Can Tech Fuel the Dow's Rally This Week?

On Friday we saw the market react to a slew of tech earnings releases the night before. The Dow Jones Industrial Average (INDEX: ^DJI) jumped 0.76% while the S&P 500 and Nasdaq were both mostly flat. The reason was simple: Investors loved tech earnings the night before. Fresh off better-than-expected earnings, Dow components IBM and Microsoft saw huge gains.

In shaky economic times, earnings season can be seen as a measuring stick. While the U.S. economy has seen effectively zero growth since the end of 2007, corporate earnings have rebounded steadily. However, last quarter saw its weakest corporate growth in two years, leading many to believe the market's rally would be short-lived.

That's why the market has been rallying so hard as positive news comes out of giants like Microsoft and IBM. However, there's plenty of big-name tech companies reporting this week, so let's take a look at who's reporting and how it might shape the market.

  • Today: Hard disk maker Western Digital (NYS: WDC) reports. While Western Digital is an $8 billion company that toils in an industry in turmoil, investors should key in on what Western has to say. That's because many tech companies watered down earnings expectations because of hard disk shortages after recent Thai floods. Western Digital should have plenty of commentary about that situation, so if its comments on the situation are more positive than expected, that could show that Microsoft and other PC-related companies are blaming flooding as a short-term woe when their slipping business has broader problems.
  • Tomorrow: The world will be watching Apple (NAS: AAPL) release its earnings. The company famously missed analyst expectations last quarter after a decade of outperformance. Analysts ignored the bump in the road last quarter and assumed it was the result of pent-up demand for Apple's newest iPhone, which launched at the beginning of the current quarter. Analyst expectations of nearly $39 billion in sales and $10.07 in earnings per share point to a quarter with more than 30 million iPhones sold and iPad sales bumping past the 13 million count. However, with the iPhone just launching in huge markets like China, be on the lookout for whether Apple give more aggressive guidance than usual for next quarter as well.
  • Wednesday: In the morning, LCD glass maker Corning (NYS: GLW) reports. The company has been lowering expectations for upcoming quarters but still believes it has a bright future ahead of it. In any case, Corning's comments shed a light on a TV industry that looks to be transformed this year by smarter TVs, and added comments on its Gorilla Glass product can give a better picture on mobile demand as well.
  • Thursday: While growth stocks have been making a rebound over the past month, one sector that has been pummeled the worst and remains near 52-week lows is companies that provide equipment to the telecom sector. As a leader in the space, Juniper's (NYS: JNPR) comments will be closely watched. The company already pre-announced a disappointing $0.26-$0.28 in adjusted EPS, so the drama is taken out of the financial results. However, comments on the overall health of the telecom equipment industry could give investors a better look at how long the severe downturn in the industry will last.

Keeping the big picture in mind
As you're watching earnings, keep in mind that the game of beating earnings by a penny or two is just that -- a game. Real investing success is defined by investor's ability to key in on improvements that will benefit companies for years to come.

If you're looking for one company that can ignore quarter-to-quarter swings because it's at the forefront of the technology change that will define the next decade, The Motley Fool has a just released free report on mobile named "The Next Trillion Dollar Revolution" that details a "hidden" component play inside mobile phones that also is a market leader in the exploding Chinese market . Hundreds of thousands have requested access to previous reports, but you can be among the first to access this just-released report -- and it's free.

At the time this article was published Eric Bleeker owns shares of no companies listed above. The Motley Fool owns shares of Microsoft, Western Digital, Corning, International Business Machines, and Apple. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, and Corning. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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