Wall Street Week Ahead: Apple, Facebook take the spotlight

Fri Jul 20, 2012 7:23pm EDT
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By Caroline Valetkevitch

NEW YORK (Reuters) - The trend of better-than-expected earnings will be put to the test in the coming week when investors hope Apple (AAPL.O: Quote) can exceed already high expectations for the tech giant and Facebook (FB.O: Quote) reports its first quarterly earnings.

Apple accounts for a significant proportion of the overall earnings of Standard & Poor's 500 .SPX components. S&P 500 earnings are expected to show a rise of 5.7 percent in the second quarter from a year ago. Excluding the maker of the iPad, the rise is 4.8 percent, according to Thomson Reuters data.

Apple's results, due Tuesday, could help stocks build on this week's gains and counter investor worries over the euro zone crisis. More signs of financial stress in Spain on Friday caused stocks to give back some of the week's increase. The S&P 500 ended 0.4 percent higher for the week.

"Apple can drive the whole (tech) group," said Daniel Morgan, who helps manage about $3.5 billion at Synovus Trust Company in Atlanta.

"There's a huge psychological component as it relates directly to Apple. If they just blast numbers like they did last quarter, then obviously the perception will be everybody else did pretty good and Apple did fabulous."

Apple's expected strong performance is mainly why technology earnings growth has held up better than other S&P 500 sectors. The expected growth rate for the sector has gone from 6.9 percent in April to 8.7 percent as of Friday, the data showed.

Apple's earnings for the quarter are seen at $10.38 a share, based on Thomson Reuters I/B/E/S, which includes estimates from 43 analysts. That compares with a profit of $7.79 a share for the year-ago quarter.

Morgan said Apple's growth has largely depended on the success of its new products. "For the stock, to continue its trajectory at the pace it has, it's critical that they release these new products," he said. Apple's shares are up 49.2 percent for the year so far.   Continued...

A trader works on the floor of the New York Stock Exchange in New York July 20, 2012. REUTERS/Keith Bedford