Wall Street’s rally could persist next week as investors’ conviction grows that the US economy is on track for a recovery. But retailers’ results, CPI and other consumer data could cast a pall if shoppers fail to show signs of life.
The focus will also be on the US Federal Reserve, which will release a statement on Wednesday afternoon at the end of its two-day interest rate-setting meeting. The central bank is expected to hold rates near zero. So investors will look for signals of an exit strategy from its efforts to prop up the financial system.
The US government’s retail sales data for last month as well as quarterly scorecards from major retailers, including Wal-Mart Stores Inc, J.C. Penney and Macy’s, will give a snapshot of the industry and how consumer spending is faring in the recession. So far, consumers have tightened their belts and shopped mostly for just the bare necessities as worries about job security take precedence.
Encouraging US manufacturing and employment data this week pushed all three major stock indexes to nine and 10-month highs. Analysts said the enthusiasm from the better-than-expected reports should carry over into next week.
The broad Standard & Poor’s 500 is up 49.4 percent from the 12-year closing low of early March after vaulting above the key 1,000 level this week.
On Friday, the Dow and the S&P 500 ended at closing highs for this year. Earlier this week, on Tuesday, the NASDAQ popped back above the 2,000 mark to end at 2,011.31 — its closing high for this year.
For the year, the S&P 500 is up 11.9 percent. The Dow Jones industrial average is up 6.8 percent and the NASDAQ Composite Index up 26.8 percent this year.
“All the fundamentals for recovery are now aligned,” said Steve Hagenbuckle, managing principal of TerraCap Partners, based in New York. He expects stocks to climb next week.
The non-farm payrolls report on Friday, in particular, boosted confidence after it showed the economy shed far fewer jobs than expected last month. While the job losses were still hefty — 247,000 jobs disappeared last month — the data provided the clearest signal yet that the economy was turning around.
Although this week’s data offered more evidence that some of the pillars of the economy are stabilizing at a better-than-expected rate, the recovery will still be a long process.
Analysts said the next point of focus for economic stabilization will be the consumer, whose spending accounts for about two-thirds of the US economy.
“We’re seeing the turning point right now,” said Kurt Karl, head of economic research and consulting for North America at Swiss Re in New York. “That should feed through to the consumer psyche and that will get things rolling, but it doesn’t look like a very fast-moving ball at this point.”
Wal-Mart, the discount king that’s also the largest retailer in terms of revenue, will be the biggest retailer reporting quarterly results next week. Investors will be keen to see if Wal-Mart benefits from shoppers looking for cheaper products. About about 140 million people walk through the doors of its 4,000 US stores each week.
Other data on tap in the week ahead include the international trade deficit for June on Wednesday, weekly initial jobless claims on Thursday, and the Fed’s report on Friday on industrial production and capacity utilization for last month.
TYPHOON: The storm’s path indicates a high possibility of Krathon making landfall in Pingtung County, depending on when the storm turns north, the CWA said Typhoon Krathon is strengthening and is more likely to make landfall in Taiwan, the Central Weather Administration (CWA) said in a forecast released yesterday afternoon. As of 2pm yesterday, the CWA’s updated sea warning for Krathon showed that the storm was about 430km southeast of Oluanpi (鵝鑾鼻), Taiwan’s southernmost point. It was moving in west-northwest at 9kph, with maximum sustained winds of 119kph and gusts of up to 155kph, CWA data showed. Krathon is expected to move further west before turning north tomorrow, CWA forecaster Wu Wan-hua (伍婉華) said. The CWA’s latest forecast and other countries’ projections of the storm’s path indicate a higher
TYPHOON DAY: Taitung, Pingtung, Tainan, Chiayi, Hualien and Kaohsiung canceled work and classes today. The storm is to start moving north this afternoon The outer rim of Typhoon Krathon made landfall in Taitung County and the Hengchun Peninsula (恆春半島) at about noon yesterday, the Central Weather Administration (CWA) said, adding that the eye of the storm was expected to hit land tomorrow. The CWA at 2:30pm yesterday issued a land alert for Krathon after issuing a sea alert on Sunday. It also expanded the scope of the sea alert to include waters north of Taiwan Strait, in addition to its south, from the Bashi Channel to the Pratas Islands (Dongsha Islands, 東沙群島). As of 6pm yesterday, the typhoon’s center was 160km south of
SECURITY: The New Zealand and Australian navies also sailed military vessels through the Strait yesterday to assert the right of freedom of navigation The Japan Maritime Self-Defense Force on Wednesday made its first-ever transit through the Taiwan Strait in response to the intrusion by a Chinese reconnaissance aircraft into Japan’s sovereign airspace last month, Yomiuri Shimbun reported yesterday. The Japanese news platform reported that the destroyer JS Sazanamisailed down through the Taiwan Strait on Wednesday, citing sources in the Japanese government with knowledge of the matter. Japanese Chief Cabinet Secretary Yoshimasa Hayashi declined to comment on the reports at a regular briefing because they concern military operations. Military vessels from New Zealand and Australia also sailed through the Strait on the same day, Wellington’s defense ministry
The Central Weather Administration (CWA) is set to issue sea and land warnings for Tropical Storm Krathon as projections showed that the tropical storm could strengthen into a typhoon as it approaches Taiwan proper, the CWA said yesterday. The sea warning is scheduled to take effect this morning and the land warning this evening, it said. The storm formed yesterday morning and in the evening reached a point 620 nautical miles (1,148km) southeast of Oluanpi (鵝鑾鼻), Taiwan proper’s southernmost point, moving west-southwest at 4 kph as it strengthened, the CWA said. Its radius measured between 220km and 250km, it added. Krathon is projected