RPT-Wall St Wk Ahead: Fannie, Bernanke and data to rule stocks
(Repeating column initially transmitted late Friday)
NEW YORK, July 13 (Reuters) - The bears have Wall Street cornered and they just won't let go.
This 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 that own or guarantee about one in every two mortgages in this country.
Barring any news, say over the weekend or early this 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 will focus on Federal Reserve Chairman Ben Bernanke this week, when he is scheduled to appear twice on Capitol Hill to give his semiannual testimony on monetary policy. He is set to testify on Tuesday before the Senate Banking Committee, and on Wednesday, before the House Financial Services Committee.
Investors will latch on to anything Bernanke says about Fannie Mae and Freddie Mac, as well as 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 almost $5 trillion in 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.
This week also brings a torrent of numbers from earnings reports and economic indicators. It will be one of the busiest weeks for quarterly earnings, with reports 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 worries about oil and inflation. On Friday, oil shot up to a record above $147 a barrel. This week, investors will scrutinize data on consumer and producer prices for any signs of rising inflationary pressures.
Major economic reports on tap 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," said Frederic Dickson, senior vice president and market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. "We expect it to be another volatile week with the market reacting to a triple play of earnings, oil and the mortgage agencies.
"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 (this) week."
OIL, PPI AND CPI
Political tensions over Iran's nuclear work and supply worries drove oil prices to yet another all-time high last week. Continued...
