Investors brace for a new round of alarming data

Wall Street is bracing for yet more reminders this week that the economy is in rotten shape.

Companies including networking-gear maker Cisco Systems Inc. and media giant Time Warner Inc. are set to report quarterly results, while a steady stream of economic readings is also due.

The most recent numbers from companies and the government haven’t been roundly awful, but most have. That is stirring fears the economy’s slide isn’t slowing.

On Friday, Wall Street learned that the economy posted its steepest slowdown in a quarter-century during the final three months of 2008. The 3.8% decline in the nation’s gross domestic product wasn’t as bad as Wall Street had forecast, but investors grew worried that the numbers would only worsen.

The stock market is coming off its weakest January on record. The benchmark Standard & Poor’s 500 index slid 8.6% for the month. The previous record was a 7% drop in January 1970. The tumble has investors nervous because January often sets the tone for the year.

About 75% of the time the S&P; ends lower for January, it does for the year as well. Some Wall Street veterans say, however, that the market’s past behavior is less relevant because the S&P; plunged 38.5% last year. A drop of that size makes it more likely the market will end 2009 higher, they argue.

With January behind them, investors will remain eager this week for any insights companies can offer on the economy. Many companies are now wary of committing to specific forecasts, however. That can leave investors with little to go on.

Dow Chemical Co., Marathon Oil Corp., MetLife Inc., Kellogg Co., Kraft Foods Inc. and Walt Disney Co. are expected to report quarterly results this week. Another rush of reports is expected next week before the flow begins to ebb.

Investors are also likely to remain uneasy ahead of the government’s January employment report, due Friday. Other readings are scheduled throughout the week on home sales, manufacturing, factory orders and the service sector.

The jobs numbers are often the most-anticipated report of the month. Investors forecast the Labor Department data will show a big drop in payrolls.

“Hopefully it won’t be significantly worse than expected,” said Doug Roberts, chief investment strategist at Channel Capital Research. He said that even if the numbers aren’t as bad as some investors fear, it might not ultimately instill much confidence in the market. Investors have become so pessimistic they often view any number that’s better than expected with skepticism.

Companies have been slashing workers. Last week alone, thousands of new layoffs were announced. The cuts and the scary headlines that follow are prompting consumers to cut their spending. That’s a worrisome prospect on Wall Street because consumer spending is key to the economy.

Investors are looking for any respite from the bad news. Wall Street remains eager to see what steps Washington will take to try to shift the economy’s course.

President Obama said Saturday that he would lower mortgage costs, offer loans to small businesses for creating jobs and restore the flow of credit. Wall Street remains eager to see how he will proceed.

The administration also is determining how to use the second half of the $700-billion financial bailout fund.

And the Senate’s version of the stimulus bill backed by the White House and congressional Democrats is headed to the floor for debate this week. The Senate’s bill is nearly $900 billion; the House bill totaled about $819 billion.

“This year I wouldn’t expect much from the economy,” said Ronald Schwartz, portfolio manager of the RidgeWorth Investment Grade Tax-Exempt Bond Fund. “If we can stabilize this year I think that would be a very good accomplishment. And with the stimulus, what the administration is putting in, that’s the hope for it.”

But Roberts said Wall Street was waiting for the government to introduce a more “comprehensive” approach to fixing the economy’s ills.

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At a glance

TODAY

The Institute for Supply Management releases its manufacturing index.

The Commerce Department releases reports on personal income and spending and on construction spending, all for December.

Treasury’s weekly auction.

Quarterly financial results are expected from Anadarko Petroleum, Humana and Mattel.

TUESDAY

Major automakers report U.S. auto sales for January.

National Assn. of Realtors releases pending home sales index.

House Financial Services Committee holds hearing on promoting bank liquidity and lending.

Senate Banking, Housing and Urban Affairs Committee holds hearing on ways to modernize the banking regulatory system.

Quarterly financial results are expected from Archer Daniels Midland, Avon Products, Centex, Dow Chemical, D.R. Horton, Electronic Arts, GMAC, IAC/InteractiveCorp, Marathon Oil, Merck, MetLife, Motorola, Northrop Grumman, Schering-Plough, United Parcel Service, Walt Disney and Yum Brands.

WEDNESDAY

The Institute for Supply Management releases its non-manufacturing index.

Quarterly financial results are expected from BJ’s Wholesale Club, Cisco Systems, Kraft Foods, Philip Morris International, Prudential Financial, Pulte Homes, Saks, Sara Lee, Time Warner and Visa.

THURSDAY

Labor Department releases reports on weekly jobless claims and on productivity for the fourth quarter.

Commerce Department releases report on factory orders for December.

Mortgage finance company Freddie Mac releases report on weekly mortgage rates.

Retailers report sales results.

Quarterly financial results are expected from Belo, Burger King Holdings, Cigna, Duke Energy, Kellogg, MasterCard, McClatchy, NCR, News Corp., Scripps Networks Interactive and Western Union.

FRIDAY

Labor Department releases unemployment data for January.

Federal Reserve releases consumer credit data for December.

Quarterly financial results expected from Biogen Idec and Weyerhaeuser.