Wall Street Braces for Bumpy Ride

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Wall Street Braces for Bumpy Ride

Mar 4, 1:24 PM (ET)

By MADLEN READ

 

NEW YORK (AP) - If last week was Wall Street's big dive, this week

will be where it tries to figure out how deep the water is.

 

Stocks are in for a shaky ride, now that the past five sessions have

erased all of this year's gains and then some. Investors in the coming

days will be grasping at any and all signals, both domestic and

foreign, to see if the market can find a foothold.

 

Most market watchers now agree that last week's plunge doesn't signal

disaster. The stock market, which pushed the Dow to 31 record highs

since early October, had been climbing at a pace that was arguably

more extraordinary than the depth of Tuesday's drop. Chatter about a

big correction had been circulating the floors of stock exchanges for

months - it just came as a shock that so much of the correction

happened in a single day.

 

What the sages are split over is whether stocks have hit a short-term

dip or entered a bear market, so they'll be closely watching this

week's economic data. Many say there's no reason that stocks shouldn't

resume their trek into record territory in the coming months, given

that little has changed fundamentally in terms of the average

consumer, corporate earnings, manufacturing activity or inflation. But

others argue that stocks had inflated way too much given the torpidity

of many areas of the economy, and that there is still more air to be

let out.

 

The Dow Jones industrials are down 3.3 percent on the year, the

Standard & Poor's 500 index is 4.4 percent lower, and the Nasdaq

composite index is down 5.9 percent.

 

If the Labor Department's employment data on Friday shows stability in

U.S. jobs - previously a big market driver, as it suggests consumers

will keep spending money - the stock market has a better chance of

regaining its footing. At the end of last week, the market was

expecting February nonfarm payrolls growth to slip to 100,000 from

111,000 in January; February's unemployment rate to hold steady at 4.6

percent; and hourly earnings to inch up 0.3 percent, more than

January's 0.2 percent. Other reports, including a snapshot of the

nation's service economy and the U.S. trade balance, will also be

closely watched.

 

No matter where the data falls, however, Wall Street is anticipating

choppiness this week as some investors flee from stocks to the

traditionally safer Treasury market, while others swoop in to scoop up

bargains.

 

And because last week's plunge was triggered in large part by a sharp

decline in Chinese stocks, which also set off drops in other Asian

markets and European markets, U.S. investors will undoubtedly be

looking abroad to see if other countries' stocks are recovering or

collapsing.

 

OTHER ECONOMIC DATA IN THE FOREFRONT

 

The Institute for Supply Management on Monday will report its index on

the services economy in February. The market is expecting a reading of

57.5, down slightly from 59.0 in January.

 

Also Monday, St. Louis Fed President William Poole will speak on

inflation and economic growth in Santiago, Chile.

 

On Tuesday, the market expects the Labor Department to revise its

fourth-quarter productivity growth measure to an annual rate of 1.7

percent from a previous 3.0 percent, and the Commerce Department to

report a 4 percent slowdown in January factory orders. Factory orders

include the previously reported durable goods - one of the many

disappointing factors contributing to last Tuesday's freefall - plus

non-durable goods orders.

 

Meanwhile Tuesday, the National Association of Realtors reports

January's pending home sales.

 

On Wednesday, investors will read the Fed's beige book, which

describes economic conditions in regions around the country. The

Federal Reserve's monthly measure of consumer credit comes Wednesday

as well, and is expected to be $7 billion for January, up from

December's $6 billion.

 

On Thursday, the nation's retailers report their sales for February.

 

And Friday will be a data-heavy day, bringing the jobs report and the

trade balance for January. The market is forecasting the trade gap

will come in narrower at $60.0 billion from $61.2 billion in December.

Also, January wholesale inventories are expected to show a 0.1 percent

decline, less than December's decrease of 0.5 percent.

 

AND IN THE BACKGROUND, A TRICKLE OF EARNINGS

 

Earnings season is mostly over, and corporate growth in the last

quarter of 2006 came in at around 10 percent - slower than in previous

months, but still healthy. Investors haven't been too occupied lately

with individual company news, but they shouldn't discount the

possibility of a big earnings surprise rattling the markets.

 

BJ's Wholesale Club Inc. (BJ) and Costco Wholesale Corp. (COST)

release their earnings Wednesday and Thursday, respectively. The

market is expecting BJ's to report profit of 66 cents per share. BJ's

closed at $31.93 Friday, at the upper end of its 52-week range of

$25.18 to $34.04.

 

Costco is also expected to report profit of 66 cents per share. Costco

closed at $55.75 Friday, at the upper end of its 52-week range of

$46.00 to $58.70.

 

Meanwhile, analysts predict homebuilder Hovnanian Enterprises Inc.

(HOV) on Thursday to report a loss of 59 cents per share. Hovananian

closed at $30.75 Friday, in the middle of its 52-week range of $24.79

to $47.80.