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January 06, 2009 |  |
Stocks will try to find recipe for 12,000 |  |
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Posted By Allan Prestly for Senaxis World News
Source: David Ellis / CNN Money NEW YORK (CNNMoney.com) -- Investors didn't quite have the momentum last week to push the Dow above 12,000, but that could all change with the glut of earnings and economic data due out this week. Last week, the Dow crossed the 11,900 line for the first time ever and closed at 11,960.51, marking its sixth record high in the last nine sessions and another record intraday high. The S&P rose 1.2 percent on the week, while the Nasdaq was 2.5 percent higher. Investors have lately been trying to assess the strength of the economy and what the Federal Reserve plans to do with interest rates, while keeping an eye on the price of oil. But in order to sustain the recent rally, bulls will have to get some additional positive corporate earnings news, and two key economic reports on inflation and the housing sector. "There's tons of economic data next week that could push the market one way or another," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. So far, the earnings are off to a pretty good start, as both PepsiCo (Charts) and wholesale retailer Costco (Charts) beat estimates last week. But after this week, investors should have a better sense of whether corporate earnings will post their 13th-straight double-digit percentage gain quarter, as 12 of the 30 Dow components are scheduled to report, including Caterpillar (Charts), Johnson & Johnson (Charts), Merck (Charts) and 3M (Charts). Investors will also get a glimpse into how the tech sector has fared after languishing earlier this year, as Yahoo (Charts),Google (Charts), Apple (Charts), Intel (Charts) and rival AMD (Charts), will deliver their quarterly results. "A lot of attention will be paid to how these companies asses their prospects over the next several quarters," said John Lonski, chief economist for Moody's. Eyeing inflation and housing After a comparatively slow economic reading week, investors will have a number of reports to digest. Two readings on inflation, the Producer and Consumer Price Indexes, are due out Tuesday and Wednesday, respectively, and investors will be scouring for clues about what the Federal Reserve might do next with interest rates. A surprisingly strong core inflation reading could confirm recent comments by Fed officials that inflationary pressure is not under control. "Since the market's assumption is that inflation is contained, those reports will probably have a chance to upset the apple cart," said Ablin. A surprising uptick in core inflation, which strips out normally volatile food and energy prices, would also fuel speculation that the Federal Reserve is not done cutting interest rates any time soon. Last week, a number of Fed officials delivered hawkish speeches, warning that inflation may not be under control, while underlying strength in Friday's September retail sales suggested that the economy is faring better than many expected. Those developments suggest that the central bank may not cut interest rates as quickly as market observers originally expected. The central bank held the fed funds rates steady at 5.25 percent in August and September, having raised it 17 times since June 2004. But more negative news from the housing sector could derail the Dow's attempt at breaking the 12,000 barrier; housing starts for September is slated for release Wednesday. However, market observers such as Ablin believe that a healthy report could send bulls running. "That has the potential of helping the market because everyone is assuming the worst in housing," said Ablin. And there's always the threat of oil, which has helped drive the recent rally on Wall Street. While the price of crude is off 2006 lows reached last week, a formal production cut announcement by OPEC this week could send prices back towards record highs reached this summer. But as for breaking 12,000? Both Lonski and Ablin ask why not. "If we can get through much of the inflation data without much problems and there are not too many downside surprises on the corporate earnings front, there is a pretty good chance the Dow will make it above 12,000," said Lonski. Send Us News. If You Have News, Or Find World News, Email Us Now! |
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