Tuesday, April 29, 2003

Beware of weak numbers By Justin Lahart

Given that, despite their April billing, the week ahead's big numbers won't give much of an indication of what the post-war economy looks like, the market should arguably look right past them. But for investors betting on a rebound, that may be a hard argument to swallow. Weeden strategist Steve Goldman points out that bullishness among investors appears to be on the rise, which means that stocks are vulnerable to bad news. "We have a fragile market," he said, "and we're due for a pullback."

Key events in the week ahead:

*The week ahead brings the last big raft of first-quarter earnings.
*The Commerce Department releases its March report on personal income and consumption Monday. It's considered a bit of a stale number (for traders, last month seems like a long time ago), but gains in the income section can be a decent predictor of future consumer demand. Economists polled by Reuters expect a 0.4 percent gain in income and a 0.7 percent gain in consumption. [Personal income rose 0.4% in March, after a revised 0.2% gain in February, the Commerce Department said Monday. Personal consumption also rose 0.4% in March after a 0.1% gain the month before. The Commerce Department had previously reported February income up 0.3%, and spending unchanged. The March report was broadly in line with Wall Street expectations.]
*The employment cost index -- believed to be one of Fed Chairman Alan Greenspan's favorite reports -- is due out Tuesday. For the first quarter, economists expect it climbed to 0.8 percent from 0.7 percent. This shows that there's still considerable slack in the labor market.
*Economists expect the April consumer confidence index, due out Wednesday, lifted to 68.7 from March's 62.5. Another sign that, with the closing of the war, the nation's mood has improved. [The Conference Board's index of consumer confidence catapulted to 81.0 in April from 61.4 in March, far above expectations of a reading near 70. It was the biggest one-month gain since after the end of the first Gulf War ... But economists caution that better confidence figures may not last while the labor market remains stagnant. The payrolls report on Friday is expected to show another slide in jobs in April, taking total recent losses to more than half a million.]
*Wednesday, the Chicago Purchasing Managers' Index, considered to be a good indicator of where the following day's national index is headed, comes out. Economists think it rose slightly in April, moving to 49.1 from 48.4. [Chicago PMI at 47.6 vs the consensus estimate of 48.5 ]
*Fed Chairman Alan Greenspan speaks before the House Financial Services Committee Wednesday on monetary policy. Fed watchers will be poring over what he says to gauge the chances of a rate cut at the Federal Open Market Committee's May 6 meeting. [Economists expect the Fed chief to be cautiously optimistic, pointing to positives like the recent fall in oil prices and improving corporate profits. Other officials at the Fed have been more guarded about the outlook, citing worries about capacity overhangs in the nation's factories and the risk of consumers slowing down. From Briefing.com: Greenspan text upbeat : The chairman says that the timing of the pickup remains uncertain, and that the end of the Iraqi war should ease economic tensions, after which the economy should grow at a noticeably better pace. However, lingering business caution may impede growth and business confidence has not improved after the war - though rising equities are encouraging. He cites claims as evidence that firms do not have the need for labor and lower energy prices as better for the consumer. .]
*Economists expect the government's report on first-quarter productivity, due out Thursday, to show a rise to 2.1 percent from the fourth-quarter's 0.8 percent.
*The Institute for Supply Management releases its Purchasing Managers' Index Thursday. Economists expect the key read on manufacturing rose only slightly for April, to 47.3 from March's 46.2.
*Throughout the day Thursday, car companies will report April sales. Expectations are they pushed higher.
March construction spending, due out Thursday, is expected to show a 0.3 percent pickup coming back from February's 0.3 percent drop.
*Economists expect Friday's April employment report to be a downer. Payrolls are forecast to drop by 59,000, bringing the nation's job losses over the past three months to over a half million. The unemployment rate is expected to pick up from 5.8 percent to 5.9 percent.

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