Wall St. eyes economy

Wall St. eyes economy
This week will bring more data to digest along with individual stories
By Staff Writer Catherine Tymkiw
April 1, 2001: 7:00 a.m. ET


NEW YORK (CNNfn) - Looking for a reason to jump in or out of the market this week? Watch the economic data for clues about whether the time is right.

A quarter of wild swings and uncertainty might just have been the storm before the calm.

"Investors continue to wait and see if there is anything that signals a bottom," said Michael Holland, chairman of Holland & Co.

Analysts are having a tough time saying if and when the worst is over. This leaves investors reacting to individual corporate stories and hoping for strength in the economy.

The focus this week will be on the economic news, beginning with the National Association of Purchasing Managers (NAPM) survey Monday and culminating with the unemployment report Friday.

Market participants will be keeping close tabs on whether or not the data signify that the economy is starting to show strength, especially in light of a slowdown in earnings growth as more and more companies say they may not meet expectations.

ECONOMIC DATA
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Economic Calendar

"We're all going to be looking for the employment rate and looking for that corroboration of this economy slowing, but the picture is ultimately confusing," said Barry Hyman, chief market strategist with Weatherly Securities. "You've got earnings slowing to the point where it's certainly pinpointing a recession and you've got Mr. Greenspan [Fed chairman] trusting some indicators and not trusting other indicators."

It was the prevailing uncertainty amid an influx of profit warnings that led to Wall Street's wobbly week.

The Nasdaq composite index fell 4.5 percent on the week while the Dow industrials rose 3.9 percent. The S&P 500 gained 1.8 percent.


NAPM and unemployment on tap

Economic data have painted a confusing picture throughout the first quarter as investors are still trying to gauge whether or not the Federal Reserve's rate-cutting action will be enough.

Monday, the NAPM's key index of manufacturing activity for March will be released and analysts are hoping the numbers will show the manufacturing recession has come to a close.

Analysts polled by Briefing.com expect the NAPM to come in at 42.5 percent, slightly higher than February's 41.9 percent.

The key focus will be on the unemployment rate, which will be reported by the Labor Department Friday.

"It will certainly loom as the largest, most influential stat we'll get," said Charles Payne, head analyst with Wall Street Strategies.

Expectations are for the rate to edge higher to 4.3 percent, according to analysts polled by Briefing.com.

Payne said market participants will be hoping for a more significant decline. "If we can see a dramatic decline in unemployment, perhaps 4.4 or 4.5 percent, that would certainly put Wall Street in a better frame of mind," he said.

And if that wasn't enough for investors to digest, Comdex will be holding one of the country's largest technology conferences, in Chicago, Monday through Thursday.

And Dell Computer ?DELL: Research, Estimates) will be hosting its analyst meeting in New York Wednesday and Thursday.


Remain calm

As negative news continues to weigh on investor sentiment, analysts say stay calm ?things will get better.

It won't be an immediate surge of optimism, but slowly, steadily, corporate revenue growth will regain an even keel with the economy.

"I think you're going to have days focused on earnings and that will hurt tech [issues]," said Hyman. "You're going to have days focused on economic statistics, which, if they give a slow growth look, will be taken to heart."

While there are bargains to be found, many valuations are still expensive and investors may be best advised to hold onto their portfolios and wait for actual earnings reports to come before making a move.

"Don't buy your favorite stock until you see the earnings statement," said Hyman. "It's better to have the trend with you than guess at a bottom."

Analysts say the negative pre-announcements will continue to plague market sentiment but it is ultimately a good thing.

"We'll probably get somewhat of an overreaction to the pre-announcements but that will be good because it brings people back to reality," said Chuck Hill, director of research with First Call.

EARNINGS WARNINGS
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Earnings Warnigns

Compared with the same time in the fourth quarter, negative pre-announcements for companies in the S&P 500 are up 31 percent, according to First Call.

In the technology sector, 167 companies have issued negative pre-announcements, up 78 percent from the comparative point in the fourth quarter.

"It always takes a toll," said Hill. "These are the peak weeks for warnings and it's going to be worse than normal, but we probably need a little of that.