Investors Await Fed's Decision on Rates?

Investors Await Fed's Decision on Rates?

http://biz.yahoo.com/ap/070506/wall_street_week_ahead.html?.v=6

On what basis can this public media explain the market?

AP
Investors Await Fed's Decision on Rates
Sunday May 6, 2:50 pm ET
By Madlen Read, AP Business Writer 
After Another Record-Setting Week on Wall Street, Investors Await Fed's Decision on Rates

NEW YORK (AP) -- After another record-setting week on Wall Street, investors are wondering whether stocks are due for a fall or are headed even higher. This week's words from the Federal Reserve and retail sales could provide some clues.
 
Recently, it has seemed as if nothing can derail the stock market's climb. Economic reports last week were mixed, but institutional investors remained enthusiastic thanks to soaring takeover activity. News Corp.'s bid for Dow Jones & Co. reinvigorated the stock market Tuesday after a morning of mixed economic news, and on Friday, reports that Microsoft Corp. might be mulling a buy of Yahoo Inc. nudged stocks higher despite lackluster jobs data.

Overall, economic data has shown slow and steady growth, alleviating investors' fears about recession. Still, worries linger about stagflation -- slowing growth amid soaring prices -- and what the Federal Reserve would do about it.

On Wednesday, the central bank's Federal Open Market Committee meets to decide whether to keep interest rates steady or move them higher or lower. Everyone expects the Fed to stand pat, as they have done since last summer, but investors, hoping for a rate cut by the end of the year to boost spending, will parse the Fed's statement for indications about future moves.

To get another hint about where interest rates may be headed, investors on Friday will watch for the Producer Price Index, a measure of inflation at the wholesale level. The market predicts the Labor Department's report will show the PPI rose 0.7 percent in April, less than the 1 percent rise in March, according to last Friday's median estimate of economists surveyed by Thomson Financial. The core PPI, which strips out energy and food prices, is expected to show a 0.2 percent increase for April, up from a flat reading in March.

Investors will be looking at a cascade of retail reports to get some insight into consumer spending. On Thursday, the major stores will release their sales results for April. And on Friday, investors will get the Commerce Department's retail sales report. Economists forecast a 0.4 percent rise in March retail sales, the same as in February.

Last week, the Standard & Poor's 500 index surpassed 1,500 for the first time in more than six years, bringing the index closer to its record close of 1,527.46 reached in March 2000. Meanwhile, the Dow Jones industrial average has been climbing further into uncharted terrain; the blue-chip index broke through 13,200 last week and on Friday hit its 19th record close this year.

The Dow rose 1.10 percent last week; the S&P 500 advanced 0.77 percent; and the Nasdaq composite index gained 0.58 percent.

MORE ECONOMIC DATA ...

The Federal Reserve reports Monday on consumer credit in March. The market is expecting a reading of $5 billion, up from $2.9 billion in February, according to the median estimate of economists surveyed by Thomson Financial.

On Tuesday, the market is expecting the Commerce Department to report that wholesale inventories in March rose 0.3 percent, a slimmer rise than the 0.5 percent increase in February.

The Commerce Department on Thursday reports on the trade balance for March, and on import and export prices in April. Economists predict the trade balance widened to $60.0 billion in April from $58.4 billion the previous month.

On Friday, in addition to retail sales, the Commerce Department will also release data on March business inventories, which are expected to rose 0.1 percent, less than the 0.3 percent rise in February.

... AND ANOTHER BATCH OF EARNINGS

On Tuesday, Walt Disney Co., one of the 30 companies that make up the Dow, releases first-quarter financial results. Analysts are expecting a profit of 38 cents a share. Disney closed at $35.85 Friday, at the upper end of its 52-week range of $27.95 to $36.09.

Cisco Systems Inc. also releases its first-quarter earnings Tuesday, and analysts are expecting profit of 33 cents a share. Cisco closed at $27.91 Friday, at the upper end of its 52-week range of $17.10 to $28.99.

On Wednesday, Toyota Motor Corp. releases first-quarter earnings, and analysts predict a profit of $2.13 a share. Toyota's U.S. shares closed at $120.94 Friday, in the upper half of their 52-week range of $94.52 to $138.