The stream of corporate results due out this week could provide the driving force to lift Toronto stocks higher, but gloomy news from tech heavyweights could act as a brake on an already cautious market.
"The outlook is very foggy, there are too many uncertainties," said Don Reesor, institutional trader with Burgeonvest Securities Ltd.
Merrill Lynch's downgrade on global semiconductors along with bleak outlooks from Intel Corp, the world's largest chip maker, and Nokia, the world's largest mobile phone maker, helped act as a drag on the Toronto Stock Exchange this past week.
The Toronto Stock Exchange's S&P/TSX composite index gave up 122 points, or 1.4 percent, to end the week at 8,350.46. Even strong reports from Apple Computer and Dell Computer Corp weren't enough to keep the tech sector from retreating 3.6 percent over the week.
"Partly it's a hangover from the late '90s when techs were the thing. So if techs weren't going up, the market was not going up," said Conor Bill, executive vice-president with Mt. Auburn Capital Corp.
"There's a perception that tech is a leading indicator of business sentiment because you spend on tech when you are feeling good about your business ... I think it's overdone in many ways."
Bill said this coming week's results from retailers like Shoppers Drug Mart Corp, Sears Canada Inc and Loblaw Cos. Ltd may give more insight into how the economy is really faring than results from tech companies like Hummingbird Ltd and Celestica Inc.
What may also boost Canada's main equity index are earnings from resource companies like Imperial Oil Ltd, Shell Canada Ltd, Inco Ltd and Falconbridge Ltd, due out this week as well.
Strong demand coupled with a fear of low inventories has combined to drive up commodity prices. This, in turn, has had a positive effect on the Toronto exchange, which is home to some of the biggest resource firms in North America.
But regardless of what happens, this earnings period will lie in sharp contrast to last year's when it was easy for companies to beat prior-year results, with their stocks languishing from the tech bust.
"Earnings in the Canadian market have been strong for over a year so we don't expect the same kind of earnings growth going forward. Inevitably it's going to slow," said Richard Nield, portfolio manager with AIM Trimark.
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