Next Week's Market Forces
By Matthew Freedman
4/13/01 12:00 PM ET
>>>Firms need only meet Wall Street's reduced expectations to egg on the bulls after the long holiday weekend.<<<
>>>Meanwhile, BellSouth, Lucent, Nokia, Nortel, Oplink, and Sprint will call in their results, hoping beyond hope that healthy profit growth among energy interests such as Duke, El Paso, Occidental, USX-Marathon, and Sonoco will overshadow the telecom industry's woes and call forth a broad rally. Reports from Texas Instruments and Advanced Micro Devices could also chip away at the market's recent gains unless the semiconductor producers can provide some evidence of a turnaround in the overextended industry.<<<
>>>Though Corporate America will undoubtedly steal the show in the week ahead, several notable economic releases are due out. Housing starts data, which the Bureau of Census will release Tuesday, are expected to show only a slight moderation in residential building activity in March following two very strong months. Mortgage rates hovering below 7% have helped the housing market withstand weakness in the stock market and the broader economy.
The consumer price index and industrial production report are also due out Tuesday. In light of recent declines in wholesale and import prices as well as softening consumption, price pressures at the consumer level were likely subdued in March. A benign inflation situation strengthens an already strong case for further monetary easing going forward.
Industrial production likely declined a sixth consecutive month in March as manufacturers continued reducing capacity utilization. As the recently released business inventories report suggests, however, companies are successfully paring down their stockpiles of goods. With the inventory correction under way, industrial production may very well pick up in coming months.
Thursday's Treasury budget report takes on some added significance as bond traders look for signs that the Treasury will buy back more bonds this year than the $35 billion projected in the Bush administration's fiscal 2002 budget. A larger-than-expected government surplus could prompt additional buybacks, which tend to raise long bond prices and thereby flatten the yield curve.
This, in turn, would reinforce a trend seen this past week in which investors unwound positions taken recently on hopes that the Federal Reserve might cut interest rates prior to its next scheduled meeting on May 15. As a result of a wave of upbeat comments from Fed officials and some signs that equities have bottomed out, traders have now effectively ruled out a rate cut in April. <<<
Original article: dismal.com
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