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For the Week of October 19 to October 23 - Earnings Focus

10/20/2009

This upcoming week surely is a big one on the earnings front. 139 companies, roughly 35% of the S&P 500, will be reporting this week.

Thus far, the market's focus has been on sales growth. I am disappointed in the top lone performance of the majority of companies that have reported. In particular, the consumer discretionary names have been weak. However, the market seems to be discounting the disappointment with the S&P 500 up 2.9% for the month of October. This past week, Tuesday's JPMorgan Chase and Intel earnings trumped the disappointment surrounding Monday's Johnson & Johnson sales growth absence. Later in the week, Google trumped IBM in the technology space.

There are 11 weeks remaining in 2009. Earnings reports encompass 3 of those weeks, so maybe "survival" will be enough to sustain the upward momentum. In S&P futures I see long-term resistance overhead at 1104.00 to 1112.00. Continued equity market strength should present a challenge toward that resistance level.

Back to the 139 companies reporting this week - the focus for investors should be as follows:

Technology heavyweights Apple, Yahoo, Texas Instruments, Microsoft, and Broadcom are the biggies of the roughly 25 tech Names reporting. September PC sales were surprisingly strong with double digit growth both quarter over quarter and year over year.  We know enterprise demand is strong, so the surprise would be if consumer demand was strong as well. Apple is more consumer oriented while Microsoft is more enterprise oriented. Hence, the surprise may just come from Apple.

The ugly ducklings are up this week among financials - here come the regional banks. Again I will take "treading water" as the optimal result and subsequent market performance.

If there is a "sleeper' just maybe it comes from healthcare. Pharma giants Pfizer, Merck, Schering-Plough, Bristol Myers-Squibb, and Eli Lilly report this week.  Biotech names Gilead Sciences, Amgen, Celgene, and Forest Labs also report.

Finally, my favorites. Natural resources are a theme I love. This week will be an excellent read through on natural resource strength, as well as the industrials. The heavyweight lineup there is:

Tuesday - Caterpillar and Peabody Energy
Wednesday - Freeport McMoran Copper and Gold
Thursday - Occidental Petroleum, 3M Company and Nucor Steel
Friday - Honeywell and Schlumberger

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.