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Preview / Sept. 4 - 10

Stock Market Expected to See Infusion of Cash

September 04, 2006|From the Associated Press

Wall Street gets back to work Tuesday after two weeks of light summer trading, and investors encouraged by recent economic data are expected to shift money into the stock market.

Portfolio managers and traders will end their vacations and come back to a pretty decent market. Stocks have inched their way up leading into September, and the major indexes are at three-month highs as investors remain confident about the economy.

In addition, with oil spending most of last week below $70 a barrel, investors are expected to use the next few days to take positions ahead of upcoming third-quarter earnings reports.

"With energy on the sidelines, corporate earnings staying strong and the Federal Reserve on the back burner, you're going to see a lot of reluctant money chasing returns during the week," said Peter Dunay, an investment strategist at New York-based Leeb Capital Management Inc.

Last week, Wall Street absorbed a number of new economic readings that provided further evidence the economy has moderated enough to ward off future interest rate hikes.

The Federal Reserve's 17 straight interest rate hikes, before it paused Aug. 8, were designed to help slow down the economy from its expansion over the last three years.

Consumer confidence, home sales and other recent reports have indicated the central bank's campaign appears to be working. As fears about inflation and the strength of the economy subside, and with very little data due this week, oil prices are seen as the market's main driver.

Crude prices fell as Tropical Storm Ernesto missed oil rigs in the Gulf of Mexico. Prices for the most part have stayed at lower levels despite renewed jitters about Iran's nuclear program.

One area that money managers might siphon cash away from is the Treasury market. Bonds staged a sharp summer rally as investors moved out of stocks in May, then slowly began building back their equity positions in late July.

The 10-year Treasury note has seen its yield, which moves in the opposite direction of price, tumble to a five-month low of 4.73% on Friday from a late-June peak of 5.24%.

"You've got a lot of people who are just waiting to get back from Labor Day to start taking positions," said David Sowerby, chief market analyst at Loomis, Sayles & Co. "Things will pick up [this week], but don't look for there to be any major swings."

On the day after Labor Day, the Dow has risen nine out of the last 11 years, according to the Stock Trader's Almanac.

But because the markets have made small, incremental gains before Labor Day, Wall Street might continue that trend until more economic data and corporate profit reports begin coming out in a few weeks.

The major indexes ended last week higher despite days of erratic intraday trading. The Dow climbed 1.6%, the S&P 500 added 1.2% and Nasdaq gained 2.5%.

From the Associated Press

The Week Ahead

Today

* Labor Day. U.S. financial markets are closed.

Tuesday

* Treasury bill auction.

Wednesday

* Labor Department reports on revised second-quarter productivity and costs.

* Federal Reserve releases survey of regional economic conditions.

* Securities and Exchange Commission Chairman Christopher Cox testifies before the Senate Banking Committee on stock options.

* Senate Finance Committee holds hearing on compensation of business executives.

* Earnings report due from Hovnanian Enterprises Inc.

Thursday

* House Energy Committee panel holds hearing on BP's pipeline shutdown in Alaska.

* Labor Department reports on weekly jobless claims.

* Freddie Mac reports on mortgage rates.

Friday

* Federal Reserve reports on consumer credit for July.

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