WEEK OF MARCH 25-31
Economic Data Expected to Point to Recovery
Despite the holiday-shortened week, look for a bevy of economic data, most of which are expected to underscore the strengthening economy.
Trading could be particularly thin and choppy since Wall Street is set for a four-day week with exchanges closed in observance of Good Friday.
Many investors will be on vacation for the Passover and Easter holidays.
Nonetheless, Wall Street will take a look at data on the housing sector, a pocket of economic strength, with reports on February sales of existing homes today and new homes Wednesday.
Economists expect a decrease in last month’s sales of existing homes, though new-home sales are likely to have risen in February, when compared with January results.
One of the week’s most closely watched set of numbers will be reported Tuesday with the release of February orders for costly durable goods, which includes such items as washing machines and computers.
Earlier this month, data showed U.S. businesses were building up inventories, anticipating an increase in demand from consumers and businesses amid the economic upturn.
Now, investors are looking for evidence that anticipated growth in demand is showing up in orders.
A final revision to fourth-quarter U.S. gross domestic product data is expected Thursday. Economists expect GDP to show a gain of 1.4%--same as the previous revision.
The consumer will move to center stage with two closely watched reports set for release.
Consumer spending, which makes up approximately two-thirds of the economic activity in the nation, remained strong throughout the downturn, and traders are watching for indications that it has continued to stay resilient.
The Conference Board’s index of consumer confidence, due Tuesday, is expected to show a gain to 98.8 in March from 94.1 in February.
On Thursday, University of Michigan’s final March consumer sentiment report will be released. The forecast calls for a reading of 95.1, up from 90.7 in February.
The New York and Chicago regional manufacturing surveys, which are due Thursday, will be scrutinized for clues on whether the U.S. manufacturing sector is emerging from its slump.
Reuters
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Andersen Partners May Vote on Work Clause
Partners of accounting firm Andersen may vote within a week on whether to rescind their noncompete agreements, which would allow them to join rival firms and bring clients along, partners and legal experts said.
Though hundreds of Andersen’s 1,600 U.S. partners have talked with other Big Five accounting firms, the rivals haven’t hired them because of concern about legal liability from plaintiffs suing Andersen over its role as Enron’s auditor or from Andersen’s creditors if the company files for bankruptcy.
“The noncompete clause is under consideration by our leadership, and we are supposed to hear back from them by ... Thursday,” said Jack Gelman, a New York-based partner in Andersen’s consulting business. “The firm is cognizant of the fact that people have a right to make a living, and these are internal matters being discussed by our leadership.”
Last week, Andersen oversight board Chairman Paul Volcker proposed a takeover of the fourth-biggest accounting firm, provided the Justice Department drops the criminal charges that threaten its survival. The proposal, which Volcker promises will place new management at the top of the firm headed by Chief Executive Joseph Berardino, requires the approval of Andersen partners.
Rivals Ernst & Young, KPMG, PricewaterhouseCoopers and Deloitte & Touche, as well as smaller firms, could gain hundreds of clients that may follow departing Andersen partners.
For the partners, even voting to rescind the noncompete agreement so they can get new jobs could be legally perilous. If a partner then leaves the firm, a plaintiff or creditor could argue that the partners contributed to Andersen’s demise by voting in their own self-interest.
For now, concern about Andersen’s liabilities has scared away potential purchasers of the firm. Ernst & Young and Deloitte & Touche held talks with Andersen about buying its U.S. operations, then pulled out because of the legal liabilities.
For rival firms that want to hire Andersen partners, the noncompete clause is the main concern. If that obligation is dropped, it may spark an exodus of partners and accelerate client defections, analysts said.
Bloomberg News
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States vs. Microsoft Case Enters 2nd Week
The antitrust case against Microsoft Corp. continues this week in Washington, after an opening week in which witnesses faced tough questioning and were admonished by a skeptical federal judge.
Yet the nine states suing Microsoft over antitrust violations still think they can persuade the court to impose far-reaching penalties on the software company.
The states want Microsoft to create a stripped-down version of its flagship Windows software that could incorporate competitors’ features. The states also want Microsoft to divulge the blueprints for its Internet Explorer browser.
The states hope U.S. District Judge Colleen Kollar-Kotelly will allow them to present evidence they say shows that Microsoft has damaged competition in emerging markets such as hand-held computers, television set-top boxes and smart cell phones.
Witnesses expected for the states this week are:
* Carl Ledbetter: A vice president of Microsoft rival Novell Inc., Ledbetter plans to say that Microsoft abused industry standards for competitive gain and that the states’ penalties would force Microsoft to disclose technical information that would help computers communicate with one another.
* Steve McGeady: A former executive with Intel Corp., the leading computer-chip maker, McGeady will testify that the technical disclosure will not compromise security, as Microsoft claims.
* Michael Mace: A top executive of hand-held computer pioneer Palm Inc., Mace will allege that Microsoft has tried to block Palm’s development by blocking access to Microsoft’s development tools.
Associated Press
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Europeans Debate Airline Insurance
The European Commission and the region’s transport ministers, meeting Tuesday in Brussels, will discuss the issue of allowing governments to continue providing airlines with emergency war and terrorism insurance to cover risks that have been uninsurable since Sept. 11.
After insurers slashed coverage and hiked premiums, governments stepped in to provide their airlines with third-party liability coverage for acts of war and terrorism.
Under European Union rules, this constitutes state aid and must therefore be approved by the commission, the EU’s executive arm.
Current approval runs out at the end of the month, and if EU governments want to extend it they need the commission’s nod. The United States decided last week to extend similar coverage to its airlines for 60 days.
Many EU governments are reluctant to act as guarantor for risks they want to see covered by commercial insurers, but with a lack of adequate insurance available at a price the airlines are prepared to pay, they have had little choice.
The global airline industry is looking at the possibility of creating its own mutual insurance fund.
In the EU, the Assn. of European Airlines is planning a fund that would cover risks for as much as $1.5 billion via a surcharge on tickets of 50 cents to $1.
Reuters
