Will Earnings Dampen Stocks Next Week?

There is almost no doubt the US is in recession now, and the bigger question is how severe this downturn is going to be. 80,000 jobs were lost in March, more than what most analysts had expected, and unemployment rate rose to 5.1%. Although the numbers are very bad on their own, many investors and traders have already factored this in; after all, the economy is indeed slowing down. US stock markets actually took the poor payrolls data quite well on Friday, ignoring the biggest job loss in five years. For the week, the Dow Jones Industrial Average [[^dji]] rose 3.2%; the S&P 500 index [[^gspc]] jumped 4.2% and the Nasdaq [[^ixic]] closed up 4.9%.

On Friday itself, the Dow lost 0.13%, pulled down by General Motors (GM) which dropped 4.7% on news that its largest auto parts supplier, Delphi, may not get its hands on the needed external capital to avoid bankruptcy as a group of investors led by hedge fund Appaloosa Management said it terminated its agreement to invest $2.55 billion in Delphi.

Meanwhile, banks can’t stop downgrading other banks. JPMorgan [[jpm]] cut its 2008 earnings forecast for banks like Citigroup [[c]], Wachovia [[wb]] and Bank of America [[bac]].

Now that the first quarter has passed, we are heading into the earnings season, starting with Alcoa [[aa]] on Monday, Circuit City [[cc]] on Wednesday, Genentech [[dna]] on Thursday and General Electric [[ge]] on Friday.

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