Microsoft's red hot earnings drove stocks higher. But with all eyes on the FOMC meeting, will the momentum continue next week?

10/27/07 7:00 pm Central Time

By Dave Harris

Microsoft (MSFT) the software company said profit in the quarter rose 23 percent, well above Wall Street views. Earnings were 45 cents per share, while revenue jumped 27 percent to a whopping $13.7 billion. Their raised earnings guidance for the full year and quarter on strong demand was added to the mix. The stock closed 9.5 percent higher at 35.03 per share. I think it has a bit more to go, so I would buy the stock here with a price target at $40 per share. Microsoft gained 3.04 to close at $35.03 a share Friday.

Microsoft led stocks to a higher close on Friday. The Dow, S&P and NASDAQ all posted nice gains for the week, even with oil over $91 a barrel. Mortgage lender Countrywide (CFC) also contributed to the upward momentum with expectations of profitability in the near future, according to the company. However, third quarter profit fell by $1.2 billion. This is the perfect goldilocks scenario. Yes the credit crunch is a concern, but there is a light at the end of the tunnel. Economic data of late has been on the weaker side, but not too weak. Durable goods orders fell 1.7 percent and initial jobless claims fell. I think the Fed has room to cut rates again next week when they meet October 30-31. But until then, I believe the market will remain essentially flat. Meanwhile I would avoid the financials, but buy into the techs such as Google (GOOG), Apple (APPL), Intel (INTC) and Microsoft (MSFT).

Comcast (CMCSA) the cable provider reported a dismal quarterly net profit that fell 54 percent. Comcast had momentum and was a buy before they officially announced the triple play. These days, it's a different story. As this company continues to loose subscribers I see this stock falling further. Shares fell nearly 11 percent after the news Thursday, and it continues to slide. I have a strong sell recommendation on the shares. Swap out of Comcast and into a strong telecom like AT&T (T).

From Wednesday on, it's a pretty heavy schedule of economic data which can swing the market from one direction to the next. We're used to the volatility these days. An advanced reading on 3^rd quarter economic growth, crude inventories, and the long awaited decision on rates from the Federal Reserve all come out Halloween Wednesday. On Thursday, data on personal spending and income, automobile and truck sales, and initial jobless claims are on tap. Then Friday, it's the granddaddy of economic news- the job report for October from the Labor Department.

A few significant companies of note report earnings in the coming week. Telecom company Verizon (VZ) and cereal maker Kellogg (K) report Monday. The likes of Proctor & Gamble (PG) and Colgate (CL) open the books Tuesday. Drug store CVS Caremark (CVS), Eastman Kodak (EK) and ExxonMobile (XOM) are Thursday.