NEW YORK (CNNfn) - The rising price of oil -- the bane of summer drivers and Federal Reserve inflation fighters -- will get heated scrutiny on Wall Street this week as OPEC convenes its 109th conference.
Facing plenty of pressure from Washington to boost supply, the 11 major oil-producing countries, which supply some 40 percent of the world's crude, will debate whether to increase production at a meeting in Vienna Wednesday.
With only a handful of earnings reports and no major economic indicators on tap, the cartel's gathering could take on heightened importance. At the same time, the season for companies warning about second-quarter earnings shortfalls shifts into overdrive this week. At least 21 firms issued forecasts for disappointing profits over the past five days. More such shocks could be on the way.
 Those shocks helped push major U.S. stock indexes lower last week. The Dow Jones industrial average fell 1.6 percent. The Nasdaq composite index lost 0.36 percent for the five-day period.
The price of a barrel of oil rose above the $31 mark last week, a two-month high, while the price of a gallon of gas soared to more than $2 in many states -- just as the peak driving season got underway.
Fears that these gains will show up in the government's inflation gauges next month already has analysts handicapping the odds of another Federal Reserve interest rate hike August.
In March, pressure from U.S. Energy Secretary Bill Richardson was a key factor behind OPEC's decision to boost production. The increase -- between 1.5 million to 1.7 million barrels per day -- ultimately brought prices below the $34 mark, the highest since the Persian Gulf war.
This time, the United States is reportedly seeking higher OPEC production boosts of as much as 500,000 barrels per day.
"OPEC is going to look for some behind the scenes compensation from us before they come to some public agreements," said James Falvey, oil analyst at Dresdner Kleinwort Benson. "They will come to some token increase that effectively legitimizes the token cheating."
Falvey sees current prices nearing a peak, with oil falling in the months ahead.
Earnings warnings
Nearly two dozen companies last week warned that quarterly profits would disappoint. Big names included Xerox, Wachovia and Corel.
"The next three weeks, pre-announcements are center stage," said Chuck Hill, director of research at First Call/Thomson Financial. "It's the next three weeks that we have to get through."
Click here to view CNNfn's new earnings center.
Still, actual results for the April-June period should be solid. Hill expects average second-quarter earnings for companies in the S&P 500 growing by 22 percent to 23 percent compared to the year-ago period.
"We think a pretty strong earnings season for the quarter is pretty much cast in stone," Hill said.
 Still, the markets suffered under last week's pre-warnings, as investors debated whether the news was company-specific or reflected problems in the economy.
"Perhaps it's a function of the fears that (Fed Chief Alan) Greenspan has already gone too far (with interest-rate hikes) and the worst news is yet to come," said Clark Yingst, market analyst at Prudential Securities.
The Federal Reserve raised interest rates six times in the last year, most recently by an aggressive half percentage point in May. The Fed has aimed to slow the economy and preempt inflation. But tighter credit, with rates now at their highest level in nearly 10 years, could also eat into corporate profits.
"Perhaps as the year unfolds, you are going to see repeat (earnings) disappointments," Yingst said.
Corporate reports ahead
The week ahead brings some import actual earnings. But none bigger than Oracle (ORCL: Research, Estimates).
The maker of database software is expected to report quarterly profits of 25 cents per share, according to analysts surveyed by earnings tracker First Call. That's up from 18 cents in the year-ago period. Oracle's stock has soared over the past year. The gains helped land Oracle CEO Larry Ellison the No. 2 spot on the Forbes list of the world's richest people, which was released last week.
In other reports, brokers come out in force. Their results could lend insight into whether the slowdown in trading volume and stock and bond underwriting is hurting profits.
Earnings at Goldman Sachs (GS: Research, Estimates) are seen rising to $1.37 a share from $1.30 per share in the year-ago period and Morgan Stanley Dean Witter (MWD: Research, Estimates) is forecast to earn $1.13 a share from 98 cents per share last year.
Still, those results would be lower than those of the first quarter, when trading volume surged and the Nasdaq composite index hit its record high of 5,048.
Data desert
The week is bereft of economic indicators. Only Tuesday's April trade balance figures should draw attention. After widening for months, analysts expect a narrowing, the first since December.
Steven Wood, economist at Bank of America Securities, sees the trade deficit narrowing to $29.3 billion in April, slightly above consensus forecasts.
But while the deficit may shrink, it still is wide on a historical basis, fueled by the voracious appetite of American consumers for overseas goods.
When he looks at the numbers, Prudential's Yingst said he will be watching for any signs of consumer slowdown.
In analysts' meetings next week, Donaldson Lufkin & Jenrette hosts its wireless and satellite conference and Bear Stearns is running an industrial Internet conference.
Shares of Apple Computer (AAPL: Research, Estimates), meanwhile, could see activity. The computer maker's stock, which has more than doubled in the last 52 weeks, is scheduled to split 2-for-1 Tuesday. 
|
