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US stocks: Busy week ahead for Wall St
11.40am Monday October 30, 2006
This week may determine the sustainability of a shift from United
States energy stocks to non-cyclical sectors when payroll data and
several other key economic growth indicators are released amid a heavy
stream of earnings reports. The
trend towards bigger-cap technology, health-care and consumer stocks
that helped the Dow break through its all-time record and the 12,000
mark was briefly interrupted last week as energy and material stocks
hopped back into the lead. But
Friday's weaker-than-expected data on gross domestic product suggests
stocks that are less sensitive to growth will be the ones poised to
lead. Besides all the data,
94 of the 500 components of the Standard & Poor's 500 Index will
give quarterly profit updates this week. "We're
still in the thick of earnings," said Todd Clark, director of stock
trading at Nollenberger Capital Partners in San Francisco. "We
also get the Chicago Purchasing Managers' number and the ISM
manufacturing survey. Both are pretty important data points so we're
going to see meaningful macro numbers coincide with what we've got as
far as corporate earnings." The
Labour Department's nonfarm payrolls report on Friday will wrap up a
data-packed week as investors watch for signs that the economy is still
growing at a healthy pace and inflation remains moderate. Economists
polled by Reuters believe that payrolls grew by 125,000 jobs this
month, compared with a gain of just 51,000 in September. Average hourly earnings are forecast to rise 0.3 per cent, after an increase of 0.2 per cent the previous month. Investors
will start the week with the latest read on inflation data as September
personal income and consumption data is released, and the accompanying
price index. Three other key
gauges of economic growth are set for release: the National Association
of Purchasing Management-Chicago's index of Midwest business activity
on Wednesday; the Institute for Supply Management's manufacturing
survey on Thursday, and the ISM's survey on the services, or
non-manufacturing, sector. The
Conference Board will issue its consumer confidence index on Wednesday,
with economists expecting an October reading of 108.0, up from 104.5 in
September. Domestic car and truck sales for this month are due on
Thursday, with the Reuters poll forecasting a slower pace. Of
the 10 Standard & Poor's major industry groups, energy and
materials were the top two performers and industrials, technology and
health care lagged at the bottom, all netting negative returns for the
week. "The groups that have
led the market are oil and oil services. These areas since have
corrected around over 10 per cent and in some cases 20 per cent, but
they've come back very quickly," said Carl Birkelbach, founder and
chief executive of Birkelbach Investment Securities in Chicago. "We're
at the point where these need to correct some more. For the market to
make its next move, for the Dow to aim for 14,000, those will have to
take a little rest." Signs
of a further slowdown in the economy could force energy and other
commodity stocks to take that rest, as decreased business activity
would slacken demand for their products. But economic figures won't be the only factor determining prices of commodity-related equities. Data
on Friday showed third-quarter US economic growth was the weakest in
more than three years, which sent all three major US stock indexes
lower. Stocks finished
Friday's session lower. The blue-chip Dow Jones industrial average fell
73.40 points, or 0.60 per cent, to end at 12,090.26. The Standard &
Poor's 500 Index dropped 11.74 points, or 0.85 per cent, to finish at
1377.34. The Nasdaq Composite Index declined 28.48 points, or 1.20 per
cent, to close at 2350.62. - REUTERS
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