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September 19, 2006 > Wall Street looks to Fed

Wall Street looks to Fed

by Tim Paradis

NEW YORK (AP), Sep 15 _ While Wall Street is mostly confident that the Federal Reserve will leave interest rates untouched when it meets next week, the market is still anxious to learn how the central bank perceives the threat of inflation and the overall economy.

The meeting is the first since the Fed interrupted a two-year string of 17 straight rate increases last month by leaving unchanged the rate that banks charge each other for overnight lending. The Fed and Wall Street don't always agree on how to best shepherd the economy  - in this case, toward a soft landing. Some investors have voiced concerns that the Fed, in its zeal to contain interest rates, had perhaps overreached and slowed growth too quickly by making access to money more expensive.

But there appeared to be little airing of those concerns this past week as stocks marched to within sight of their 2006 highs amid a precipitous drop in oil prices and reassuring figures from the Labor Department. The Consumer Price Index, the key measure of inflation, was in line with forecasts and lent support to the notion that the economy is decelerating smoothly.

The Fed's comments on the health of the economy, while perhaps not detailed generally play an enormous role in shaping investor sentiment on Wall Street.

Scott Fullman, director of investment strategy at Hapoalim Securities USA, contends that if the Fed meeting doesn't bring any surprises, the markets could be poised to enter a strong period.

``We are optimistically cautious here going into the next five weeks or so,'' he said, adding he expects benchmarks such as the Dow Jones industrial average and Standard & Poor's 500 index will show strong performances this year. ``The markets are showing some real resilience. I'm looking for new highs with the Dow and the S&P before the end of the year.''

ECONOMIC DATA

Though investors will focus on Wednesday's Fed meeting, there are other reports Wall Street will be eager to examine. On Tuesday, the Commerce Department's report on August housing starts is expected to provide the latest evidence that the housing sector is cooling. Despite a modest lift on Friday, homebuilder stocks have taken a drubbing on Wall Street lately after several companies issued profit warnings tied to a drop in demand.

Also Tuesday, the Labor Department is expected to release the August producer price index, which measures the wholesale cost of goods.

On Wednesday, before the Fed meeting, comes a weekly report on crude inventories. This week, oil prices briefly moved higher after the Energy Department reported a decrease in the country's crude inventories.

Thursday brings the Labor Department's weekly report on initial jobless claims, a snapshot of how many people seeking work are unable to find it. And also Thursday, the Philadelphia Fed reports on regional manufacturing activity for September.

EARNINGS

Oracle Corp. is the first big company to report, releasing its first-quarter results Tuesday. The maker of business software is expected to earn 16 cents per share. The stock closed Friday at $16.33 after setting a 52-week high of $16.64. Its previous 52-week range was $11.75 to $16.49 per share.

On Wednesday, investors will hear from Morgan Stanley as it reports third-quarter results. This week, investors cheered as several rival investment banks turned in better-than-expected profits, even as some parts of their businesses showed signs of slowing. Morgan Stanley is seen earning $1.37 per share. The stock closed at $70.95 Friday after hitting a 52-week high of $71.47 earlier in the session. It had traded in a range of $50.73 to $70.43 for the previous 52 weeks.

On Thursday, FedEx Corp. is expected to report a first-quarter profit of $1.52 per share. The shares, which have traded at a range of $76.81 to $120.01 in the past 52 weeks, closed Friday at $105.90.

Companies that could provide insight into how consumers are spending are also due to report Thursday. General Mills Inc. is seen as likely to show a first-quarter profit of 67 cents per share. The maker of Cheerios, which has traded between $44.67 and 54.55 per share in the past 52 weeks, closed at $52.96 Friday.

Nike Inc. also plans to report first-quarter results; Wall Street expects the shoe and apparel maker will earn $1.42 per share. The stock closed Friday at $82.97. It has traded from $75.52 to $91.54 per share in the past 52 weeks.

 
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