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U.S. Economy, Mideast in Investors’ Sights

From Reuters

Investors will look this week to the Chicago purchasing managers index and the February payroll report to assess the economy’s health, strategists and traders said.

Tensions in the Middle East also will get renewed attention on Wall Street in the wake of a fatal bombing outside a Tel Aviv nightclub that shattered a de facto truce by militants, which had raised hopes for peace.

On Friday, both the blue-chip Dow Jones industrial average and the broader Standard & Poor’s 500 index hit closing highs for the year, topping off a three-day rally. That put the Dow back in the plus column for 2005 -- up 0.5%.

The stock market’s advance Friday was driven by oil company shares, including Exxon Mobil Corp., hitting all-time highs as crude oil futures prices climbed closer to $52 a barrel. The boom in commodity prices on Friday pushed the Reuters CRB index of 17 commodity futures above 300 for the first time in 24 years.

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I think we will have an up week,” said Andre J. Bakhos, president of Princeton Financial Group. “What could trip up the scenario is the econometric numbers. It’s a big week for the economic numbers, and that could tilt the scales.”

Although the market didn’t react much, it got some welcome news early Friday when the Commerce Department said gross domestic product, which measures total output of goods and services within U.S. borders, grew at a revised annual rate of 3.8% in the final three months of 2004, stronger than previously thought.

For last week as a whole, the Dow rose 0.5%, the S&P; 500 advanced 0.8%, and the Nasdaq composite index gained 0.3%.

The forecast for the monthly report on the Chicago purchasing managers index calls for a drop to 60.2 for February from 62.4 previously, a Reuters poll of economists showed. Still, that would be well above the 50 mark that is the tipping point between expansion and contraction.

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On the job front, Commerzbank estimates that nonfarm payrolls rose by 200,000 jobs in February.

“There is little doubt that job growth is now on an upward path, which will continue to support market optimism that the U.S. is set to post solid growth again this year,” Commerzbank said in a research note.

Economists polled by Reuters estimate that nonfarm payrolls added a net 220,000 jobs.

As earnings season winds down, S&P; 500 companies are showing fourth-quarter profit growth of about 20%, Reuters estimates, and more than 60% are beating expectations.

“People are not focusing on the general tenor of the economic recovery and earnings, which I think are better than people have” realized, said Philip Dow, director of equity strategy at RBC Dain Rauscher.

Finally, Wall Street will keep a weather eye on oil prices, which climbed back above $50 a barrel last week.

On the New York Mercantile Exchange, crude for April delivery ended Friday at $51.49 a barrel, after hitting a four-month high of $52.05 on Thursday.

From Reuters

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The Week Ahead

Monday

* National Assn. of Purchasing Management-Chicago issues its reading on the Midwest’s economy for February.

* Commerce Department reports on personal income and spending and new-home sales for January.

* Quarterly earnings released by H.J. Heinz Co., Nicor Inc., Tiffany & Co. and Univision Communications Inc.

Tuesday

* Institute for Supply Management issues reports on activity in the manufacturing economy during February.

* Commerce Department reports on construction spending for January.

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* Automakers release their sales figures for February.

* Quarterly earnings released by Charter Communications Inc., Foot Locker Inc., Marsh & McLennan Cos., Payless ShoeSource Inc., R.R. Donnelley & Sons Co. and Smithfield Foods Inc.

Wednesday

* Federal Reserve Chairman Alan Greenspan testifies before House Budget Committee.

* Quarterly earnings released by American Eagle Outfitters Inc., AutoZone Inc., Costco Wholesale Corp., Express Scripts Inc., Liz Claiborne Inc., Neiman Marcus Group Inc., Petsmart Inc. and Reliant Energy Inc.

Thursday

* International Council of Shopping Centers releases its index of monthly U.S. retail chain store sales.

* Labor Department reports on productivity and costs, revised for the fourth quarter, and weekly jobless claims.

* Freddie Mac, the mortgage company, reports on mortgage rates.

* Nation’s largest retailers announce sales figures for February.

* Quarterly reports issued by Del Monte Foods Co., Pep Boys-Manny, Moe & Jack and Weight Watchers International Inc.

Friday

* Labor Department reports on employment for February.

* Commerce Department reports on factory orders for January.

* Quarterly earnings released by Saks Inc.


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