Wall Street Expected to Focus on Events in Iraq
Look for another week of low volume and high anxiety on Wall Street as investors sit out the markets, watching for more violence in Iraq and waiting for the Federal Reserve to raise interest rates.
Reports on durable goods orders, new-home sales, gross domestic product and consumer sentiment are expected to confirm a picture of a stronger economy. Still, traders will be jumpy about geopolitics as the June 30 power handover in Iraq looms.
Durable goods orders will be the most closely followed data of the week, with economists predicting a May rebound after a drop the previous month.
Economists don’t think this week’s reports will shake the belief that the Fed will raise rates by a quarter-point when the Federal Open Market Committee meets June 29 and 30. Last week, Federal Reserve Chairman Alan Greenspan reassured stock investors by indicating that interest rate increases were likely to be gradual.
Events in Iraq will continue to overshadow economic news, strategists said.
“The market is probably going to continue to focus on events in Iraq,” said Peter Cardillo, chief market analyst and chief strategist at SW Bach & Co. “We do have economic numbers this week, but the market isn’t really interested right now, as long as these continue to show strong growth.
“If attacks begin to lessen, the market will begin to focus more on the economy,” Cardillo said.
Thursday’s durable goods orders are seen as the most market-sensitive data release. Lehman Bros. expects May’s overall orders for durable goods -- costly manufactured products expected to last at least three years -- to be up 1%, a partial rebound from April’s 3.2% plunge.
First-quarter GDP, to be released Friday, is likely to remain at 4.4%, economists at HSBC forecast.
Meanwhile, higher mortgage rates are unlikely yet to have slowed new-home sales, which are expected to show a 2.5% increase in May when figures are released Thursday, Lehman Bros. said.
Friday’s University of Michigan consumer sentiment survey is expected to inch higher, some economists say, as the stronger economy gives people more confidence in employment prospects. Lehman Bros. sees the final June reading for the Michigan survey rising to 95.5 from 95.2.
Investment banks Morgan Stanley and Goldman Sachs are among a handful of major companies posting their earnings reports this week. The banks both release second-quarter earnings Tuesday.
Meanwhile, investors can take the pulse of the consumer from reports due from two retailers. Walgreen Co., the largest U.S. drugstore chain, reports third-quarter figures today, while Family Dollar Stores Inc., which operates more than 5,000 stores in 43 states, reports third-quarter earnings Thursday.
FedEx Corp., the world’s No. 1 air-express shipper, will give another indication of consumer and business strength when it reports fourth-quarter figures Wednesday.
