Investors mull over earnings, economics

Investors will have a lot of profit warnings and a dash of economic news to digest.

3 min read
Investors will look to economic news Thursday as they decide whether to support the Nasdaq's gains. The Dow was set to open slightly higher.

The Nasdaq reclaimed 2,000 Wednesday, as technology stocks rose despite a rash of profit warnings and a dour forecast for the PC sector from Salomon Smith Barney.

Investors may have just been looking for bargains, but analysts also said the gains were a reaction to Wednesday's economic news--the Index of Leading Indicators for May came in stronger than expected, signaling a potential recovery later this year. Alan Greenspan also influenced the markets with some comments on banks. The Federal Reserve Chairman, testifying before a Senate panel, told banks they should make more money available to business, especially after their aggressive interest-rate cuts earlier this year.

Thursday's economic news may receive an inordinate amount of attention as investors look for more signs of a recovery.

The Labor Department's weekly jobless claims data will be released before the market opens. Economists are expecting new claims to edge lower to 425,000 last week, from 428,000 the previous week. The Commerce Department's report on April trade, which is expected to show a deficit of $30.9 billion, down slightly from a $31.2 billion deficit in March, is also due.

After the market opens, the Federal Reserve Bank of Philadelphia will also issues its index of regional economy activity. Economists expect a reading of minus 10 in June vs. minus 8.8 in May.

Stocks to watch
 Sanmina warned Wednesday night that its results will miss expectations because of sluggish demand and high inventories. The contract electronics manufacturer said it expects profit of 10 cents a share, excluding one-time charges, in the third quarter. It was expected to earn 19 cents according to First Call. Sanmina also said sales are now expected to be in the range of $760 million to $775 million. It will report third-quarter results on July 18.

 Transmeta also issued a warning. The chipmaker said second-quarter sales will fall 40 percent to 45 percent from the first quarter, compared with its April forecast that sales would be little charged or higher. That puts revenue around $10.2 million to $11.2 million. Transmeta blamed a slowdown in shipments to Japan, its biggest market.

 Exodus Communications also cut its forecast. The manager of corporate Internet sites said it expects a second-quarter loss of $140 million, excluding certain costs. In April it had forecast a loss of $110 million to $115 million.

The news came after a day of volatile trading for Exodus shares, which tumbled to new lows as one analyst issued a written apology for having been too bullish on the stock for too long. Jeffrey Camp of Morgan Stanley said his decision to reverse his opinion on Exodus was one of the most unpleasant moments of his career.

 Riverstone Networks, Verity and Micron Electronics will also be among the stocks to watch for the day after the trio reported earnings. Of the three, Riverstone may be the most active. The networking company said it is on track to report a profit no later than the third quarter. For its first quarter, Riverstone reported a pro forma net loss, excluding stock-based compensation and amortization, of $3.6 million, or 3 cents per share, for the first quarter. Including charges, the company lost 4 cents a share. Both figures topped First Call estimates, which predicted a loss of 5 cents a share.

At the bell
The Dow Jones industrial average may open 10 points higher. The Standard & Poor's 500 index for June futures contracts was up 1.2 points to 1,230 at 7:10 a.m. EDT in 24-hour electronic trading.

Reuters contributed to this report.