Now that everybody is back in the office, maybe something will happen. Please?
August 31, 2003: 10:03 AM EDT
By Justin Lahart, CNN/Money Senior Writer
NEW YORK (CNN/Money) - Come Tuesday things are going to be different.
The idle days of summer over, troops of heavy-hitter traders and big-time money managers are going to roll into Wall Street. They're going to step out of their limos, step into birds-eye maple paneled elevators that whisk them up to the top floor, kick that last bit of beach sand out of their John Lobbs and get down to business.
And then the market, which has stymied bulls and bears alike with lackluster, sideways trading over the past several months, will finally do something.
Unless, of course, it doesn't. If the old axiom that the market tends to frustrate the greatest number of people possible holds true, then maybe September will be just as dull as August was, with the S&P 500 continuing to flop about in the narrow range that has shackled it since early June.
But though the prospect of watching paint dry for another month isn't exactly what investors are hoping for right now, it would actually be quite a good thing, thinks Raymond James market analyst Ralph Bloch.
September has historically been stocks' worst month (last year the S&P fell 11 percent), and many traders think that this year will be no different. If the market can break the typical seasonal pattern, it would signal that something new was happening. And it would set the stage for a big rally through the end of the year.
"If the market can avoid the usual September swoon, the fall could be good," said Bloch.
He thinks there's a fair chance stocks manage to dodge the bullet. A couple of Fridays ago there was a big reversal day in the market that really should have set the stage for a move lower. And yet it didn't, suggesting that the sellers lack the firepower to send stocks down in a big way.
Still, Bloch sees no point in loading up on stocks just yet. He'd rather bide his time and wait to see if the market really does break higher, because if it breaks lower it's Katie bar the door.
"Why don't I just wait till the market tells me which direction the market is going to move?" he said. "Do I give away X number of points? Sure. But I improve my chances of getting the direction right, and there will be plenty more gains to come."
A little action, please
For those of us who feel that, for all its intrinsic bullishness, another sideways month for the market would make us die of boredom, there's the hope that the economic reports in the week ahead could shake stocks out of their torpor. (For a line-up of the week's key events, click here.)
The two big ones are the Institute for Supply Management's August Purchasing Managers' Index on Tuesday and the August jobs report on Friday. Both should point to an economy that's on the mend, according to Lehman Brothers economist Joseph Abate.
Given the strength of regional manufacturing reports, Abate expects that the Purchasing Managers' Index will rise to 54.5 from July's 51.8. Anything above 50 indicates expansion in the manufacturing sector. On the jobs front, Abate forecasts that unemployment will stay stuck at 6.2 percent, but payrolls will increase by 20,000. That would mark the first time in seven months that the economy has added jobs.
"The economy really is entering the recovery path," Abate said. "We had a period where it was flipping back and forth. But now with the tax cuts, stimulative monetary policy, the end of the war and the easing off of the corporate governance concerns, everything is now operating as a tailwind for the economy."
Which isn't to say there aren't challenges. The back-up in interest rates will cut into housing activity, said Abate, and that will take away from growth. High energy prices, which act as a tax on consumers and businesses alike, are also pushing against economic growth. But with the economy growing at something like a 5 percent pace in the current quarter, Abate isn't too worried.
"At the margins those things are a drag," he said, "but they're not enough to stop this train."
Key events in the week ahead
Monday the stock and bond markets are closed for Labor Day. Enjoy!
Tuesday, the Institute for Supply Management releases its Purchasing Managers' Index for August. Economists surveyed by Briefing.com expect it to rise to 53.5 from July's 51.8. Any number over 50 represents expansion in the manufacturing sector.
Through the day Wednesday automakers report August car and truck sales. Economists forecast they slowed to a 13.6 million annual pace from July's 13.9 million.
July construction spending, due out Wednesday, is expected to show a pickup of 0.4 percent versus June's 0.3 percent gain.
Wednesday afternoon the Federal Reserve releases the "beige book," an anecdotal report on the economy put together by the regional Fed banks between Fed meetings.
The Institute for Supply Management's services index for August, due Thursday, which seeks to get a read on the service economy, is expected to come in at 62 versus July's 65.1. Any number over 50 indicates expansion.
July factory orders, due out Thursday, are expected to show a gain of 0.8 percent compared with a 1.5 percent increase in June.
The August jobs report, due out Friday, is expected to show that the unemployment rate held steady at 6.2 percent. Nonfarm payrolls, however, are expected to increase by 15,000 after dropping by 44,000 in July.
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