WEEK OF JUNE 16 - 22
Earnings, Economic Reports May Sway Street
Warnings about corporate earnings may rain down on Wall Street this week, along with economic reports that could strengthen expectations that the Federal Reserve will cut interest rates soon.
To cope, stocks may meander a bit or slip.
After a string of mostly lackluster economic data, a growing chorus on Wall Street expects the Fed to reduce rates again when it meets next week. There’s not much room to cut after the Fed has slashed borrowing costs to 40-year lows.
That’s why investors will pick apart reports on the May consumer price index, a barometer of inflation at the retail level, plus housing starts and industrial production. The market will search for clues on the economy’s health in the first-quarter current account deficit, June regional manufacturing and May leading U.S. economic indicators.
Among earnings likely to grab attention: retailer Circuit City Stores Inc. and the media and entertainment giant Vivendi Universal on Tuesday and investment bank Morgan Stanley on Wednesday.
But the Street could be swayed by major confessions that financial results will disappoint, especially after such dour news last week from heavy hitters such as Nokia Corp., Texas Instruments Inc. and carmaker DaimlerChrysler.
“It’s been an enormous rally,” said David Dreman, chairman and chief investment manager of Dreman Value Management, referring to the three-month rally that has lifted the tech-laden Nasdaq nearly 30%.
“We’re probably out of the bear market and in a bull market, but I don’t think the market will accelerate at those levels until earnings start to pick up. There’s no sign of that on the horizon,” added Dreman, whose firm oversees $6.8 billion.
Before Tuesday’s open, investors will sink their teeth into a hefty helping of May reports: CPI, housing starts, real earnings and industrial production.
Shortly after the start of trading Thursday, the Conference Board will issue its May index of leading economic indicators. The index is expected to show a gain of 0.6% after a 0.1% rise in April, when it pointed to sluggish growth after the Iraq war.
Recent data showed few signs of real growth while Wall Street priced in a boom. That’s why many now await a rate cut.
Here is a list of some of this week’s key upcoming economic events.
Monday: Treasury bill auction.
Tuesday: Commerce Department reports on housing starts for May; Labor Department reports on consumer price index for May; Federal Reserve reports on industrial production for May.
Thursday: Commerce Department reports on current account, first quarter; Labor Department reports on weekly jobless claims; Treasury Department reports on the federal budget for May; Freddie Mac, the mortgage company, reports on mortgage rates; the Conference Board releases the leading economic indicators for May.
From Reuters and Associated Press
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Bidders to Compete for Las Vegas Hotel-Casino
Two of the nation’s biggest hotel chains are vying for a coveted piece of the Las Vegas Strip.
Marriott International and Starwood Hotels & Resorts have aligned themselves with joint ventures hoping to persuade bondholders and a federal bankruptcy judge that their bids contain all the right numbers to turn around the struggling Aladdin hotel-casino.
All potential bids have to be submitted to U.S. Bankruptcy Court by Tuesday, and each player must deposit $12.5 million to win a place in the high-stakes hearing. That selection hearing -- an event that will resemble an auction -- is scheduled for Friday.
Marriott wants to put a Renaissance hotel on the potentially lucrative property and Starwood is planning a Sheraton on the Las Vegas Boulevard site across from the Bellagio and next door to the Paris Las Vegas resort.
“It’s an opportunity for a major chain to put its marquee in a high-visibility market,” said Brad Garner, a leisure analyst with Smith Travel Research in Henderson, Tenn.
A hotel operation at the Aladdin would allow the chains to offer their reward members access to the Strip, which has evolved from a gambling Mecca to a destination spot for vacationers.
The Starwood Preferred Guest program has about 8 million members, and the Marriott Rewards lists more than 18 million members, one of the largest such programs in the industry.
Marriott is the second-largest U.S. hotel chain with 354,997 rooms and Starwood is sixth with 126,664 rooms, according to Smith Travel Research.
Both companies would like to increase those numbers, and the reward programs could serve as powerful incentives in luring visitors to the Strip. Neither hotelier has a signature property on the five-mile stretch, which boasts more hotel rooms than anywhere in the world.
The $1.4-billion Aladdin opened in August 2000 and filed for Chapter 11 bankruptcy protection more than a year later.
Aladdin lawyer William Noall declined to name other potential bidders, but did say there are “more than two groups” eyeing the Aladdin.
So far, only three have publicly stated their desire to buy the casino.
KenPat Entertainment and Calstar Properties Inc. of Laguna Niguel intend to offer more than $425 million in cash for the casino.
“I think we are going to get it,” said Federico Sayre, an attorney representing the investment group. “We are not asking for any financing from the bank.”
But another group that includes Robert Earl, co-founder and chief executive of Planet Hollywood International Inc., has been named the stalking horse in the bankruptcy case, meaning it bids first. This group, known as OpBiz, was formed by Earl, Starwood and Bay Harbour Management.
As part of the OpBiz deal, the venture would assume $510 million of Aladdin debt and other liabilities. OpBiz also would invest $90 million over three years in the 2,567-room hotel-casino, which would be renamed the Planet Hollywood Hotel & Casino. Starwood would invest $20 million and receive 4% of revenue plus expenses.
Marriott has joined with Financial Capital Investment Co. to offer a competing bid. Marriott intends to invest $25 million in the property’s hotel, said Richard Alter, managing director of Financial Capital. The hotel company wouldn’t be associated with gambling operations.
Alter’s group -- Las Vegas Hotel Casino Investors -- has offered to assume $476 million of the casino’s debt and invest $100 million in capital projects.
Alter said Marriott also has agreed to a joint venture to develop an adjacent 4.7 acres into time-share condominiums.
