Wall Street expecting a rate cut
After two winning weeks on Wall Street, investors find out Tuesday whether their wish for an interest rate cut -- the driver behind the rally -- will be granted.
Federal Reserve officials in recent weeks have indicated a willingness to cut rates further, so it’s almost a foregone conclusion that the target federal funds rate is headed lower.
But there are three more weeks left in this rocky year, so investors aren’t sighing with relief just yet.
Wall Street has posted robust gains recently as investors grew more confident in the Fed’s openness to loosening its policy again. Investors have also been relieved that some credit-loss estimates for banks have been milder than feared.
“The market has sort of changed its paradigm -- it’s expecting the worst. So when it doesn’t get the worst, it rallies,” said Brandon Thomas, chief investment officer for Envestnet Asset Management.
The Dow Jones industrial average has risen more than 640 points over the last two weeks.
Last week, the Dow ended 1.9% higher, the Standard & Poor’s 500 index gained 1.6% and the Nasdaq composite index ended up 1.7%.
Whether the Fed lowers rates in 2008 will depend not only on how the financial and housing industries weather mortgage problems but also on inflation.
Any higher-than-anticipated readings for November from the Labor Department’s producer price index and consumer price index -- scheduled to be released Thursday and Friday, respectively -- could worry investors.
And with two weeks left until Christmas to shop, Wall Street wants to see a fiscally fit consumer raring to spend. The Commerce Department’s retail sales report for November will be an important economic snapshot, especially after last week’s mixed sales data from individual retailers.
There are not many earnings scheduled for this week, but there are a few that the market will be watching closely.
Costco Wholesale Corp.’s quarterly results could give investors a clearer sense of how the average consumer is faring, while Lehman Bros. Holdings Inc.’s report -- the first fourth-quarter report from the investment banking industry -- will offer some insight into how tough the credit markets have been for banks during the last few months.
Analysts are expecting Lehman to post a profit decline and Costco to report a profit rise.
Wall Street will also be awaiting a Wednesday report on the October trade deficit, which could have implications for the tumbling dollar.
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At a glance
Today
Treasury bill auction.
Former media mogul Conrad Black is to be sentenced in his federal fraud trial along with three codefendants.
Quarterly earnings reports due from SAIC and H&R; Block.
Tuesday
Federal Reserve’s Open Market Committee meets to discuss interest rates.
Quarterly earnings report due from Kroger.
Wednesday
Commerce Department reports on October international trade.
Treasury reports on federal budget for November.
Thursday
Commerce Department reports on retail sales for November and on business inventories for October.
Labor Department reports on producer price index for November and on weekly jobless claims.
Freddie Mac reports on mortgage rates.
Quarterly earnings reports due from Costco Wholesale and Lehman Bros. Holdings.
Friday
Labor Department reports on consumer price index for November.
Federal Reserve reports on industrial production for November.
