Fannie, Fed chief and data to rule stocks
NEW YORK (Reuters) - The bears have Wall Street cornered and they just won't let go.
The coming week is almost sure to be a rocky ride for the U.S. stock market as investors fret about the stability of Fannie Mae(FNM.N) and Freddie Mac (FRE.N), the government-sponsored home finance companies.
Barring any news or development, say over the weekend or early next week, that quashes fears of capital constraints at Fannie and Freddie, analysts and money managers said U.S. stocks were set to fall further into the bear market's arms.
Wall Street's eyes and ears will be trained on Federal Reserve Chairman Ben Bernanke next week, when he will appear twice on Capitol Hill to give his semiannual testimony on monetary policy. He will testify on Tuesday before the Senate Banking Committee, and on Wednesday, before the House Financial Services Committee.
Investors will zero in on anything Bernanke says about Fannie Mae and Freddie Mac, in addition to his take on the U.S. economy, inflation and interest rates.
"The bottom line is that we're in the middle of a financial tsunami. This is a storm the likes of which this country hasn't seen," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. "The market right now needs to see results. It no longer gives anyone the benefit of the doubt."
Fannie Mae and Freddie Mac, which own or guarantee about one in every two U.S. mortgages and package them into bonds, are confronted by mounting losses from loan delinquencies and foreclosures. Investors fear that if they are hampered from doing business, the paralysis will only make the housing crisis get worse.
The coming week also will be filled with a torrent of numbers from quarterly earnings reports and economic indicators. It will be one of the busiest weeks for quarterly earnings, with reports due from Dow component Citigroup (C.N), the No. 1 U.S. bank, and technology bellwether Google (GOOG.O), the leading Web search company.
Making the terrain even more treacherous for stock investors are concerns about oil's jump on Friday to a record above $147 a barrel and worries that next week's data on consumer and producer prices may show rising inflationary pressures. As a result, there appears to be little that could comfort investors in the short run.
Economic reports to watch include the U.S. Producer Price Index and the Consumer Price Index, industrial production and capacity utilization, and housing starts.
"I have my helmet on and my body armor on today. We expect it to be another volatile week with the market reacting to a triple play of earnings, oil and the mortgage agencies," said Frederic Dickson, senior vice president and market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
"The market is going to remain nervous, watching developments with oil and tensions in the Middle East, and the avalanche of earnings and outlooks that will really start to hit the tape with banks and tech companies next week."
OIL, PPI AND CPI
U.S. crude oil futures shot up more than 2 percent on Friday as geopolitical concerns over Iran's nuclear work and supply worries combined to lift prices to an all-time high.
August crude gained $3.43, or 2.4 percent, to settle at $145.08 a barrel on the New York Mercantile Exchange. Earlier, it hit an intraday record of $147.27, eclipsing the previous NYMEX high of $145.85 set July 3. Continued...
