NEW YORK (AP) - Wall Street goes into the new week in an upbeat mood, with
investors growing more confident that the economy and the financial markets are
heading toward a second-half recovery.
There's been a steady stream lately of decent earnings reports and mostly
benign economic data, and there's a sense that the credit crisis that pummeled
stocks since last fall is nearing an end. For the first time in weeks, there's
optimism that the government might have actually staved off a deep recession.
The U.S. consumer clearly isn't that cheerful, judging from consumer
confidence figures released last week, but traders and portfolio managers on
Wall Street often get ahead of themselves, looking past any bad news and toward
future profits.
Analysts are a little more cautious.
"The market has cleared its hurdles, but the race isn't over yet -- we
haven't crossed the finish line," said Chris Johnson, president of Johnson
Research Group. "You'll now start to see lots of money that will be migrating
sector to sector because everyone has been waiting for this momentum."
Johnson has a very bullish stance for stocks in the near term, calling for
up to a 10 percent rise within the next four to six weeks. But, he's also
realistic -- "markets have a tendency to be overbought really quickly." That was
one reason the Dow Jones industrials pared some of its gains Friday, gaining 48
points after being up more than 100 earlier in the day and shooting up 190 in
the previous session.
The Dow gained 1.29 percent over the course of the week, the Standard &
Poor's 500 index ended up 1.15 percent, and the Nasdaq composite index rose 2.23
percent.
Johnson points out there are still some big obstacles that could stand in
the way of the market extending its gains. Chief among them is the health of the
consumer, whose spending habits account for more than two-thirds of the U.S.
economy.
That means economic data and upcoming quarterly earnings from retailers will
take on even bigger significance than usual. For example, investors are likely
to focus on Walt Disney Co.'s earnings report Tuesday to determine the strength
of sales at its U.S. amusement parks and of Disney products.
But they'll also be looking at results from Cisco Systems Inc., which makes
Internet routers and other wireless devices, when it posts results Tuesday. And
they'll be looking for comments Tuesday from global bank UBS AG on the state of
the credit markets. Fannie Mae, the government-sponsored mortgage finance
company, might give some perspective on the housing market.
The market will also get more economic data. If the numbers are good, the
Federal Reserve is more likely to pause in its campaign of lowering rates -- a
move that would allow the central bank to combat inflation and boost the anemic
dollar.
"We're slow growth, but not imploding," said Steven Goldman, chief market
strategist at Weeden & Co. "For the market, just like any patient that is ill,
time heals. We're getting some confirmation of this, but we're still not
entirely certain -- there's hope and expectations that the worst is over."
Among the reports scheduled this week, the Institute for Supply Management
on Monday releases its April reading on the service sector. The index is
expected to come in at 49.3, according to economists surveyed by Thomson
Financial/IFR. That would indicate a slightly larger contraction in activity
than March's reading of 49.6.
The Labor Department on Wednesday reports on first-quarter productivity and
labor costs. Productivity is expected to have risen at an annual rate of 1
percent, while labor costs -- one indicator of inflation -- are expected to have
increased by 2.5 percent.
Also Wednesday, the National Association of Realtors releases its pending
home sales index, which is expected to have fallen to its lowest level ever in
March, while the Federal Reserve reports on consumer debt in March.
On Friday, the Commerce Department reports on international trade in March,
data that should provide insight into how the weak U.S. dollar has affected the
nation's imports and exports. Economists are expecting a decline in the trade
gap.
Copyright 2008 Associated Press. All rights reserved. This material may not be
published, broadcast, rewritten, or redistributed.
|