Investors want news to counter blues

L.A. Times Archives

Nov. 19, 2007 12 AM PT

From the Associated Press

NEW YORK -- —

Stock investors smarting from months of volatility are hoping this holiday-shortened week provides signs of a year-end rally.

The days leading up to Thanksgiving -- which in recent years have been positive for stocks -- will bring readings on the housing market, minutes from the Federal Reserve’s meeting last month and earnings reports, including results from major retailers.

The data should keep investors busy as they stare down tumbling home prices, billions of dollars of losses at banks that made losing bets on sub-prime mortgages, and crude oil flirting with $100 a barrel.

At this point, Wall Street expects the U.S. housing market to keep wilting through next year, and perhaps into 2009. It also assumes financial institutions will be taking another giant round of write-downs during the fourth quarter, one that may be larger than the third quarter’s $45 billion in credit-related losses.

What investors remain unsure of is how long it will take Wall Street banks to bounce back from their losses and whether consumers and the broader economy will survive the worst housing market in decades.

Last week, investors sent stocks higher and lower as they wrestled with uncertainty. The Dow finished last week up 1% and both the S&P; 500 index and the Nasdaq composite rose 0.4%.

This week may bring low trading volume because of the Thanksgiving holiday, but it’s unlikely to be calm.

Today, investors will hear from the National Assn. of Homebuilders on its November forecast for the housing market. Economists surveyed by Thomson/IFR anticipate that the index will hold at 18. It fell to that level in October after eight straight months of declines.

On Tuesday, the Commerce Department is scheduled to report on housing starts and building permits. Economists believe housing starts fell again in October after declining in September to their lowest level since 1993.

Also Tuesday, the Fed will release minutes from its Oct. 31 meeting, when it lowered interest rates by a quarter-point after a half-point cut in September.

Though Wall Street does not want to hear from policymakers that the United States might be headed for recession, it does hope the Fed will lower rates again when it meets Dec. 11.

Cheaper borrowing tends to spur economic activity. But policymakers have implied they are not inclined to keep decreasing rates because of the risk of accelerating inflation.

Business sectors including consumer staples, healthcare, industrials and information technology have been helping the economy grow despite the withering housing market.

Wall Street will want to see continuing corporate strength in earnings reports scheduled for this week, including Hewlett-Packard Co., BJ’s Wholesale Club and Deere & Co. Home-improvement retailer Lowe’s Cos., lender Freddie Mac and home builder D.R. Horton will also release earnings ahead of Thanksgiving.

And after Thanksgiving, as investors do every year, they’ll be monitoring consumers’ holiday spending. A strong U.S. consumer might be the fuel the stock market needs to overcome its jitters. A weak one could be the coal that Wall Street is worried about finding in its stocking.

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At a glance

Today

Treasury bill auction.

Quarterly earnings reports due from Hewlett-Packard, Lowe’s, Medtronic and Nordstrom.

Tuesday

Commerce Department reports on housing starts for October.

Quarterly earnings reports due from Barnes & Noble, Borders Group, Freddie Mac, Limited Brands, Target and Whole Foods Market.