NEW YORK (CNN/Money) -
After muddling through several weeks of uncertainty, U.S. stock markets should enjoy a little more clarity in the coming week, but will get few signs of the future course of inflation and interest rates.
Hounded by worries about high oil prices, interest rates, inflation, the war in Iraq, China's economy -- you name it -- markets suffered a bumpy, uncertain week, ending the five-day stretch flat despite sporadic efforts to move higher.
Some analysts believe the approaching expiration of options last Friday led to some of the choppiness, as traders unwound long and short positions in certain stocks. Now that options have expired, stocks could move more normally.
Saturday's meeting of the Organization of Petroleum Exporting Countries (OPEC) was indecisive. The oil cartel delayed any formal move on production until its formal meeting June 3 in Beirut. [For a look at what's coming up in the week ahead, click here.]
Nevertheless officials of the world's biggest oil exporting nation said Friday they were willing to pump as much oil into the market as necessary to keep oil prices low -- a promise apparently reiterated to the United States on Saturday.
Based on Saudi Arabia's moves, oil prices headed downward Sunday.
Meanwhile, interest rates remain an issue.
Fed Governor Ben Bernanke did his part to soothe investors this week, repeating the Fed could move slowly in raising its target for the fed funds rate, an overnight bank lending rate that affects other rates throughout the economy.
"As we look ahead, core inflation appears likely to remain in the zone of price stability during the remainder of 2004 and into 2005," Bernanke said in a speech on Thursday.
Though some analysts worry the Fed has already waited too long, raising the risk of runaway inflation, Bernanke said high productivity should keep inflation in check, and that the market has already done some of the Fed's work for it, driving up rates on Treasury bonds and slowing down the stock market.
"Those anticipating aggressive, pre-emptive Fed rate hikes will not find much support in Bernanke's speech," Lehman Brothers chief economist Ethan Harris said in a note to clients Thursday night.
Finally, technical indicators are screaming that the market is oversold. The best-known indicator, the put/call ratio -- a measure of how many people bet that the market is sure to fall, compared to how many think it will gain -- has been extremely high lately, trading at or above 1.0 for several days.
If most investors are wrong -- as some analysts believe they usually are -- then the market could be due for a pop.
"A put/call ratio above 1.0 is a mechanical buy signal, from a contrarian point of view," said Green of MKM Partners.
Next week could offer a little more clarity about whether or not that's the right signal.
A heaping help of food earnings
The earnings calendar is spare in the new week, though a few closely watched food companies will report.
Big food processors Campbell (CPB: Research, Estimates) and Heinz (HNZ: Research, Estimates) report on Monday and Tuesday, respectively. Wall Street analysts, on average, expect Campbell's earnings to rise to 32 cents a share from 31 a year ago, and they expect Heinz's earnings to rise to 58 cents from 52 cents a year ago, according to earnings tracker First Call.
Atkins scorners can stuff themselves with Krispy Kreme (KKD: Research, Estimates) donuts, then can kick back on a La-Z-Boy (LZB: Research, Estimates). Both companies report earnings on Tuesday.
The week is also fairly heavy with retail earnings, including those of Williams Sonoma (WSM: Research, Estimates), Sports Authority (TSA: Research, Estimates), Auto Zone (AZO: Research, Estimates), Dollar Tree (DLTR: Research, Estimates), Michaels Stores (MIK: Research, Estimates) and Dollar General (DG: Research, Estimates).
The whopper, Costco (COST: Research, Estimates), will come on Thursday. Analysts, on average, expect the wholesaler to report earnings of 38 cents per share, up from 33 cents a year ago, according to First Call.
Key events in the week ahead
- Tuesday brings the May consumer confidence report from the Conference Board, a private research firm. Economists, on average, expect the firm's confidence index to rise to 94 from 92.9 in April, according to Briefing.com.
- Also on Tuesday, the National Association of Realtors will report on sales of previously owned homes in April. Economists, on average, expect sales at an annualized rate of 6.48 million homes, matching March's total.
- On Wednesday morning, the Commerce Department is scheduled to report orders for durable manufactured goods, stuff meant to last three years or more, in April. Economists, on average, expect this volatile figure to fall 0.8 percent after gaining 5 percent in March.
- Also on Wednesday, the Commerce Department will report on sales of new homes in April. Economists, on average, expect sales at an annualized pace of 1.2 million homes, down slightly from March's 1.23-million-unit pace.
- On Thursday, the Commerce Department will revise its estimate of first-quarter GDP growth. Despite a bigger-than-expected trade gap in the quarter, which usually subtracts from GDP, economists expect the department to revise the annualized growth rate up to 4.5 percent from an original estimate of 4.2 percent.
- Also on Thursday, the Labor Department will report the number of new claims for unemployment benefits in the week of May 22. Economists, on average, expect claims to slip to 334,000 from 345,000 the prior week.
- Friday brings the Commerce Department's measure of personal income and spending in April. Economists, on average, believe income rose 0.5 percent after rising 0.4 percent in March. Spending is expected to rise 0.2 percent from 0.4 percent in March.
- Also on Friday, the National Association of Purchasing Management-Chicago releases its gauge of Chicago-region business activity in May. Economists, on average, expect the index to dip to 62.4 from 63.9 in April.
- Finally, the University of Michigan will revise its measure of May consumer sentiment on Friday. Economists expect the index to be revised up to 94.6 from an initial reading of 94.2.
|
