’s economy is the size of Florida. Brazil’s is the size of New York. And Russia is smaller than Ohio and Illinois combined.”

BRICs Crumble Under Threat of Inflation

By Mike Burnick

The most popular group of fast-growing emerging market countries which includes: Brazil, Russia, India, and China are facing their biggest economic challenge this decade. Like everywhere else on the planet, inflation is picking up in the BRIC economies but it’s much worse over there and central bankers are responding by raising rates and tightening monetary policy.

While these rate hikes may be necessary to fight inflation, tight money policies are usually a very unfriendly environment for stock investors.

India is the latest BRIC under fire. Wholesale price inflation is running at 11%. That’s the highest level in 13 years and climbing. So the Reserve Bank of India responded last week by raising its benchmark lending rate to 8%. Global investors are signaling a vote of “no confidence” in the central bank move, because they sent Indian stocks plunging.

India’s currency, the rupee, is also under attack, having lost 8% of its value against the dollar this year, the worst performance for the rupee since 1993.

India is in the riskiest position among the BRICs when commodities are soaring like this. That’s because India is a net importer of most resources, including 75% of its oil.

It’s possible India’s troubles are perhaps just an early-warning sign of other troubles to come for the BRICs. Inflation in China is running close to 8% in spite of several interest rate increases last year. Inflation just topped 15% in Russia. Brazil, which suffered a painful hyper-inflationary past, recently raised interest rates after inflation crept up to 5.4%.

Seeing this threat on the horizon, stock investors have been busy pulling money out of some BRIC markets. China’s CSI 300 Index is down over 50% from its 2007 high, while India’s Sensex Index has plunged by one-third in value. Share prices in the first two markets of the BRIC alphabet, Brazil and Russia, have so far held up relatively well. This is due in no small part to their favorable trade terms and the fact that both are resource-rich exporters.

All of the BRICs are threatened by the risk of inflation. As an Indian government official put it, “Until inflation slows, this crisis is only going to widen.”

MIKE BURNICK, Senior Editor

P.S. Speaking of inflation, the big Fed rate decision comes this afternoon. We’ll find out whether Bernanke will really “get tough on inflation” as he has claimed in the last few weeks. Keep an eye on the news because there will be some very real profit opportunities once the decision hits the headlines.

Source: BRICs Crumble Under Threat of Inflation