Dados e Resultados para a semana : Bracing for more tough times

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Bracing for more tough times

Market set for another volatile week as investors consider inflation reports, earnings, oil prices.

May 14, 2005: 11:11 PM EDT
By Alexandra Twin, CNN/Money Staff Writer


NEW YORK (CNN/Money) - The news seemed good: falling oil prices and bond yields, a rising dollar and strong retail sales.

But it was no comfort for a jittery stock market last week. And unfortunately, Wall Street returns to work Monday with the same concerns that have kept the stock market zig-zagging.

Stocks have churned in a range this year, as investors attempt to get a better sense of how the economy will hold up in a rising interest rate, rising oil price environment.

A pullback in oil over the past week and a rise in the long-ailing dollar failed to spark stock gains. In fact, it sparked a mass exodus in commodity and material stocks -- the backbone of the recent rally.

"What's going on is that fund managers have come to realize that economic growth is slower than they thought and inflation is higher, so they're backing off right now," said Barry Ritholtz, market strategist at Maxim Group. "There's no reason to jump in here and there's lots of confusion about the future."

The market rallied big in 2003, but has been essentially churning within a broad trading range since February 2004. Between mid-February 2004 and mid-May 2005, the S&P 500 has risen a total of 9 points.

Year-to-date, the Dow is down nearly 6 percent, the S&P 500 nearly 5 percent, and the Nasdaq more than 9 percent. All of those declines have come in the past two months.

"We were in this post-election trading range from November to April, and that broke down," Ritholtz added. "The bull market has at least one more major run in it, but I think it's probably going to be sometime over the summer, when stocks get appreciably cheaper."

GM and the Fed
In addition to the prolonged worries about interest rates and the economy, the market also this week ran into a new concern: worries about hedge fund losses, amid downgrades of GM and Ford debt, which could have broader implications for the market.

Vince Farrell, managing director at Scotsman Capital, said the concerns were particularly upsetting to professional investors reminded of the story of Long-Term Capital Management, the hedge fund that suffered massive losses in 1998 after a Russian currency crisis sent investors into safe-haven investments.

"GM and Ford rattled the hedge fund trade, brought back memories of Long-Term Capital," Farrell added. "That's why the bank stocks were weak."

Between that, worries that third and fourth-quarter earnings forecasts are too high and are going to need to come down, and confusion about how many more rate hikes they'll be, there is a great deal of unease in the market, Farrell added.

"Hopefully, next week we'll calm down a bit," he added. "The fact that you saw a flight-to-quality into bonds at the end of the week is probably a positive sign."

With inflation and interest rate worries still in place, the analysts said that next week's Producer Price Index and Consumer Price Index reports will be the most closely watched.

Additionally, reports from top tier companies such as Hewlett-Packard and Home Depot may provide some comfort to investors if the reports and forecasts are positive.

But the broader concerns aren't likely to disappear just yet, the analysts added.

Here's a look at what's in store:

Key economic reports in the week ahead

The NY Empire State Index, due Monday, is expected to have risen to 11.0 in May, according to a consensus of economists surveyed by Briefing.com. The regional read on manufacturing stood at 3.1 in April.


Two reads on the housing sector are due Tuesday. Housing starts are expected to have climbed to a 1.98 million unit annual rate in April from a 1.837 million unit annual rate in March. Building permits are expected to have grown to a 2.043 million unit annual rate in the month from a 2.023 million unit annual rate in February.


The Producer Price Index (PPI), due Tuesday, is expected to have increased 0.4 percent in April after a 0.7 percent hike in March. The so-called "core" PPI, which excludes volatile food and energy prices, is expected to have been up 0.2 percent after gaining 0.1 percent in March.


The Consumer Price Index (CPI), due Wednesday, is forecast to be 0.4 percent higher in April after advancing 0.6 percent in March. The "core" CPI is seen posting a 0.2 percent boost after rising 0.4 percent in March.


The read on leading economic indicators (LEI) due Friday, is expected to have declined 0.2 percent in April. The index fell 0.4 percent in March.


The Philadelphia Fed index, a regional read on manufacturing, is also due Friday. The index is expected to have slipped to 19.0 in May from 25.3 in April.

Next week's big earnings

Lowe's (Research) is expected to report fiscal first-quarter earnings of 76 cents per share Monday, according to a consensus of analysts surveyed by First Call. The home improvement retailer earned 57 cents a year earlier.


Lowe's rival Home Depot (Research) is seem posting income of 55 cents per share Tuesday, three cents more than a year earlier.


J.C. Penney (Research) also reports Tuesday, and is expected to have earned 61 cents per share, up from 38 cents a year earlier; fellow retailer Staples (Research) is forecast to have income of 20 cents per share, three cents more than a year earlier.


Applied Materials (Research) reports fiscal second-quarter results after the close Tuesday and is expected to have put up profit of 17 cents per share, five cents less than the prior-year period.


Hewlett-Packard (Research) report its second-quarter results Tuesday evening and is expected to have earned 36 cents per share, two cents more than in the year-earlier period.


Gap (Research) reports Thursday evening. Its profit is seen tumbling to 30 cents a share, four cents less than the prior-year period.