Your coverage of the "Fe'ral Reverse Broad" won't be complete without listening to some elevator music in the background. I hope your margin account is well-secured in accordance to your plans. Remember that playing it too cautiously is risky as well.
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GDP, labor cost data due
Nervous Wall St. awaits key reports on 3Q growth, inflation
By Staff Writer M. Corey Goldman
October 24, 1999: 9:11 a.m. ET
NEW YORK (CNNfn) - This week's release of preliminary third-quarter gross domestic product data -- the government's take on the pace of the U.S. economy -- will garner much attention from a jittery Wall Street.
So too will the Labor Department's quarterly tally on employment costs. Both numbers are due out Thursday.
"These are important numbers, particularly the one on employment costs," said Adam Blankman, an analyst with Standard & Poor's MMS in San Francisco. "There's some concern about rising wage costs and rising prices and I think the market is really going to be on alert for that."
The preliminary indications are that there may be reason to be nervous, at least as far as the GDP figure is concerned. The consensus estimate of analysts surveyed by Reuters is for an annual growth rate of 4.4 percent, nearly tripling the 1.6 percent rate of expansion in the second quarter of the year. The torrid pace of expansion the U.S. economy has enjoyed for the past several years has long kept market watchers on edge amid fears that strong growth will eventually begin to generate inflation.
Yet the GDP price deflator, a measure of inflation, is raising less concern this time, as it is expected to ring in at 1.2 percent - slightly below the 1.3 percent posted for the second quarter.
Joining the GDP data in grabbing the financial markets' attention will be the Employment Cost Index report. Analysts expect that companies' employment costs -- which include wages, salaries and benefits -- rose 0.9 percent in the third quarter after gaining 1.1 percent in the second.
Of recent concern to Wall Street has been whether employment gains, rising wages and robust demand abroad for U.S. goods and services is lulling wholesalers and retailers into lifting prices, generating faster inflation.
So far, there's been little evidence that that's happening on a long-term basis. Although September prices at the wholesale level rose 1.1 percent, the biggest monthly jump in 10 years, those costs never made it to the sticker prices on consumer goods. The Labor Department reported last week that consumer prices rose 0.4 percent on a month-to-month basis, and advanced a moderate 2.6 percent from a year earlier.
But if the economy continues to show signs of strong growth and inflation begins to accelerate, the Federal Reserve will be more inclined to raise short-term lending rates, discouraging people and businesses from spending money and slowing the economy down, said Ian Shepherdson, chief U.S. economist with High Frequency Economics in Valhalla, N.Y.
"Nobody wants to see the Fed fall behind the curve and be forced to raise rates quickly to keep inflation in check," he said. "Our expectation is that the Fed will not be raising rates in November - unless the numbers cast a large shadow of doubt on growth or wage gains."
The Fed raised rates twice this past summer, each time by a quarter percentage point, bringing its key interest rate up to 5.25 percent. At its Oct. 5 meeting, it chose not to raise rates, but said it was leaning toward doing so in the future.
The ECI is said to be one of Federal Reserve Chairman Alan Greenspan's favorite reports because it provides a comprehensive reading on wage costs -- a critical aspect of the economy. Because consumer spending accounts for more than two-thirds of U.S. output, Greenspan wants to be sure that wages aren't rising too quickly, prompting more people to spend their earnings and driving prices higher.
Other economic reports will also garner some attention this week, including September's existing home sales figures, due Monday; October's consumer confidence report, to be released Tuesday; September's durable goods orders numbers, due out Wednesday; and September's new home sales, to be unveiled Friday.
Beyond the numbers, investors will also be listening to remarks from Fed officials. Fed Bank of Richmond President J. Alfred Broaddus, Fed Bank of San Francisco President Robert Parry and Fed Bank of St. Louis President William Poole are all scheduled to speak Tuesday, while Fed Vice Chairman Roger Ferguson will speak on Thursday.
See-sawing stocks
Stocks and bonds finished last week on a positive note in what has so far been a tumultuous month. Of principal concern to investors this fall have been two things: the pace of inflation and the direction of interest rates.
The Dow Jones industrial average ended the week up 4.50 percent at 10,470.25 The Dow is now up 14.04 percent for the year.
The S&P 500 index rose 4.35 percent for the week, to 1,301.55, while the tech-heavy Nasdaq composite gained 4.35 percent for the week, closing at 2,816.52.
The Dow Jones Industrial Average posted its biggest weekly drop in 10-years this month, falling 660 points
Lots of Earnings…
Another wave of corporate results is scheduled as Wall Street enters the third week of the quarterly peak reporting period.
On Monday, Computer Sciences (CSC) and BMC Software (BMCS) will lead off the technology companies reporting third-quarter earnings. Hershey Foods (HSY), American Express (AXP), Safeco (SAFC) and Hartford Financial (HIG) will also report earnings, as will energy companies Exxon (XON), Chevron (CHV) and Texaco (TX), among others. Union Carbide (UK), soon to be Dow Chemical, will unveil its quarterly performance, as will healthcare companies Columbia HCA (COL), Medquist (MEDQ) and McKesson HBOC (MCK).
On Tuesday a slew of technology companies will release their earnings, including Lucent Technologies (LU), Nortel Networks (NT), Compaq (CPQ) and Mindspring (MSPG). AT&T (T), eBay (EBAY) and Priceline.com (PCLN) will also announce their quarterly financial performances, as will Washington Post (WPO), CVS (CVS), Estee Lauder (EL), Lockheed Martin (LMT) and Burlington Northern (BNI).
IBM's stock plunged last week after announcing it won't make analysts' earnings estimates for the next two quarters...
E-commerce giant Amazon.com (AMZN) will kick off Wednesday's earnings calendar, followed closely by Qwest Communications (QWST), Anheuser-Busch (BUD), Sara Lee (SLE), Wrigley (WWY), Ameritrade (AMTD) and Conseco (CNC). Bethlehem Steel (BS), National Steel (NS) and Norfolk Southern (NSC) will also report earnings.
On Thursday, Network Solutions (NSOL), Infoseek (SEEK), Electronic Data Systems (EDS) and MCI Worldcom (WCOM) will announce their quarterly results, as will eToys (ETYS), Marketwatch.com (MKTW), Procter & Gamble (PNG), Phillips Petroleum (P), Pharmacia & Upjohn (PNU) and Aetna (AET). Home improvement and building products maker Masco (MAS) is the only S&P 500 company slated to report its earnings on Friday.
And lots of IPOs
As for initial public offerings, more dot-com's are expected, including AmericasDoctor.com (AMDR), CropKing.com (CROP), GetThere.com (GTHR), Tickets.com (TKTS), busybox.com (BUSY) and goracing.com (GRCN), among others.
Allied Riser Communications (ARCC), Cavion Technologies (CAVN), Chartered Semiconductor Manufacturing (CHRT), CompGeeks (CGKS), Data Return (DRTN) Mediaplex (MPLX) and Plastic Surgery (PSU) are just a few of the other IPOs that may be priced and begin trading this week, according to Hoovers Online. |
