After climbing more than 7% from the July lows, the S&P 500 erased its entire weekly advance on Friday, falling 31.61 points, or 2.9%, to 1,064.87. The index was off 1.2% for the week. The Nasdaq Composite performed even worse, sliding 70.03 points, or 3.1%, to 2,179.05. The tech-heavy index finished the week 0.8% below the prior week’s close. For a moment it seemed as though the double-dip camp was heading for greener pastures, but one day’s trade has them back in full force.
It is in that context that we will reenter earnings season this Monday, with several big names set to release their quarterly numbers. With all the noise that is sure to ensue, the one company that the Street is likely to pay the most attention to is International Business Machines (NYSE: IBM).
IBM has beaten estimates in ten of the past eleven quarters and the past ten in a row. They’re set to unveil their Q2 results after the bell on Monday, and the Street is expecting the tech bellwether to report YOY EPS growth of about 11%. The company is expected to benefit from a rebound in demand for technology from both consumers and businesses. IBM has been gaining in recent years from its shift toward software and services and away from hardware, and if Intel’s (NASDAQ: INTC) Q was any indication, Big Blue will likely be able to at least meet expectations.
The devil, though, will be in the guidance. Qs out of INTC and others have already demonstrated to the Street that the earnings environment was robust earlier this year. But with the continued growth of the double dip camp, all eyes will be fixated on management’s expectations for future Qs.
From a technical standpoint, IBM has hit a wall at about $132 several times this year and a breakout would be unquestionably bullish for shares. If they miss estimates, or beat and selloff anyway, look for support around the area of the 50-day moving average at approx. $127.
Disclosure: No holdings in IBM.
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