Wall Street Looking to Bernanke

Posted 12 February 2007 @ 09:30 am EET     Print     Reprint     E-Mail     Comments

NEW YORK (AP) - Wall Street has been running short on inspiration lately and will look to a stream of economic data in the coming week for clues on whether stocks can push beyond the range in which they have been mired in recent weeks. The reports include figures on housing starts and inflation.

After a short-lived pop following the Federal Reserve's Jan. 31 decision to stand pat on interest rates, stocks have shown little will to move higher, though they also haven't ceded much ground. Some investors see a need for a more substantive pullback before stocks can build on the gains of the second half of 2006, while others are simply awaiting the next catalyst, arguing stocks have paused long enough. Last week, the Dow Jones industrial average fell 0.45 percent, the Standard & Poor's 500 index fell 0.71 percent, and the Nasdaq composite index fell 1.16 percent. The indexes are still higher for the year, however.

The market hasn't been entirely cautious. Last week, for example, a robust forecast from Cisco Systems Inc. sent technology stocks higher for a session. Despite the narrow trading range, the increases led to new highs for the Dow as well as the Russell 2000 index of smaller companies. The arrival of such milestones often leads investors to pause before moving higher and can presage a pullback by investors who think stocks have climbed too far too quickly.

Much of the angst appears to center on a growing sense that the Fed might not lower interest rates for some time. It was enthusiasm over the possibility for a rate cut that helped push stocks sharply higher in the second half of 2006. The coming week will likely keep a focus on rates. Fed Chairman Ben Bernanke is scheduled to appear before the Senate Banking Committee on the outlook for the U.S. economy.

Fourth-quarter earnings reports have also added to Wall Street's somewhat lethargic mood. Investors have received mixed messages on how profits will hold up. As earnings wind down in the coming weeks, investors will continue to look for signs profit growth will continue to justify an increase in stock prices.

ECONOMIC DATA

On Monday, the Treasury Department is scheduled to release budget data for January. Tuesday brings figures from the Commerce Department on the nation's trade balance for December.
Investors on Wednesday will be looking for January retail sales figures from the Commerce Department. The figures help identify whether consumer spending, the linchpin of the nation's economy, remains robust. The department is also scheduled to release data on December business inventories.

Also due that day is the Energy Department's weekly reading on the country's domestic crude inventories. On Wednesday, Bernanke is scheduled to begin two days of testimony before the Senate Banking Committee. Thursday starts off with Commerce Department data on import and export prices for January and brings weekly claims for unemployment benefits from the Labor Department.

The Fed is expected to weigh in with data on capacity utilization, a measure of output of the nation's factories. The New York Fed and the Philadelphia Fed are expected to release figures on regional manufacturing for February. Also Thursday, St. Louis Fed President Bill Poole is set to speak in Omaha, Neb., on savings in the United States.

On Friday, the housing sector will come into focus with January data on housing starts and building permits from the Commerce Department. Another important set of numbers comes with the Labor Department's release of the January Producer Price Index, a measure of inflation at the wholesale level. A preliminary reading of the Reuters/University of Michigan consumer sentiment survey for February is due.

EARNINGS

On Monday, home improvement retailer Lowe's Cos. is expected to show a fourth-quarter profit of 97 cents per share. Shares closed at $33.42 Friday. The stock has traded from $26.15 to $34.82 in the past 52 weeks. MetLife Inc. reports fourth-quarter results Tuesday; the insurer is expected to post earnings of $1.18 per share. The stock has traded from $48 to $64.38, and ended Friday at $63.32.

Coca-Cola Co. on Wednesday is expected to report a profit of 50 cents per share for its fourth quarter. The stock ended at $47.76 Friday and has traded from $40.63 to $49.35 in the past 52 weeks. On Thursday, Biogen Idec Inc. is seen as earning 55 cents per share for its fourth quarter. The stock, which closed Friday at $49.50, has traded from $40.24 to $52.72 in the past 52 weeks. Goodyear Tire & Rubber Co. weighs in Friday and is expected to post a loss of 40 cents per share. The stock closed at $25.11 Friday after hitting a fresh 52-week high of $25.85. Its previous 52-week high was $25.79 and its 52-week low is $9.75.