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[October 22, 2007]  NEW YORK (AP) --  Lukewarm third-quarter earnings reports to date imply that corporate America has some thorny problems. For the stock market to get back on track, this week's releases will have to offer Wall Street some more upbeat news.

Last week's batch of earnings reports, along with some downgrades from Standard & Poor's on mortgage-backed securities, indicated credit tightness lasted well after summer ended. That suggests the fourth-quarter comeback Wall Street bet on when it hit record highs earlier this month may not happen.

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It wasn't only banks and housing-related companies that revealed troubles last week. Big Dow components including 3M Co., Honeywell Inc., and Caterpillar Inc. posted third-quarter profit rises, but their outlooks were much dimmer than anticipated.

On Friday, stocks sold off. The Dow Jones industrial average ended the week down 4.05 percent, the Standard & Poor's 500 index finished down 3.92 percent, and the Nasdaq composite index ended 2.87 percent lower.

This week, given Citigroup Inc.'s 57 percent drop in profit and Bank of America Corp.'s 32 percent decline, investors are going to be interested in how brokerage Merrill Lynch fared during the recent credit squeeze, which peaked in August.

They will also be curious about technology names like Apple Inc., Microsoft Corp. and Motorola Inc.; until recently, tech stocks had been the stock market's darlings.

Companies that depend on the housing market will be scrutinized closely, too. Homebuilder Pulte Homes Inc. and mortgage lender Countrywide Financial Corp. release third-quarter earnings this week.

Other Dow components reporting earnings include American Express Co., DuPont Co., Boeing Co. and AT&T Inc.

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Not many investors are expecting the housing market to bounce back soon. On Wednesday, the National Association of Realtors is expected to report that existing home sales in September fell.

On Thursday, the Commerce Department is anticipated to show that September new home sales also declined.

The market hopes the broader economy is strong enough to keep growing, though, despite housing's drag. A key measure of overall business spending -- the Commerce Department's report on durable goods orders -- is expected to show a rise in demand in September after August's drop.

All the corporate and economic data will be scrutinized by the Federal Reserve, which meets Oct. 30-31 to decide interest rate policy. On Sept. 18, the Fed cut rates for the first time in four years after determining that the housing market and problems in the financial markets posed bigger risks to the economy than inflation.

Core inflation -- which strips out volatile food and energy prices -- is mild, but crude-oil prices have been surging to record highs amid a weakening dollar.

That could cause policy makers to think twice about another rate cut, dashing hopes in the market for cheaper borrowing costs that would reinvigorate the stock and credit markets.

[Associated Press; by Madlen Read]

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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