Interest Rates, Iraq Are Focus of Eventful Week

Relief over moving past the crucial Federal Reserve meeting and the power hand-over in Iraq may boost stocks this week, but trading is likely to tail off as dealers wind down for the Fourth of July holiday weekend.

Weeks of stagnant trading have been leading up to the key date of June 30 when the Fed’s keenly watched decision on interest rates coincides with the transfer of power in Iraq.

In addition, the market will wade through a slew of economic data, including Friday’s payroll data, Tuesday’s consumer confidence survey and Thursday’s manufacturing index.

“Everything’s happening” this week, said John Shin, an economist at Lehman Bros. “We have the Fed, the payroll report and then for good measure on the political side, the hand-over of power in Iraq.”

A Reuters survey of 39 strategists showed that the market is now certain that the Federal Reserve will raise its key rate, the federal funds rate for overnight bank loans, Wednesday from its 46-year low of 1.0% to curb inflation.

Shin said that with the verdict so certain, the market would instead be “hooked on every word, every adjective in the statement.”

“If the Fed makes the expected 25 [basis-point] rise and continues to use the phrase ‘measured pace,’ the equity markets will probably be relieved that it doesn’t seem to be stepping on the brakes -- and that will be a mild positive,” Shin added.

Though the Fed is likely to take much of the limelight this week, a blitz of economic data also will get Wall Street’s attention.

The market will be sharply focused on Friday’s nonfarm payroll data, expected to show a net gain of 250,000 jobs in June versus 248,000 in May. Tuesday’s consumer confidence survey could show a slight increase for June, according to HSBC.

Thursday’s Institute of Supply Management manufacturing index for June could show a pullback from recent strength, according to HSBC, which forecasts a decline to 60 from a reading of 62.8 the previous month.

But there will be little on the earnings front as the quarter winds to a close. Among the larger companies reporting is General Mills Inc., the Minneapolis maker of packaged foods, which announces fourth-quarter figures Wednesday.

ConAgra Foods Inc., maker of Healthy Choice meals and Hunt’s ketchup, reports fourth-quarter data Thursday.