Dados para a semana nos EUA: Big week, big worries

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Big week, big worries

The Fed's expected interest rate hike leads the list of key events for investors next week.

June 25, 2005: 8:37 AM EDT
By Alexandra Twin, CNN/Money Staff Writer


NEW YORK (CNN/Money) - Hold on tight, it's going to be a bumpy ride.

Investors still reeling from last week's bruising return Monday to the busiest week on Wall Street this month. No, you can't just slip out back and return after the Fourth of July. And really, why would you want to?

Many of the hot issues that have been bothering investors will be addressed starting Monday. Not resolved, mind you, but at least addressed.

The new week brings reports on inflation, personal income and spending, consumer confidence, manufacturing, and the biggest news of the week -- the Federal Reserve's meeting on interest rates.

Then of course there's oil, which hit record highs three times last week, leaving prices up about 38 percent so far this year.

The Fed meeting is the big event of the week, said William Hummer, principal at Wayne Hummer.

"I think it will be a relief for the stock market to get past it, and then in July we may see more of an upturn," he said. "But right now, $60-a-barrel oil is making people nervous."

Oil hit $60 a barrel Thursday and tested that level again Friday, before closing the week at $59.84, the highest settlement price for a front-month futures contract in the 22 years of futures trading on the New York Mercantile Exchange.

The rally revived worries, and sparked debate, about how high oil might go.

"The stock market is looking at a pretty benign economy, low interest rates and a 10-year note yield that is below 4 percent, all positives," said Stephen Leeb, president at Leeb Capital Management. "But then there's the big negative -- oil."

"The question is whether it will go high enough to hurt the economy, hurt corporate profits, cut into discretionary spending," he said. "My sense is that we probably would need to see oil above at least $65 a barrel on a sustained basis before people really get concerned."

But in the short term, oil is making investors nervous enough -- witness the two-day sell-off that bruised stocks Thursday and Friday.

Fed meeting looms

Fed policy-makers, due to meet Wednesday and Thursday, are widely expected to boost the fed funds rate, an overnight bank lending rate, another quarter point to 3.25 percent, which would be the ninth straight increase since last June.

Many Fed watchers expect another quarter-point hike in August.

But a debate has been raging on Wall Street as to whether the central bank is likely to pause its rate-hiking campaign after August -- and investors will be scouring Thursday's Fed statement for clues.

Analysts said stocks are betting on a pause after August, with investors pointing to signs of slower economic growth as evidence. That belief has protected the stock market over the last few weeks from steeper losses, even as oil prices surged.

Influential bond fund manager Bill Gross went so far last week as to say that not only is the Fed near the end of its rate-hike campaign, but that the central bank may start cutting rates later this year.

Gross is in a decided minority. Many economists say even if the Fed pauses after August, it could start raising short-term rates again afterward.

"Everyone expects the Fed to raise (a quarter point) and everyone wants to see if there is a change in the outlook that gives hints about future meetings," said Michael Sheldon, chief market strategist at Spencer Clarke.

All eyes will be on whether the Fed keeps its pledge to raise rates at a "measured" pace and what it says about the economy, and oil prices.

The statement will probably say the economy is growing at a moderate rate and that inflation remains well contained, little different from May's statement, said Hummer.

Greenspan and company are also unlikely to say anything that may upset the market, Hummer added, noting that the statement will likely try to soothe participants, even as it makes clear that rates will rise again at the August meeting.

One factor that could support stocs next week: Thursday is the last day of the quarter.

The last week of a quarter tends to be an up one for markets, according to Stock Trader's Almanac, as portfolio managers buy some of the quarter's big winners so their portfolios look better.

Key events in the week ahead

Nike (Research) reports results Monday morning. The shoe and clothing retailer is expected to have earned $1.27 a share, according to Thomson/First Call estimates, versus $1.13 a year ago.


Due Tuesday, June consumer confidence numbers from the Conference Board are expected to have risen to 104.3 from 102.2 in May, according to conomists surveyed by Briefing.com.


Oracle (Research) reports Wednesday morning. The business software maker is expected to have earned 23 cents a share, according to forecasts, up from 19 cents a year ago.


Wednesday also bring the final read on gross domestic product growth (GDP) in the first quarter. GDP is expected to have grown at a 3.7 percent annualized rate, up slightly from the previous reading of 3.5 percent.


Research in Motion (Research) is expected to report Wednesday after the bell. The maker of the Blackberry wireless device is forecast to have earned 54 cents a share, up from 36 cents a year ago.


May personal income and spending figures are due Thursday. Income is expected to have risen 0.3 percent after rising 0.7 percent in April Spending is expected to have held steady after rising 0.6 percent in April. The spending component's key inflation gauge, the core PCE deflator, is expected to have risen 0.1 percent after rising at the same pace in April.


The Chicago PMI is expected to come in at 55 for June versus 54.1 in May, analysts forecast. The regional read on manufacturing is due Thursday.


The Institute for Supply Management's manufacturing index, due Friday, is expected to have edged up to 51.5 in June from 51.4 in May, according to forecasts. Any reading over 50 indicates expansion in the sector.


Construction spending, due Friday, is expected to have risen 0.5 percent in May after rising 0.5 percent in April.


The revised read on June consumer sentiment from the University of Michigan, due Friday, is expected to show no change from an earlier read of 94.8, economists forecast.