THE WEEK AHEAD: More earnings and Fed watching

3 min read

After another week of robust earnings reports from leading technology companies investors responded by pushing the Nasdaq composite to record levels. Next week, Wall Street will spend a lot of time pondering the Fed's next move and digesting another batch of earnings reports.

For the week, the Dow Jones industrial average closed off 471 points to 11,251.71 while the Nasdaq composite rose 170 points to end at a record high of 4,234.90.

With so many earnings out this week, investors had little choice but to buy into tech bellwethers such as Apple Computer Inc. (Nasdaq: AAPL), International Business Machines Corp. (NYSE: IBM), America Online Inc. (NYSE: AOL), Microsoft Corp. (Nasdaq: MSFT) and Sun Microsystems Inc. (Nasdaq: SUNW).

"Basically, we are digesting the earnings numbers to see whether they are good or bad," said George Rodriguez, senior vice president at Guzman & Co. "For the most part, the Nasdaq -- with the more technology-driven names that have a predictable earnings flow -- will benefit the most in this market."

Predictably, America Online came through in its second quarter, turning a profit of $224 million, or 9 cents a share, on sales of $1.6 billion.

First Call consensus was expecting AOL to earn 8 cents a share.

Kudos to Apple Computer for blowing past Street estimates by a dime a share, earning $$183 million, or $1 a share, on sales of $2.34 billion.

Apple received a number of upgrades this week and its shares closed off 2 3/16 to 11 5/16 Friday.

Finally, it's time to acknowledge Advanced Micro Devices Inc. (NYSE: AMD), which topped analysts' estimates by a stunning 42 cents a share in its fourth quarter.

The chipmaker earned $65 million, or 43 cents a share, on sales of $969 million. Its shares closed off 2 3/8 to 36 5/8 Friday.

Looking ahead to next week, all eyes will be on the Fed or at least what everyone thinks the Fed might do at its policy meeting in early February.

Despite the market's sizzling performance so far this year, economists are expecting the Fed to only raise short-term interest rates by one-quarter of a percent.

If the Fed were to raise rates by 0.50 basis points, it could spell the beginning of a dry spell for the red-hot technology sector.

As if there haven't been enough earnings reports lately, a whole new batch of tech companies will report their results this week.

Investors will be paying close attention to BMC Software's (Nasdaq: BMCS) third-quarter earnings.

Once a darling of Wall Street, BMC shares came under fire last quarter when it warned that Y2K concerns would dent it sales and earnings in the second and third quarters.

BMC did manage to top lowered expectations, earning $110.4 million, or 44 cents a share, on sales of $415.7 million.

This time around, First Call consensus expects a profit of 42 cents a share.

Silicon Graphics Inc. (NYSE: SGI) should provide some good theater next week when it unveils its second-quarter results. Not too long ago, this was a must-have for any technology stock portfolio.

But some good news appears to be on the horizon after company officials this week said it expects to report fiscal second quarter revenue of about $640 million, and operating results "just short" of breakeven.

Analysts were looking for a loss of 11 cents a share in the quarter but have since revised the figure to a loss of 7 cents.

Other earnings to keep an eye out for include GTE Corp. (NYSE: GTE), Tellabs Inc. (Nasdaq: TLAB) and eToys Inc. (Nasdaq: ETYS).