"We'll have a difficult environment in the next couple of months," said Robert Streed, a money manager with Northern Trust Co. in Chicago. "Everyone's worried, because no one knows how what's happening in Asia will affect profits."
The Dow Jones Industrial Average had its worst week in eight years, falling 384.62, or 4.8 per cent, to 7580.42. The Standard & Poor's 500 Index declined 4.8 per cent, also the worst week since October 1989.
Earnings reports due this week will show how much damage Asia has done to large multinational companies. Among them: International Paper Co., whose shares have fallen 30 per cent since mid-July on concern that it would be hurt by low-priced exports from rivals in Asian countries where currencies have plummeted.
JP Morgan, too, is scheduled to report profits. Its shares have fallen 20 per cent since early December on concern its investment banking and trading business is being hurt by turmoil in Asia.
Earnings reports also are due from technology leaders Intel Corp. and Sun Microsystems. Intel, the world's top maker of integrated circuits, reports its quarterly profit after the close of the market on Tuesday. The Asian economies, once called "tigers," are key markets for technology companies.
"Intel didn't warn investors about their earnings, but if they indicate that things aren't picking up fast, that could be trouble," Streed said. "This is the news event of next week.''
Oracle Corp. plunged 29 per cent on 9 December after the software company reported lower-than-expected profits. Oracle attributed a portion of its disappointment to the Asian slowdown.
During the past three years, as the Dow doubled, money managers were rewarded by being fully invested in stocks. Now the professionals are playing defence. They're hoarding cash, buying bonds, and accumulating shares of steady-growing companies with predictable profits.
The outlook for the bonds is much rosier as the market demonstrated last week that it believes you can have sustained low inflation and strong job growth. The yield on the 30-year US bond fell to a record low of 5.69 per cent Friday even as the government reported brisk growth in employment.
It was the first time since November 1985 that US Treasury bonds gained after the government's monthly employment report showed an increase in jobs that exceeded expectations. The economy added 370,000 jobs in December, 162,000 more than analysts forecasted.
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