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March 13, 2007 > Stock market to focus on retail sales, inflation gauges

Stock market to focus on retail sales, inflation gauges

By Madlen Read

NEW YORK (AP), Mar 10 _ Wall Street appears to have regained some stability after its nosedive two weeks ago, but investors aren't ruling out more turbulence if upcoming data shows consumers are spending less in the face of rising costs.

This week will bring several retail sales reports for February, as well the government's producer and consumer price indexes _ key guages of inflation.

Last Friday's jobs data showed that U.S. employment hasn't been crippled by the slower areas of the economy, but investors want to know if average American is still financially healthy enough to feed economic growth.

The market is expecting the Commerce Department on Tuesday to show that retail sales rose in February by 0.3 percent from January. Also Tuesday, the International Council of Shopping Centers reports on chain store sales, and Redbook releases its retail sales index. Last week, individual retailers reported sluggish clothing sales for February.

Even if sales look robust, markets could be rattled by the producer or consumer price indexes. If they come in higher than expected, it would suggest that the Federal Reserve, which meets March 20-21, won't be able to lower interest rates later in the year _ a move that looked more probable right after Wall Street's big plunge, but which appears much less likely now that economic data has kept showing moderating growth.

After falling to four-month lows last Monday, the indexes rebounded and finished slightly higher on the week _ which many investors saw as promising, given that the previous week was the worst in more than four years. The Dow Jones industrials rose 1.34 percent, the Standard & Poor's 500 index picked up 1.13 percent and the Nasdaq composite index rose 0.83 percent.

But the anxiety is far from over.

The Street will not only be watching economic data this week, but also news about the subprime mortgage market and currency trading. Jitters about financial backers bailing out of subprime lenders, who give loans to people with poor credit ratings, have been a big factor in stocks' recent volatility. So has the dollar's weakness versus the yen, which led many investors to take money out of high-yielding dollar assets bought with the low-yielding yen.

OTHER ECONOMIC DATA

On Tuesday, in addition to retail sales, investors will be looking at the Commerce Department's business inventories report for January _ which is expected to show a 0.1 percent rise _ and global staffing firm Manpower Inc.'s survey on hiring rates.

On Wednesday, the market is expecting the Commerce Department to report that the current account deficit narrowed in the last quarter of 2006 to $203.0 billion from an all-time high of $225.6 billion in the previous quarter; the current account is the broadest measure of foreign trade. The department will also be releasing import and export prices for February.

Thursday will bring some regional manufacturing data: the market is expecting the New York Fed's Empire State manufacturing index for March to fall to 17.0 from 24.4 in February, and the Philadelphia Fed's manufacturing index for March to rise to 4.0 from 0.6 in February.

On Friday, the Federal Reserve will report industrial production for February, which the market is predicting will rise by 0.3 percent, up from a drop of 0.5 percent in January. The Fed will also report February capacity utilization for February, expected to register at 81.3 percent, virtually unchanged from January.

The University of Michigan's preliminary data for consumer sentiment in March will also be released Friday. The market is forecasting a slight drop in the index to 90.5 from a reading of 91.3 in February.

EARNINGS COME BACK INTO FOCUS

This week will bring some earnings reports from financial services firms, which should give the market a better idea of whether investment houses can keep up their record-breaking profit trend this year. Goldman Sachs Group Inc. will release its earnings on Tuesday, Lehman Brothers Holdings Inc. will report Wednesday; and Bear Stearns Cos. Inc. will report Thursday.

The market is expecting Goldman Sachs to report a first-quarter profit of $4.84 a share. Goldman closed at $201.70 Friday, in the upper half of its 52-week range of $136.79 to $222.75.

Lehman Brothers is expected to report first-quarter profit of $1.94 a share. Its stock closed at $75.83 Friday, in the upper half of its 52-week range of $58.37 to $86.18.

Analysts forecast that Bear Stearns will report first-quarter profit of $3.80 a share. Its stock closed at $151.98 Friday, in the middle of its 52-week range of $120.10 to $172.61.

General Motors Corp. will also be reporting fourth-quarter profit next week. The market is expecting a profit of $1.19 per share. GM closed at $30.99 Friday, in the middle of its 52-week range of $19.00 to $37.24.

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