Stocks Look a Bit Bullish Going Into Holiday Week
Stocks are expected to edge slightly higher this week amid very light trading as many investors leave town for the Fourth of July holiday Wednesday.
Wall Street is optimistic after the Federal Reserve chopped interest rates again last week to help reverse the economic downturn. Though the quarter of a percentage point cut was less than expected, it hinted a rebound may be at hand, investors said.
“There’s a slightly bullish bias to the market because there’s a belief that the rate cuts are working their way into the economy,” said Uri Landesman, who helps manage $250 million for AFA Management Partners. “Hopefully we don’t need any more cuts.”
The coming corporate profit announcements will not be pretty. Companies in the Standard & Poor’s 500 are expected to report earnings slumped an average 17.4% in the second quarter, according to First Call/Thomson Financial. That’s the worst performance since the third quarter of 1991.
But investors are looking beyond the dismal numbers to brighter days ahead. Profits are forecast to grow by 5.7% in the fourth quarter of this year and analysts expect profit growth of 19.1% in 2002, First Call said.
Aluminum producer Alcoa Inc. and SunTrust Banks Inc. are among the few companies expected to report earnings this week.
Among economic reports that could move markets, the National Assn. of Purchasing Management index, due today, should provide keys to the struggling U.S. manufacturing sector. And the June unemployment report, coming Friday, will probably show the nation’s labor pool deepening as employers continued to shed jobs.
Other economic reports this week:
* Today, the Commerce Department is scheduled to release its income and spending reports. Analysts predict that consumer spending probably increased 0.4% in May, the same as in April, and personal income probably increased 0.3% in May, the same as in April.
* Tuesday, the Commerce Department will report on factory orders during May. They declined 3% in April.
* Thursday, the Labor Department’s weekly report on new claims for unemployment insurance will probably point to weakness, with new filings expected to be at 393,000 in the final week of last month, about 100,000 higher than a year earlier.
