Trade, retail sales data expected

L.A. Times Archives

July 9, 2007 12 AM PT

From the Associated Press

NEW YORK —

As investors return this week from their Fourth of July vacations and prepare for earnings season, they’ll get a few snapshots of the economy’s health.

Wall Street is hoping for signs that the economy is on the rebound, but it doesn’t want to see growth that is so strong that it might make the Federal Reserve more inclined to raise interest rates to rein in inflation.

The Dow Jones industrial average -- about 65 points below its record close reached June 4 -- has waffled over the last several weeks as bond yields ballooned, stoking jitters about high rates putting a damper on deal making.

Although most analysts say the stock market will keep wobbling until at least mid-July, when earnings reports are underway, a couple of pieces of economic data this week could give investors some idea of where bond yields are headed and what the Fed might decide at its next meeting.

The Commerce Department reports Thursday on the international trade balance and Friday on retail sales. The trade deficit is expected to have widened to $59.0 billion in May from $58.5 billion in April, according to the consensus estimate of economists surveyed Friday by Thomson Financial. Retail sales for June are anticipated to have risen about 0.3%, smaller than May’s jump of 1.4%.

The trade deficit, or the gap between what America sells overseas and what it imports, should tell investors how well U.S. exporters are faring and give an indication of how much prices are rising.

Any sign that inflation is accelerating could exacerbate worries about Treasury bond yields surging and a possible interest rate hike by the Fed, which said last month that it wanted to see more evidence that inflation was truly under control.

If investors are uneasy about inflation, the market could see a return of the turbulence that sent stock prices fluctuating in June.

Retail sales, meanwhile, will tell investors whether the U.S. consumer is staying resilient in the face of high energy prices and a sluggish housing market.

Consumer spending has remained fairly strong despite the recent economic slowdown and has given stock investors an incentive to keep buying.

Last week, when the Fourth of July holiday muted Wall Street’s dealings, the Dow rose 203.06 points, or 1.5%; the Standard & Poor’s 500 index rose 27.09 points, or 1.8%; and Nasdaq advanced 63.28 points, or 2.4%.

Investors this week will also keep an eye on crude oil prices, which have been rising to their highest levels since last August. High energy prices accelerate inflation and could prompt the Fed to consider a rate hike.

The Fed reports today on May consumer credit, which Wall Street expects to have risen $5 billion compared with April’s increase of $2.6 billion.

The Commerce Department releases data Tuesday on May wholesale inventories. Analysts estimate a rise of 0.6% after April’s 0.3% uptick.

On Friday, in addition to its retail sales data, the Commerce Department will report on June import and export prices and May business inventories -- which analysts estimate rose 0.4%, the same as in April.

Also Friday, the University of Michigan will release its preliminary reading on July consumer sentiment, which Wall Street forecasts will come in slightly higher than June’s final reading.

At a glance

Today

Treasury bill auction.

Federal Reserve reports on consumer credit for May.

Quarterly earnings report due from Alcoa.

Tuesday

Quarterly earnings report due from Levi Strauss.

Wednesday

Quarterly earnings reports due from Genentech and Yum Brands.

Thursday

The nation’s largest retailers announce their sales figures for June.

Commerce Department reports on international trade for May.