Feb. 14 - 20
Markets Await Greenspan Message
U.S. markets may need a clear signal from Federal Reserve Chairman Alan Greenspan about the strength of the economy and the pace of future interest rate hikes to clock gains this week.
Blue-chip stock indexes have risen for three straight weeks, after falling for three straight at the start of the year. As of Friday, the Dow Jones industrial average was slightly positive year to date, though the Nasdaq composite index still was down 4.5%.
The question is whether stocks can move higher or whether the market will be stuck in a trading range, at least for the short term. The answer may depend on Greenspan, who testifies Wednesday and Thursday on Capitol Hill.
“The key thing would be to see if the concept of ‘measured’ is removed from the Fed’s psyche,” said Bryan Piskorowski, market analyst at Wachovia Securities, referring to the Fed’s language since June about raising short-term interest rates at a measured pace.
The Fed has lifted its key rate six times since June 30, to the current 2.5%.
In recent weeks, some bond investors have been focused on the possibility that the Fed might soon be done tightening credit. The yield on the benchmark 10-year Treasury note fell as low as 3.98% last week, the lowest since October. But long-term yields rebounded somewhat by week’s end, when the 10-year T-note finished at 4.08%.
The bond market will be particularly sensitive to Greenspan’s comments about economic growth and inflation, analysts said.
Besides Greenspan, Wall Street will have a relative few corporate earnings reports to digest this week. Most companies already have reported fourth-quarter results. The average year-over-year gain in operating profit for Standard & Poor’s 500 companies is 21.1%, according to Thomson First Call.
From Times Staff and Wire Reports
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The Week Ahead
Tuesday
* Commerce Department reports on retail sales for January.
Wednesday
* Greenspan delivers semiannual report to Senate Banking Committee.
* Commerce Department reports on housing starts and building permits.
* Quarterly earnings reports released by Hewlett-Packard and Coca-Cola Co.
Thursday
* Greenspan delivers report to House Financial Services Committee.
* Quarterly earnings reports released by Wal-Mart Stores Inc. and Nextel Communications Inc.
Friday
* Labor Department issues producer price index
* Former Boeing executive Michael Sears sentenced on federal charges stemming from the illegal hiring of a former Air Force official.
