Stocks Could Get Boost if Reports Are Upbeat
U.S. stocks could rise this week if economic data and earnings restore investors’ faith in a market rocked by the Federal Reserve’s surprise hint that it may raise interest rates sooner than expected.
Stocks reeled Wednesday after the Fed yanked its pledge to keep rates low for a “considerable period” and replaced it with a promise to “be patient” before implementing the first rate increase since May 2000.
The slight change in the minutely scrutinized statement unsettled investors who have reaped the benefits of low rates on consumer spending and corporate profits.
Despite dipping last week, stocks are still on the upward path they began in March of last year.
January was the fourth consecutive month of gains for the technology-focused Nasdaq composite index and the Standard & Poor’s 500 index, and the second straight month of advances for the Dow Jones industrial average.
The immediate direction of stocks probably will depend on the next batch of quarterly earnings as the reporting season continues.
About 15% of the S&P; 500 stocks will issue reports this week, including International Paper Co. on Monday, technology bellwether Cisco Systems Inc. on Tuesday, insurer Allstate Corp. on Wednesday, and PepsiCo Inc. on Thursday.
Today is a busy day for economic reports, beginning with personal income and consumption data, which will provide a snapshot of how much Americans earned and spent in December. The forecast is for a gain in both: income up 0.2% and consumption up 0.5%, according to a survey of economists by Reuters.
The Institute for Supply Management’s manufacturing index and the Commerce Department’s construction spending data follow.
The manufacturing index is forecast to rise to 64 in January, the strongest reading in 20 years after December’s revised 63.4. The expectation for December construction spending is up 0.7% after a gain of 1.2% in November.
On Wednesday, the institute’s non-manufacturing index will shed some light on the health of the services sector. The forecast calls for a January reading of 60, up from December’s revised reading of 58.
The highlight of the week comes Friday, with the government’s January employment report. Economists polled by Reuters expect that 150,000 new nonfarm jobs were created last month while the unemployment rate remained steady at 5.7%.
Last month, the payrolls report shocked economists by indicating only 1,000 new jobs were created in December, well below estimates. Most market watchers waved off the low number as an anomaly that would not be repeated this month.
