Wall St Week Ahead-Stocks to rise, but safety rules
(UPDATE: Repeating column that ran late Friday)
biz.yahoo.com
By Brendan Intindola
NEW YORK, March 3 (Reuters) - Shares of safe-haven companies with steady growth and pristine financials will lift the stock market this week, as investors search for more assurances the U.S. recession is over.
``I expect the markets to labor higher, with emphasis on the traditional leaders coming out of recession: basic materials, industrials, transportation and retailers,'' said Paul Cherney, chief real-time market analyst at Standard & Poor's Marketscope in New York.
But wariness about the extent of creative accounting methods will continue to vex the market, particularly in the tech sector, keeping the bulls on a short leash.
``You have to differentiate between the markets and the economy,'' Cherney said. ``It is evident the economy has turned, but the market is grappling with the psychological problem of ... the aggressive accounting by some tech companies.''
This week, economic data and retailers' report cards will get Wall Street's attention.
Retail is the name of the game for the handful of companies set to report quarterly earnings. Tuesday will bring numbers from Costco Wholesale Corp. (NasdaqNM:COST - news), Kohl's Corp. (NYSE:KSS - news) and Staples Inc. (NasdaqNM:SPLS - news). While the reports are expected by Wall Street to show the resilience of the great American consumer, the news may inspire some investors to take profits while they can, particularly with Kohl's and Staples, which have outperformed the lagging Costco.
Thursday marks another pivotal event: Fed Chairman Alan Greenspan returns to Capital Hill for the Senate leg of his congressional testimony before U.S. lawmakers. Last Wednesday, his cautiously optimistic presentation to a House committee sparked a brief rally.
MORE ECONOMIC CLUES
Reports on service-sector activity and layoffs on Tuesday will give Wall Street something else to look at, besides a fistful of earnings. The Institute for Supply Management will report on non-manufacturing activity, with the figure expected to be 51, which would show modest growth. A number below 50 is evidence of contraction. Last month, it was 49.6.
The ISM service-sector data will be closely watched to see how it dovetails with the ISM manufacturing index, which jumped to 54.7 in February from 49.9 in January. That data, released on Friday, reflected expansion in the U.S. manufacturing sector for the first time after 18 months of decline.
On Wednesday, the ``Beige Book'' will be required reading. Market strategists say the data, which is retrospective in nature, is not expected to be terribly influential -- barring numbers wildly beyond predictions.
The market will also get a read on U.S. factory orders on Wednesday. In January, factory orders were expected to have risen 1 percent, according to economists polled by Reuters. The month before, factory orders rose 1.2 percent.
On Friday, the Big Daddy of economic data -- the non-farm payrolls report for February -- will give Wall Street some clues on whether the economic recovery is any closer at hand. The economy is expected to have added a scant 9,000 non-farm jobs in February, compared with a drop of 89,000 jobs in January, according to a Reuters poll of economists. The unemployment rate, though, is expected to have risen to 5.7 percent in February from 5.6 percent in January.
A SHIFT IN THE WIND
Stocks climbed last week, largely on surprisingly positive news about the economy. Specifically, a revised reading of the U.S. gross domestic product for the last three months of 2001 showed the economy grew 1.4 percent -- seven times the initial reading and nearly double the market's expectation.
For the week, the Nasdaq rose 4.54 percent, snapping a four-week losing streak. The Dow average climbed for the third straight week, gaining 4.02 percent, while the S&P 500 advanced 3.85 percent.
But the ground for stocks is not entirely fertile. On Friday, consumer sentiment fell in February for the first time in five months, as the accounting fears on Wall Street and sluggish economic conditions dented Americans' hopes for a vigorous recovery.
The data revealed the consumer uncertainty typical of a major shift in the economy, which many believe has already pulled out of the first recession in a decade.
``Money continues to be deployed in the safety zone rather than in risky areas, so it remains a stock-picker's market,'' said Alan Ackerman, market strategist at Fahnestock & Co. in New York. ``I would look for a little up tilt in the market.''
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