U.S. corporations to report best and worst of times

Fri Jan 29, 2016 6:36pm EST
 
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By Rodrigo Campos

NEW YORK (Reuters) - Stock market investors who spent January swayed by oil prices, economic weakness in China and central bank speculation may continue to do that next week, even though it should be a dramatic one for earnings reports and economic data.

Fourth-quarter 2015 earnings reports coming from Internet leader Alphabet GOOGL.O and Exxon Mobil XOM.N, an old-economy company hit by falling oil prices, will spotlight the yin and yang of Corporate America.

If shares of Alphabet, Google's parent, rally in response to the strong results that are expected, it could displace Apple AAPL.O as the biggest company in the world. That would be ironic and a confirmation of the move away from traditional companies to new tech ones: Apple unseated Exxon when it climbed to the top of the list in 2011.

So far, the earnings reporting season has painted a bifurcated picture of corporate health: social media behemoth Facebook FB.O reported fourth-quarter revenues more than 50 percent higher than those of the same quarter a year earlier, while oil major Chevron CVX.N reported its first quarterly loss in more than 13 years.

As they have for several years running, companies are generally beating expectations on earnings but doing so via cost cuts and buybacks; the number of companies surprising analysts with better-than-expected sales figures is far smaller.

Perhaps because of that, investors have muted their response to earnings reports a bit while they ramp up trades based on more global events, such as Chinese economic reports or oil price declines and increases.

Though investors continue to bid up stocks of companies that beat expectations and sell those that fail, the spread between their performance has narrowed, said Jonathan Golub, chief equity strategist at RBC Capital Markets in New York.

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Specialist trader Meric Greenbaum works at his post on the floor of the New York Stock Exchange January 13, 2016. REUTERS/Brendan McDermid