Latest Stock Rally Hangs in Balance
Wall Street is likely to claw higher this week as investors hope the troubled stock market is on the verge of turning the corner.
The major stock indexes posted their biggest rally in more than six weeks Friday on hopes the flagging U.S. economy and dwindling corporate profits may be poised for recovery after Cisco Systems Inc. signaled its business is stabilizing.
Wall Street’s mood may have brightened, but few think there will be clear sailing from now on. In fact, economic data this week--including reports on consumer confidence Tuesday, gross domestic product Wednesday, and personal spending Thursday--could throw a wrench into any upside move.
Fears of a recession, which had faded in July after the government said U.S. gross domestic product notched a narrow second-quarter gain, have been making a comeback.
GDP, the broadest measure of the nation’s economic health, rose at a meager 0.7% rate in the second quarter, according to the Commerce Department’s “advance” or early estimate. That marked its weakest performance in eight years as businesses cut spending on new equipment and slashed inventories.
The Commerce Department is slated to provide a fresh GDP estimate Wednesday. In a Reuters poll, economists expect the number to be revised downward to show zero growth in the second quarter.
Others say, however, a contraction may not be all bad news. If GDP shrank due to aggressive inventory liquidation by businesses that could signal the companies, which had racked up shelves full of unsold goods, can rev up production again. Other economic reports this week:
* Today, the National Assn. of Realtors will issue its report of July sales of previously owned homes. Such sales account for 85% of all residential real estate transactions.
* Tuesday, the Conference Board issues its consumer confidence index for August. In July, the index stood at 116.5.
* Thursday, the Commerce Department is scheduled to release its report on personal income and consumption for July. In June, personal income rose 0.3% and personal consumption rose 0.4%. Consumer spending is closely watched by economists because it makes up two-thirds of U.S. economic activity.
* Friday, the Chicago purchasing management index for August will be released. The Chicago PMI often is viewed as a precursor to the National Assn. of Purchasing Management manufacturing index, set for release next week.
