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Investors to Focus on Greenspan's Remarks

June 07, 2004|From Bloomberg News and Reuters

Investors won't get much in the way of corporate news this week, but Federal Reserve chief Alan Greenspan could sway the market in two appearances as investors search for clues into an interest rate increase expected at month's end.

Financial markets usually pay close attention whenever Greenspan speaks. But his remarks will take on heightened significance this week, with a Fed meeting set for June 29-30, during which the central bank is widely expected to lift interest rates from rock-bottom lows.

A surprisingly strong monthly jobs report last week bolstered expectations of a rate increase. Employers added a better-than-forecast 248,000 jobs in May, according to a Labor Department report that was the latest sign of an improving economy, which is likely to usher in higher interest rates.

"Greenspan speaking will be important," said Bill Strazzullo, chief market strategist at State Street Global Markets in Boston. "What's the Fed's timetable on tightening? We know it's going to happen, but how much, and will we see tightening sooner or later? That's going to be the highlight of the week."

Tuesday, Greenspan will speak to a central bank panel before the International Monetary Conference in London. Thursday he will testify before the Senate Banking Committee hearing on his nomination to a fifth term as Federal Reserve chairman.

Wall Street's top economists unanimously agree that the Fed will start raising interest rates at the June meeting.

Wall Street also will focus on economic data, including Friday's report on the Labor Department's producer price index, a measure of prices paid to farms, factories and refineries.

Economists forecast a 0.5% rise in May's PPI after a gain of 0.7% in April, which was the biggest increase since March 2003. But the core PPI, which excludes volatile food and energy prices, is forecast to advance just 0.2%, in line with April's gain.

Also Friday, the University of Michigan will release its monthly consumer sentiment index. Analysts have forecast a preliminary reading of 90.2 for June, in line with May's final reading of 90.2.

In other reports due this week:

Today, the Federal Reserve will issue a report on outstanding debt through credit cards, auto loans and other non-mortgage financing for the month of April. Economists surveyed by Bloomberg News expect the debt to have risen by $6 billion during April after rising $5.7 billion in March.

Wednesday, in a report due from the Commerce Department, wholesale inventories are expected to show a rise of 0.5% in April, according to the same economists. In March, inventories showed a 0.6% increase.

Thursday, the Treasury Department is expected to report a $66.3-billion budget deficit for May, compared with an $88.9-billion gap in the same month last year.

Also Thursday, a report from the Labor Department will probably show that first-time claims for unemployment insurance benefits dropped to 335,000 in the week ended Saturday, from 339,000 a week earlier.

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