THE WEEK AHEAD: Looking for a bottom

3 min read

Next week features a handful of minor earnings reports but investors are hoping they'll find something, anything to turn this ferocious bear market around.

For the week, the Dow Jones industrial average fell 359 points to close at 10,440.00, while the Nasdaq composite shed 165 points to end at 2,260.09.

Despite the prospect of another interest-rate cut next month, investors were put off by a stronger-than-expected Consumer Price Index report this week.

In January, the Index jumped 0.6 percent rather than the 0.3 percent increase most analysts had anticipated. The core Index, excluding volatile food and energy prices, rose 0.3 percent last month.

Combined with last week's stronger-than-expected Producer Price Index figures, it now appears the Federal Reserve Board will be inclined to either leave short-term interest rates unchanged next month or perhaps only cut rates by one-quarter point rather than the half-point cut some had predicted.

"We've lost the big rally that we had in January," said David Eberhart, market strategist at Optima Investment Research. "And you still have this pattern over the past six months of lower major highs and lower major lows, so there's nothing to suggest that we've put in any kind of serious bottom here."

It didn't help that tech leaders such as Sun Microsystems (Nasdaq: SUNW), Motorola (NYSE: MOT) and Brocade Communications Systems (Nasdaq: BRCD) all watered down their estimates for the current fiscal year, the latest sign this economic slowdown isn't confined to the small and mid-sized players.

"The earnings numbers continue to push this market down, the Nasdaq leading," said Milton Ezrati, senior economic strategist at Lord Abbett & Co. Technology companies' "earnings numbers were too optimistic and remain too optimistic despite the adjustments so far."

On Thursday, Sun warned that weak sales to major corporations will result in earnings of between 7 cents and 9 cents a share this quarter, well below the First Call estimate of 15 cents a share.

The company now sees third-quarter revenue growth of 10 percent to 13 percent year-over-year, which would result in sales of $4.41 billion to $4.53 billion. First Call consensus was predicting revenue of $5.25 billion.

Motorola on Friday admitted that first-quarter earnings and sales will fall short of estimates--and an operating loss could occur--because of significant weakness in orders across all of its business segments.

Analysts polled by First Call have been expecting the company, based in Schaumburg, Ill., to earn 12 cents a share on revenue of $8.8 billion.

Motorola, which manufactures wireless handsets and semiconductors, said the "sharp" economic slowdown caused changes in its overall inventory and order patterns. The company said it could see an operating loss in the quarter if the order patterns persist.

Even the storage sector was banged up this week when EMC (NYSE: EMC) and Brocade both issued scaled-back guidance for the next few quarters.

Looking ahead to next week, investors will have only a few earnings reports to digest.

 Prodigy Communications (Nasdaq: PRGY) will report its fourth-quarter results with analysts expecting a loss of $1.48 a share.

Prodigy, which has transformed itself into an Internet service provider, is trading at $3 a share, well off its 52-week high of $22.31 set last February.

Last quarter, it managed to top analysts' estimates even though it lost $62.8 million, or 90 cents a share, on sales of $134.6 million.

 SCM Microsystems (Nasdaq: SCMM) is scheduled to report its fourth-quarter numbers next week.

The developer of hardware, software and silicon that enables secure access of digital content and services watched its stock fall to a 52-week low of $19.25 Friday.

Analysts are expecting a profit of 23 cents a share, up from the $1.9 million, or 12 cents a share, it earned last quarter.

 Teligent (Nasdaq: TGNT) is expected to lose $2.95 a share on sales of $51.1 million in its fourth quarter.

Last quarter, it lost $92.1 million on sales of $42.7 million.

The stock closed just above $1 a share Friday.