Wall Street braces for rush of corporate, economic data
Sunday February 1, 5:55 pm ET
By Tim Paradis, AP Business Writer
On Friday, Wall Street learned that the economy posted its steepest slowdown in a quarter-century during the final three months of 2008. The 3.8 percent decline in the nation's gross domestic product wasn't as bad as Wall Street had forecast but investors grew worried that the numbers will only worsen.
The stock market is coming off its weakest January on record. The benchmark Standard & Poor's 500 index slid 8.57 percent for the month. The previous record was a 7.04 percent drop in January 1970. The tumble has investors nervous because January often sets the tone for the year.
About 75 percent of the time when the S&P ends lower for January it does for the year as well. Some Wall Street veterans say, however, that the market's past behavior is less relevant because the S&P plunged 38.5 percent last year. A drop of that size makes it more likely the market will end 2009 higher, they argue.
With January behind them, investors will remain eager this week for any insights companies can offer on the economy. Many companies are now wary of committing to specific forecasts, however. That can leave investors with little to go on.
Dow Chemical Co., Marathon Oil Corp., insurer MetLife Inc., Kellogg Co., Kraft Foods Inc. and Walt Disney Co. are expected to report quarterly results this week. Another rush of reports is expected next week before the flow begins to ebb.
Investors are also likely to remain uneasy ahead of the government's January employment report, which is due Friday. Other readings are scheduled throughout the week on home sales, manufacturing, factory orders, and the services sector.
The jobs numbers is often the most-anticipated report of the month. Investors forecast the Labor Department data will show a big drop in payrolls.
"Hopefully it won't be significantly worse than expected," said Doug Roberts, chief investment strategist at Channel Capital Research. He said even if the numbers aren't as bad as some investors fear, it might not ultimately instill much confidence in the market. Investors have become so pessimistic they often view any number that's better than expected with skepticism.
Companies have been slashing workers. Last week alone, companies announced thousands of new layoffs. The cuts and the scary headlines that follow are prompting consumers to cut their spending. That's a worrisome prospect on Wall Street because consumer spending accounts for more than two-thirds of U.S. economic activity.
Investors are looking for any respite from the bad news. Wall Street remains eager to see what steps Washington will take to try to shift the economy's course. President Barack Obama said Saturday he would lower mortgage costs, offer loans to small businesses for creating jobs and restore the flow of credit. Wall Street remains eager to see how he will proceed.
The administration is also determining how to use the second half of the $700 billion financial bailout fund.
And the Senate's version of the stimulus bill backed by the White House and congressional Democrats is headed to the floor for debate this week. The Senate's bill is nearly $900 billion, while the House bill totaled about $819 billion.
"This year I wouldn't expect much from the economy," said Ronald Schwartz, portfolio manager of the RidgeWorth Investment Grade Tax-Exempt Bond Fund. "If we can stabilize this year I think that would be a very good accomplishment. And with the stimulus, what the administration is putting in, that's the hope for it."
But Roberts said Wall Street is waiting for the government to introduce a more "comprehensive" approach to fixing the economy's ills. He said Washington will have to help banks deal with the bad assets crippling their balance sheets before lending can resume more normal levels and the economy can improve.
"It's a difference between triage and long-term care," he said. "What people are now looking for is what are we going to do to cure the problem?"
Comments