Wall Street nervously awaits data on home sales, consumer confidence

Investors are uneasy going into this week, which will bring two reports on April home sales and the latest assessment of consumer confidence. They’re also nervous about next week’s widely expected bankruptcy filing by General Motors Corp.

“There are some big, big, big issues going on right now,” said Tommy Williams, president of Williams Financial Advisors in Shreveport, La. “I don’t think any one of them are going away this summer.”

The major indicators managed to eke out gains last week. The Dow Jones industrials gained 0.10%, while the Standard & Poor’s 500 index rose 0.47%.

The first test of the market’s ability to build on those numbers comes Tuesday, when the Conference Board releases its May consumer confidence index. The reading should provide some insight into consumers’ willingness to spend.

But Ron Weiner, president and chief executive of RDM Financial in Westport, Conn., says that although any positive news about consumers would be welcome, the market is likely to have just a short-term upward blip.

“We want the consumer to be out there, we want them to spend,” Weiner said. “For the most part, however, we don’t see [that] consumers [are] going to pull us out of this economy because they are also paying down debt at the same time.”

Investors are also mindful of the Commerce Department’s disappointing retail sales report for April, which took the market by surprise May 13 and sent stocks plunging.

On Wednesday and Thursday, investors will get reports on sales last month of new and previously owned homes. A government report is also due on U.S. home prices during the first quarter of 2009.

The housing data could be a big force in shaping investors’ attitudes. A housing recovery is crucial to helping consumers feel more confident and to enabling banks to worry less about eroding asset values.

Wall Street has been trying to get a read on the housing market for months and has responded enthusiastically to any signs that the slump is leveling off. Stocks surged more than 3% on May 4 following unexpected increases in pending home sales and construction spending. But a big inventory of unsold homes and record foreclosures are swallowing much of the demand, making it hard for prices to stabilize.

“We are getting to the point of the year where we are getting into the peak home sales season,” said Kevin Shacknofsky, co-portfolio manager of the Alpine Dynamic Dividend Fund in Purchase, N.Y. “The numbers now will be far more important.”

Analysts say more stabilization in the housing industry is needed for a recovery to occur.

“Some carpenters are out of work and some home builders are struggling, but we can’t right this ship if we don’t run off that inventory,” Williams said.

Investors are also anxiously awaiting the government’s June 1 deadline for GM to complete its restructuring plans. To avoid filing for Chapter 11 bankruptcy reorganization, the automaker must have concessions ratified by union workers as well as persuade holders of $27 billion in bonds to agree to exchange nearly all of it for company stock. But bondholders have been balking.

Last week, dozens of members of Congress told the Obama administration to slow down the restructuring of GM and Chrysler because they are worried the process could cost tens of thousands of jobs.

“I think everybody is expecting a [GM] bankruptcy,” Shacknofsky said. “We could get a positive surprise if they can come to some sort of negotiation. . . . The market would probably like that.”

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At a glance

TODAY

Memorial Day. Markets are closed.

TUESDAY

Standard & Poor’s/Case-Shiller releases its March and first-quarter index of home prices.

Conference Board releases the Consumer Confidence Index for May.

Quarterly earnings report due from Borders Group.

WEDNESDAY

National Assn. of Realtors releases existing home sales for April.

Federal Housing Finance Agency releases March and first-quarter home price index.

Quarterly earnings reports due from AutoZone and Staples.

THURSDAY

Labor Department releases weekly jobless claims.

Commerce Department releases durable goods statistics and new home sales for April.

Freddie Mac releases weekly mortgage rates.

Quarterly earnings reports due from Costco Wholesale, H.J. Heinz and Sears Holdings.

FRIDAY

Commerce Department releases gross domestic product data for the first quarter of 2009.

Quarterly earnings report due from Tiffany.