Economic indicators may drive markets this week
NEW YORK» Investors are expected to spend the last week of 2006 getting their portfolios in order, taking advantage of a slow period on Wall Street where volume plunges to its lowest levels of the year.
Indeed, there will be little in the way of corporate news that might influence stocks. No major companies will report earnings next week, putting most of the focus on quarterly reports due in January.
There will be some economic indicators due to be released that could give stocks some direction. At the start of a shortened week, investors expect to receive reports from the Richmond and Dallas Federal Reserve banks on regional manufacturing activity.
Tomorrow, the Commerce Department is expected to release its report on new home sales for November. Wall Street has kept close tabs on housing figures to determine whether a slowdown in the sector will prompt consumers to curtail spending.
But some on Wall Street have been surprised by the degree to which housing values are holding given the pullback in the sector. Stocks of homebuilders have come well off their lows for the year amid speculation that a slowdown in home construction and perhaps a reduction in interest rates could eventually spur renewed demand.
Also tomorrow, the International Council of Shopping Centers, a trade group, is expected to release a report on weekly chain-store sales.
The Chicago Federal Reserve plans to release its report on midwest manufacturing tomorrow. Last week, the Philadelphia Federal Reserve's regional manufacturing report showed its lowest reading since 2003, sending stocks lower amid concerns the economy was slowing too quickly.
On Thursday, the Labor Department is scheduled to release its weekly report on jobless claims. As consumer spending accounts for two-thirds of economic activity, Wall Street wants to see the job market remain strong. Recently, unemployment has fallen to a five-year low. Should workers become scarce, however, wage inflation could creep upward, making it more difficult for the Fed to justify a decrease in interest rates.