Wall Street braced for reports

THE YEAR most Wall Street investment banks would like to forget is nearing an end and the first quartet of big brokers will give an indication of the damage when they report year-end earnings this week.

Morgan Stanley, Goldman Sachs, Lehman Brothers and Bear Stearns release earnings from their fourth quarters, which ended in November, on Wednesday and Thursday. Earnings are expected to be off anywhere from 35% to 50% for the quarter and 30% to 60% for the full year but the rising stock market in recent weeks has helped some more than others.

Firms that rely more heavily on revenue from investment banking fees, such as mergers, are expected to fare the worst. Several analysts have in recent weeks lowered earnings estimates for Morgan Stanley, which is expected to report fourth-quarter profits of 66 cents a share, compared with $1.06 in the year-earlier period.

By contrast, several analysts have recently upped estimates for Goldman as chief executive Henry Paulson's firm is well positioned to take advantage of the stock market's upturn. The consensus calls for Goldman's fourthquarter revenue to be about 90 cents a share, down from $1.50 last year although one analyst said it could be as high as $1.

Shares of most of the major brokers have risen substantially since the low point at the end of September as the market tone has improved and investors look ahead to 2002, which is expected to be a much better year for stocks.

Two of the largest discount retailers, Best Buy and Circuit City, will report profits on Tuesday. Both are expected to show improvement from a year ago, with Best Buy's earnings rising to 36 cents a share from 27 cents.

Economic data will take a back seat to the earnings news but there are several scheduled releases investors will closely monitor. The most important come on Friday, when the government will report its final estimate of third-quarter gross domestic product expected to be down 1.1%. Personal income for November is seen dropping 0.1%, in response to lost jobs and lower pay rises in the stumbling economy. Consumption is thought to have fallen in line with income, off 0.1%.

The Michigan Sentiment survey for December will give investors the last update on consumers as they enter the final stretch of the critical holiday retail season. The gauge is expected to be 85.5, off from 85.8 and consistent with the dull state of retail sales so far this season.

Data supplied by Thomson

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