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NEW YORK >> When Federal Reserve Chairman Alan Greenspan indicated this past week that additional interest rate cuts were unlikely, Wall Street yawned. Rate cuts likely ending
but market still lethargicGreenspan and the Fed may hold
pat when they meet for 2 days next weekBy Lisa Singhania
Associated PressAnalysts say investors weren't alarmed because they've already seen evidence that the economy is stabilizing. Now they want companies to say the same thing.
But that has yet to happen. After a month of lackluster fourth-quarter results and guarded forecasts, investors still lack solid confirmation that business is improving.
Most people don't believe the Fed, which reduced rates 11 times in 2001, can do much more to help.
"People feel like the Fed has given the market all the medicine necessary. Now we have to see if the economy continues to recover and if the stock market continues to respond," said Robert Streed, portfolio manager of Northern Select Equity Fund in Chicago.
"In effect, we're waiting to see if the patient sits up," he said. "So far, that hasn't happened. But I believe it will."
Greenspan apparently does, too.
He told the Senate Budget Committee, "We are just at this particular point turning, as best as I can judge."
When asked whether Congress needed to take more steps to stimulate the economy, Greenspan said he didn't think that was essential, given signs of a rebound.
Economists and strategists took Greenspan's cautious optimism as an indication that the Fed sees no need for any further rate cuts. Stocks rose modestly after the chairman testified, and ended the week higher.
The Fed's Open Market Committee is scheduled to meet Tuesday and Wednesday of the coming week, but few expect the market to take much notice.
Instead, they say, Wall Street will be waiting for manufacturing and employment figures due out Friday from the Institute of Supply Management and the Labor Department, respectively.
Both reports are considered good indicators of where the economy is headed.
"People are hoping the manufacturing sector is going to show growth, and the unemployment figures won't be so bad," said Larry Wachtel, market analyst at Prudential Securities. "If the economy recovers, then profits will recover. You can't have the second until the first happens."
Indeed, this month's fourth-quarter earnings season has been a letdown for the market.
Investors had hoped to hear that business was improving, and upbeat forecasts for coming quarters.
Instead, many companies said it was still too early and business too uncertain to make any sweeping predictions. Most met previously reduced earnings estimates but that wasn't enough for a market eager for leadership.
Although the next significant earnings reporting period is still three months away, February could also provide some important clues about what business will look like in the coming months.
That's because retailers, whose fiscal year ends in January, are expected to release earnings. The strength of those numbers as well as the forecasts for future business could give the market the incentive to move higher -- or, alternately, sell off.
The sector is closely watched because it relies on consumer spending, which accounts for two-thirds of the economy.
Technology investors will also be watching Cisco Systems. The bellwether, which has a different fiscal calendar than most of its peers, is expected to report its second-quarter results on Feb. 6.
"If they can say that business is turning, that's the most likely thing that will please the market and cause stocks to start going up," said Streed, the Northern Select Equity Fund manager.
The major indexes ended the week with small gains.
The Dow Jones industrial average rose 68.23, or 0.7 percent, to 9,840.08, after gaining 44.01 yesterday.
The Nasdaq composite index advanced 7.36, or 0.4 percent, to 1,930.70, despite a loss yesterday of 4.88.
For the week, the Standard & Poor's 500 index gained 5.70, or 0.5 percent, to 1,133.28, helped by a 1.13 gain yesterday.
The biggest percentage increase came in the Russell 2000 index, which managed a weekly advance of 4.98, or 1.1 percent, to 479.35. It fell 0.38 yesterday.