October housing sales, inflation data expected

L.A. Times Archives

Nov. 26, 2007 12 AM PT

From the Associated Press

NEW YORK -- —

November has been a nerve-racking month for Wall Street, and investors are hoping this week’s readings on economic growth, home sales and inflation don’t meet their worst fears.

The Dow Jones industrial average is on pace to post the biggest monthly loss since September 2002. Sentiment certainly has shifted since early October, when the overriding belief on Wall Street was that the credit crisis was largely over.

Since then, dozens of financial institutions have revealed huge losses on risky mortgages -- even Fannie Mae and Freddie Mac, government-sponsored entities that private lenders rely on to buy their mortgages.

Meanwhile, the credit markets remain very squeezed, so the companies that depend on them have several tough quarters ahead as they overhaul their investment strategies and wait for the housing market to bottom out.

Last week, the blue-chip index shed 1.5%, the Standard & Poor’s 500 index fell 1.2% and the Nasdaq composite index slid 1.5%.

The only chances for a December rally, it seems, are another interest rate cut from the Federal Reserve or data showing that businesses and consumers are more resilient than investors believe.

The National Assn. of Realtors reports Wednesday on October’s existing-home sales, and the Commerce Department reports Thursday on October’s new-home sales. Both are expected to show declines from September.

Wall Street is hoping other data released this week are more promising.

Last month, the Commerce Department estimated that gross domestic product grew 3.9% last quarter, and now, economists anticipate that it will revise that estimate up to 4.8%.

Economists are mixed in their forecasts of Wednesday’s durable goods report, but on average they anticipate an October uptick in orders of 0.3% after a September decline of 1.7%.

Economists also expect the Conference Board’s November index on consumer confidence to hold at its October level, which was a two-year low.

And they see Friday’s personal spending report showing a rise of 0.3%, and core personal consumption expenditures -- an inflation measure -- is anticipated to come in at 1.8%, within the Fed’s comfort range.

The market is pricing in a high chance of a Fed rate cut, but it’s not guaranteed. The central bank, which will meet Dec. 11, said the decision to approve a quarter-point cut on Oct. 31 was a close call. A falling dollar and surging oil prices continue to threaten higher inflation, even as policymakers expect growth to slow into next year.

Companies scheduled to report earnings next week include Canadian banks such as Bank of Montreal, the National Bank of Canada and Toronto Dominion Bank, and big consumer brands including Dell Inc., Staples Inc. and Sears Holdings Corp.

The Dow is still up 4.2% on the year, but it had been up more than 13% year-to-date in early October. The Nasdaq is up 7.5%, and the S&P; is up 1.6%.

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At a glance

Today

Treasury bill auction.

Talks resume in Hollywood writers strike.

Tuesday

Conference Board reports its monthly consumer confidence index.

National Forum on Homeownership Preservation and Foreclosures, a meeting of mayors from across the country.

Quarterly earnings report due from Staples.

Wednesday

Commerce Department reports on durable goods orders for October.