Housing data expected; Fed to weigh rate move
The stock market proved again last week that it was vulnerable to bad news relating to U.S. sub-prime mortgage lenders.
This week should give investors a clearer view of the housing market’s health and whether it is stable enough to stave off an overflow of that sector’s troubles into the wider economy.
In addition to housing data, investors will be digesting the Federal Reserve’s take on inflation and trying to figure out whether the central bank is leaning toward a rate hike -- a move that could put even more of a drag on the housing market and consumer spending.
On Tuesday, the Dow Jones industrials dropped more than 240 points after the New York Stock Exchange said it was moving to delist New Century Financial Corp., Accredited Home Lenders Holding Co. said it was low on cash, and the home loan units of GMAC Financial Services and H&R; Block indicated they were struggling.
The sub-prime mortgage industry isn’t a huge portion of the U.S. economy, but some market sages (including former Fed Chairman Alan Greenspan) are saying troubles could escalate and spill into other sectors if home prices drop off significantly, making mortgages impossible to refinance.
On Friday, the markets will find out whether homes lost value in February, when the National Assn. of Realtors reports last month’s median home price.
January’s report -- which came out Feb. 27, when the Dow Jones industrials plummeted more than 400 points -- showed that the median home price fell for a sixth straight month.
The data will also include existing-home sales and inventories; economists are expecting February sales to slip to 6.35 million, after jumping to 6.46 million in January.
Investors this week should also get a better idea of how the sluggish housing market is affecting the industries that depend on it.
Today the National Assn. of Home Builders will release its index on builders’ perceptions of new single-family home sales and near-term sales prospects.
On Tuesday, the Commerce Department reports on February housing starts and building permits; the market is expecting housing starts to have risen to 1.450 million from 1.408 million in January, and building permits to have slipped to 1.56 million from 1.57 million.
Also Tuesday, Fed policymakers begin their two-day meeting to discuss whether to adjust interest rates. Market watchers are forecasting that the central bank will leave rates unchanged for the sixth straight time, but the statement it releases Wednesday could provide some insight into whether it sees inflation as a bigger threat than the economy’s sluggishness.
The week ahead
Today
* Treasury bill auction.
* Airbus A380, the world’s largest passenger aircraft, arrives in the U.S.
* Quarterly earnings report due from Nortel Networks.
Tuesday
* Commerce Department reports on housing starts for February.
* Federal Reserve Open Market Committee meets on interest rates through Wednesday.
* Quarterly earnings reports due from Adobe Systems and Oracle.
Wednesday
* Quarterly earnings reports due from FedEx and Morgan Stanley.
Thursday
* Labor Department reports on weekly jobless claims.
* Freddie Mac reports on mortgage rates.
* Conference Board reports its monthly leading economic indicators index.
* Quarterly earnings reports due from KB Home, Palm, Barnes & Noble, Borders Group, ConAgra Foods and General Mills.
Friday
* National Assn. of Realtors reports on existing-home sales for February.
* Quarterly earnings report due from Freddie Mac.
