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Wall Street Not Expecting New Data on Housing, Inflaction, Manufacturing to Give Assurance

NEW YORK (AP) — February’s stock market so far has displayed more stability than January’s, but Wall Street wants to see a stronger economy on the horizon before it trades confidently again.Investors are not counting on this week’s readings on housing, inflation and manufacturing to give them that assurance. As a result, they are bracing for more volatility.

The market has been swinging higher and lower as traders sell off when disappointing economic data rolls in and then drive the market up when they snap up stocks that look like bargains. The pattern is indicative of a market that has underlying demand holding it up, but one that could have a bit further to fall if more bad news comes along.

After rallying early last week and then losing steam toward the end, the Dow rose 1.36 percent for the week, the Standard & Poor’s 500 index gained 1.40 percent, and the Nasdaq composite index advanced 0.74 percent. All three indexes remain down sharply for the year, particularly the Nasdaq, which is 12.5 percent lower than it was at the end of 2007.

“We may not have hit the bottom, but people seem to be looking for things to buy rather than things to dump,” said Alexander Paris, economist and market analyst for Barrington Research in Chicago. “Things might get worse before they get better, but you’ve got to buy stock when things look worst.”

The question is whether there’s any data coming in the near future that will have the power to reinvigorate the stock market back — or whether the market is doomed to a holding pattern until the economy starts to recover.

One overriding concern is the weak housing market. Though investors have come to terms with falling prices, there’s uncertainty over how long the downturn will last and how much it will affect homeowners’ spending patterns. And there are worries about the financial well-being of companies with investments in mortgage-backed assets.

All U.S. financial markets are closed Monday for the Presidents Day holiday.

On Tuesday, the National Association of Home Builders releases its housing industry index, which economists surveyed by Thomson Financial/IFR expect to show a decline for February. Then Wednesday, the Commerce Department reports on housing starts and building permits — both are expected to be weak.

Because of the housing market’s deterioration, many businesses are suffering. The Institute for Supply Management’s January manufacturing report showed modest growth, but economists predict that the Philadelphia Fed’s regional manufacturing index will register another contraction. The decline is not expected to be as dismal as the December report, which caused the Dow to tumble more than 300 points a month ago, but if it is, it could send stocks reeling again.

Another worry is the inflation that is occurring alongside the economic slowdown. The dollar’s recent tumble appears to have plateaued, but it is still weak, while food and energy costs are staying high. Consumers are finding themselves unable to spend money on discretionary items because the bulk of their wages is going toward necessities like meals, transportation and health care.

The Labor Department reports Wednesday on consumer prices, which economists predict ticked up 0.3 percent in January, the same rate as in December. Core consumer prices, which exclude food and energy costs, are anticipated to have risen by 0.2 percent.

Also Wednesday, the Federal Reserve releases the minutes from its Jan. 29-30 meeting. At that meeting, the central bank lowered the key interest rate by a half point to 3.00 percent and stated that the financial markets are still under considerable stress. The Fed also said credit is tightening for businesses and households alike, the housing contraction appears to be deepening, and the job market seems to be weakening.

“It seems to be, as the data unfolds, they’ll have no choice but to cut further,” said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co. He added, though, that given how much policy makers have already slashed rates and their persistent worries about inflation, “they don’t have much more to go.”

The Jan. 30 move followed an emergency three-quarter-point reduction a week earlier, and three cuts in the latter part of 2007. Rate changes tend to take at least six months to affect the economy. The Fed meets next on March 18.

http://biz.yahoo.com/ap/080218/wall_street_week_ahead.html

Oil Prices Steady After Talk of Possible OPEC Cuts Amid Forecasts for Slower Demand Growth

BANGKOK, Thailand (AP) — Oil price were steady Monday in Asia, rising slightly after further hints that OPEC may cut production if global supplies continue to rise amid forecasts for slower growth in demand.

The Organization of Petroleum Exporting Countries has trimmed its demand forecasts for this year by 100,000 barrels a day, but it has also hinted it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires.Several reports in recent days, though, have suggested that global economic conditions may not be deteriorating as quickly as feared. The U.S. Federal Reserve said Friday that industrial production in the world’s largest economy rose last month in line with expectations. On the other hand, the Energy Department, the International Energy Agency and now OPEC have all cut demand forecasts.

Light, sweet crude for March delivery rose 23 cents to $95.73 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore.

The Nymex crude contract rose 4 cents Friday to settle at $95.50 a barrel after alternating frequently between positive and negative territory. Oil prices have risen more than $8 in little more than a week.

On Sunday, Venezuelan President Hugo Chavez soothed American motorists, saying that Venezuela is not preparing to cut off oil shipments to the United States.

The socialist leader rattled oil markets when he threatened a week ago to halt shipments to the United States in retaliation for Exxon Mobil Corp.’s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets.

“We don’t have plans to stop sending oil to the United States,” Chavez said Sunday during a visit to heavy-oil projects in Venezuela’s petroleum-rich Orinoco River basin that were nationalized last year.

But he added that Venezuela could cut off supplies to the United States if Washington “attacks Venezuela or tries to harm us.” Chavez has repeatedly warned against a possible U.S. invasion to seize control of Venezuela’s immense oil reserves. U.S. officials have denied any such plan exists.

The United States relies on Venezuela for about 10 percent of its oil imports.

Chavez’s administration is locked in a legal battle with Irving, Texas-based Exxon Mobil over compensation for the nationalization of one of four heavy-oil projects in the Orinoco River basin.

Exxon Mobil, the world’s largest publicly traded oil company, is seeking to freeze billions of dollars in Venezuelan assets in the United States and Europe to guarantee a payoff if it wins a decision by an international arbitration panel.

Last month, a British court injunction ordered the temporary freezing of up to $12 billion in assets of state-run Petroleos de Venezuela SA, or PDVSA.

Brent crude for April delivery rose 26 cents to $94.89 a barrel on the ICE Futures exchange in London.

Heating oil futures rose 0.81 cent to $2.655 a gallon while gasoline prices gained 0.59 cent to $2.4997 a gallon. Natural gas futures rose 15.1 cents to $8.811 per 1,000 cubic feet.

http://biz.yahoo.com/ap/080218/oil_prices.html

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