By Madlen Read, AP
NEW YORK: Corporate America’s strong profits helped drive the Dow Jones industrials past 13,000 for the first time last week, but investors will want to see if US consumers also have financial muscle before pushing stocks much higher.
In addition to more earnings data, market participants will be examining this week’s data on personal spending and the job market. Now that the Dow has gained more than 760 points since April, some investors are proceeding cautiously,upcoming data showing the economy is slowing too quickly or that inflation is getting out of control could trigger a sell-off. High inflation keeps the Federal Reserve from lowering interest rates, which would boost spending.
Currently, though, Wall Street is optimistic: first-quarter earnings data have shown about two-thirds of Standard & Poor’s 500 companies beating analyst estimates, and most economic data have presaged cooling growth but not recession. Even a lower-than-expected reading on first-quarter gross domestic product (GDP) failed to stifle the Dow’s climb on 27 April, and the blue-chip index hit its 37th record close since October.
The Dow is up 1.23 % for the week; the S&P 500 index is up 0.65 %; and the Nasdaq composite index is up 1.22 %.
Today, the Labour Department reports on personal spending, income, and core personal consumption expenditures inflation, a gauge of cost of living. The market expects that personal income for March rose 0.6 %, the same as February; personal spending rose 0.4 %, lower than the 0.6 % in February; and core PCE inflation was 2.1 % year-over-year, down from 2.4 % the previous month, according to the median estimate of economists surveyed by Thomson Financial.
Later, on Friday, 4 May 2007, the Labour Department reports on non-farm payrolls and unemployment. Economists forecast that non-farm payrolls rose by 135,000 in April, less than 180,000 in March, and that the unemployment rate rose to 4.5 % from 4.4 %.
A heavy schedule of economic data...
In addition to personal spending and income, investors today will be looking at the Chicago Purchasing Managers’ Index of regional manufacturing and the Commerce Department’s construction spending report.
Tuesday, 1 May 2007, the Institute for Supply Management releases its index on US manufacturing. Economists expect the April index to come in at 51.0, indicating slow expansion. Also Tuesday, the National Association of Realtors reports on pending sales of existing homes in March, and automakers release their April sales.
OnWednesday 2 May 2007, the Commerce Department reports on factory orders, which the market is expecting to have risen 1.0 % in March, after a similar gain a month earlier.
On Thursday, 3 May 2007, the Labour Department releases its measure of worker productivity, and the Institute for Supply Management releases its service sector index. Economists forecast that productivity rose 1.1 % in the first quarter, less than the 1.6 % gain in the fourth quarter. They expect the ISM’s April service sector index to register at 53.5, suggesting slightly faster growth than March’s reading of 52.4.
...And more earnings
So far, 22 of the 30 Dow components have reported earnings, and 16 of those have beat expectations. This week, three more Dow component companies will release results from the latest quarter: Verizon Communications Inc., Procter & Gamble Co. and General Motors Co.